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The Impact of the 2015 UK Elections and the Upcoming Pension Freedoms on Citizens and Expats

The 2015 UK general elections are drawing nearer, and speculations abound over which party is going to come out on top, and more importantly, how new legislation implemented by the winning party will affect UK residents and expats, especially with the new pension legislation coming into effect on 6 April 2015.

Indeed, there is much conjecture over whether or not a grand coalition between the Conservative and Labour parties will be necessary after the 7 May 2015 elections. Of course, many believe this conjecture is just that – guesswork, and that a deal between David Cameron and Ed Miliband is simply absurd. Yet many have pointed out that this type of arrangement worked with great success in Germany, where Angela Merkel’s Christian Democrats governed with the Social Democrats.

Of course, all of this speculation comes from fears of a minority Labour party-Scottish National Party deal and the consequences of this. Regardless of whether there will be a grand coalition or not, the new elections, along with the upcoming pension legislation changes, are going to see some noteworthy tax implications for UK residents and expats.

For example, Miliband recently announced that, should the Labour party win, he would cut student university fees from £9,000 per year to £6, 000. This is great news for students, but of course, where there is give there is take, and middle-class pensioners are the ones that will see a loss. £2.9 billion would be taken from those with an income over £150, 000, and this would be done by reducing tax relief from 45 per cent to 20 per cent. As there are so many other large pension changes on the horizon, many see this as a foolish move. Indeed, head of pensions research at Hargreaves Landsdown, Phil McPhail stated that, “It is reckless and irresponsible to tinker with so many other big pension changes going on, such as the freedoms being introduced in April. We need our politicians to take a long-term view rather than raid the pensions’ piggy bank to pay for other policies.”

These new policies coming into effect on 6 April 2015 are going to have a large impact on UK citizens and expats. These legislative changes will allow people to take cash from a defined contribution scheme without having to take an annuity. Similarly, there will be much more freedom for investors in terms of withdrawing funds, how much they can draw as income, and when they can do this. The news is welcomed by many, but these changes should not be accepted without warnings. McPhail says that this leaves people more open to scammers who will be able to gain access to their pensions much more easily. Similarly, the onus of taking care of pensions now lies largely with the investor, and people may be more likely to make financial choices that are not in their best interests, such as underestimating life-expectancy and withdrawing cash too quickly.

Whatever the upcoming elections and legislative changes will bring, one thing remains constant, and that is Carrick’s commitment to growing the wealth of our clients and helping them secure their futures through our financial services.

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