State pension triple lock to come under 'more and more pressure' as Labour look at top priorities
There has been speculation over the longevity of the state pension
PA
Britons will be anticipating what reforms to the pension system will be the main focus of the new Government in the upcoming months.
With a new pensions minister, the focus for many will be on how this will impact one's finances and what her main priorities will be.
An expert has shared some of the challenges facing Reynolds, as well as what areas she should review for reform.
The state pension
There has been speculation over the longevity of the state pension. Sir Edward Troup, a former executive for HM Revenue and Customs (HMRC) who has been advising Shadow Chancellor Rachel Reeves, said action has to be taken on pensions.
Speaking to LBC, Sir Edward claims that pensioners must "contribute possibly more" than Britons of working age in some circumstances.
Despite officially being a benefit, the state pension is not means-tested like other payments from the Department for Work and Pensions (DWP), like Pension Credit.
Helen Morrisey, pensions expert at Hargreaves Lansdowne said: "We have a burgeoning state pension bill and the Government needs to be wary of not placing too much on the shoulders of an already pressurised working population.
Emma Reynolds has been appointed as pensions minister
GETTY"With life expectancy slowing and healthy life expectancy hovering around age 63, the Government will find its hands tied in terms of future boosts to state pension age. Ideally, state pension needs to be part of any pension review, to put it on a long-term sustainable footing that gives people certainty of what they will get and when."
Jon Greer, head of retirement policy at wealth manager Quilter added: "We know from Labour’s manifesto that the state pension triple lock will be maintained. But this is likely to come under more and more pressure, particularly given the state of public finances and demographic trends.
"We need policy that works for the long-term and a state pension uprating system that is pegged to average earnings would be a fairer option that should make the state pension sustainable for future generations."
Pension tax system
Labour vowed to not reintroduce the lifetime allowance, but "more needs to be done" to deliver a simpler system.
A complex system can make it hard for Britons to plan for their retirement long term.
Morrisey said: "An overarching review needs to look at the system as a whole and make sure people are properly incentivised to save without fear of being tripped up by tax changes further down the line."
Workplace pensions
The development of the lifetime pension proposal could help solve the lost pension problem.
By allowing people to keep the pension provider of their choice throughout their career, they will be able to keep track of all money.
Retirement planning for self-employed
Reforms to the Lifetime ISA (LISA) could be particularly useful especially since an early withdrawal could mean people lose their free government bonus and their savings.
Savers can put up to £4,000 per year into a LISA and get a 25 per cent Government bonus.
Currently, there is a 25 per cent exit if people withdraw early from this fund which can be useful for the self-employed during times when their earnings are fluctuating.
However, she warned: "The issue is that the 25 per cent penalty for withdrawal not only removes the government bonus but also a slice of your savings too."
Pension investment in UK businesses
Encouraging pension investment in the UK has the potential to boost the economy.
Chancellor Rachel Reeves’ first speech as chancellor stated: "Driving investment in British businesses has the capacity to deliver greater returns for people’s pensions."
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Tim Middleton, PMI’s Director of Policy and External Affairs, said: "There is much crucial work to be done. It is clear that our members are keen to see reforms introduced by the new Government. Some proposals could be achieved over the short term, but others would involve major changes that would take years to enact."
"The most obvious changes called for are to the auto-enrolment regime. We welcome the opportunity to meet the new Minister for Pensions to discuss these proposals.
"We are sure Emma Reynolds will rise to the exciting challenge of her new position and confirm that we would be delighted to offer our support."
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