General election 2017: Your future finances are at stake

With the general election coming up this week, it’s more than just your immediate future that’s at stake. In the long-term you need to know that your finances are secure. So before you make the choice, have a look at the differences in what the main parties are promising for your pensions, and how that could affect you in the long run.

What’s the difference?

A lot of what each side is offering are very similar. However, there are two crucial areas where the Conservative and Labour parties make conflicting promises on pensions.

The triple lock on state pension increases

Labour promise to maintain the triple lock (state pensions rise by the highest of inflation, earnings or 2.5%) until 2022. The Conservatives on the other hand promise to end increases of at least 2.5% in 2020, converting the triple lock to a double lock (the highest of earnings or inflation).

Verdict: The triple lock was introduced in 2010 to increase state pensions, relative to wages. It has had the desired effect, but unless a large portion of the public finances are to be devoted to state pensions, at some point the minimum increase of 2.5% will have to be dropped or reduced.

State pension age

The Conservatives promise to increase the state pension retirement age in line with life expectancy. The current legislation is that for both men and women this rises to 66 in 2020, 67 between 2026 and 2028, and 68 between 2044 and 2046. Labour will not increase the state pension age beyond 66, and will commission a review looking at a flexible retirement age allowing for differences in life expectancy and the arduous nature of some work.

Verdict: The Labour policy of launching a review of the state pension age is surprising as the Cridland Review on this very subject reported in March 2017. Linking retirement ages to longevity is widely accepted as an important way of making pensions affordable. Current government policy is that people should spend one third of their adult life (i.e age 20+) in retirement, so that each pensioner depends on not less than two workers.

Who has your vote?

On the one hand, the triple lock has worked so far and so Labour’s desire to keep it could be seen as a positive move. On the other, increasing the state pension in line with life expectancy is a widely accepted model, and so the Conservatives’ promise to retain this could also be beneficial. There are positives and negatives from both sides, but whatever party you decide to vote for, it is always important to think about the long-term as well as the short-term.