Investors and savers urged to challenge all political parties on their financial pledges in the run up to next month’s general election

News - Savings

Written by Ray Clancy

Manifesto pledges by the three main political parties in the UK do not stack up and do nothing to create confidence for investors and savers , it is claimed.

Investors need to challenge MPs and candidates from all parties in the run up to next month’s general election about the state of Britain’s diminishing financial security in retirement due to pension shortfalls and poor returns on savings, says David Pegler, Head of Brewin Dolphin, one of the largest private client portfolio managers and pension advisers in the UK

‘Some of their election promises simply do not stack up. We want to see the right policy measures introduced to restore individuals’ faith in saving for retirement, and we want the next Government to stick to the policy throughout the next Parliament to create more certainty and confidence for savers and investors and support the re-emergence of a savings culture,’ he said.

The Labour Manifesto clearly states that the party ‘will continue to make pension saving more attractive for individuals through favourable tax treatment’ but Pegler said his company is concerned that many Britons now face a pensions time bomb with an ageing population with diminishing financial security in retirement as a result of the removal of the tax credit on dividend income by Labour in their 1997 Budget.

He added that the Labour Manifesto needs more clarity about what the Party means by ‘favourable tax treatment’, and apart from confirming its commitment to National Employment Savings Trusts there is nothing new.

Brewin Dolphin said it welcomes the Conservative Party’s aspiration to restore the value of dividend tax credits. ‘When resources allow, our ambition is to start to reverse the effects of the abolition of the dividend tax credit for pension funds,’ its manifesto says. ‘It is also reassuring to hear that an incoming Conservative government would work with the trade unions, businesses and others to address the growing disparity between public sector pensions and private sector pensions, while protecting accrued rights. They also pledge to end the annuity at 75 requirement, to stop the spread of means testing and to look at how they can simplify the rules and regulations round pensions, which would he hugely welcome by both savers and their advisers,’ said Pegler.

‘However, we do call on the Conservatives to have more clarity about how they would encourage wider savings and ISAs in particular,’ he added.

Also welcomed is the Liberal Democrats pledge to immediately restore the link between the basic state pension and earnings, and increase the state pension annually by whichever was the higher of growth in earnings or growth in prices or 2.5%.

Their pledge to scrap the age 75 compulsory annuity rule and give people ‘greater flexibility in accessing part of their personal pension fund early, for example to help in times of financial hardship’ is also praised. ‘However, the proposal we are most concerned about is to reduce tax relief for all pension contributions to the basic rate, thus removing incentives for many tax payers to save into pensions,’ said Pegler.

One of the main problems is that last 20 years have seen it become easier to borrow money than to save, according to Richard Harwood, Divisional Director of Pensions at Brewin Dolphin. ‘This spend now pay later approach combined with the reliance on residential property, has had a desperate effect on pension savings at just the wrong time in the cycle. The next Government urgently needs to address this,’ he explained.