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Press comment on the Queen's Speech

21/06/2017

If you are covering the Queen’s Speech please see below comment from Rachael Griffin, tax and financial planning expert at Old Mutual Wealth.

Rachael Griffin“The toned down ceremony, the first since 1974, was fitting for the watered-down Queen’s Speech, which was a skeleton version of the Conservative manifesto and tactfully steered clear of controversial policies.

“It is unsurprising the Conservatives removed their commitments to scrap the triple-lock and amend universal pension benefits as they were easy concessions to make in their difficult negotiations with the DUP.

“The triple-lock ensures pension incomes go up with inflation, earnings or 2.5%, whichever is higher. It means that state pension incomes are hard-wired to grow ahead of pay. The Conservatives proposed to replace it with a double-lock, which would see pensions rise by earnings or inflation. Over the long term, this would still result in a £30bn increase over the next half-century, according to the Institute for Fiscal Studies.

“While it’s discouraging the Conservatives have pushed aside this expensive issue, it now gives them the opportunity to carefully consider their approach.  One option that should be on the table is a ‘smoothed earnings link’ from the Work and Pensions Select Committee. This means growth in pensions continues, but when earnings fall behind price inflation, an above earnings increase could kick in until either earnings growth resumes or for as long as the pension remains above a previously established limit compared to average earnings. When this happens it would revert to earnings.

“This would ensure that the state pension rises in line with earnings rather than faster than earnings, but also protects pensioners when earnings fall.

Social care got a cursory mention in the speech. The controversial policies, which wounded Theresa May’s reputation, were unsurprisingly absent. Instead, the Conservatives simply said they would put forward policies for consultation.

“The key will be creating a social care policy that is a satisfactory compromise for all parties via a cross-party parliamentary group. That group should consider all options and create a multifaceted solution, which will encourage people to save for their own long term care. A social care green paper is still expected and it would be wise to push ahead with it. Hopefully, the paper will generate solutions that are simple, sustainable and communicated in consumer friendly language

“However, as the speech revealed, Brexit is centre stage for policy at the moment and all other issues, despite their importance, are likely slip down the agenda. 

“Several policies remain in limbo as the fate of the Finance Bill remains in the air. With limited time on their hands the Parliament is likely to push it aside until April 2018. This leaves policies covering deemed domicile*, non-domicile’s holding property in overseas structures** and the pension Money Purchase Annual Allowance*** in limbo, despite the fact that they had ‘technically’ already come into force since they applied from 6 April 2017.”

 

*The deemed domicile amends came into force on 6 April 2017, and reduces the period of time someone needs to be living in the UK before they become deemed UK domiciled for tax purposes from 17 out of 20 years down to 15 out of 20 years. The Finance Bill is the enacting legislation which brings these into force – so it is currently unlike if this will happen

**From 6 April 2017 non UK domicile’s who own property in the UK held through an overseas structure (generally a company or trust) will no longer be exempt from IHT. The Finance Bill is the enacting legislation which brings these into force – so it is currently unlike if this will happen

***The MPAA was also set to come into force from 6 April 2017 and it is set to bring down the pension funding allowance to £4000 for those that have taken accessed their pension flexibly.

For more information contact

Kathleen GallagherOld Mutual Wealth023 8072 629307990 004932kathleen.gallagher@omwealth.com

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