General Election 2015: Will pension reform be a major factor?

Video: Tom McPhail, head of pensions at Hargreaves Lansdown, says May's outcome could alter your pension

Peter Macdiarmid | Getty Images

Will pension reform be a major factor? Yes, says Tom McPhail, head of pensions at Hargreaves Lansdown.

“If we get a Conservative government we’re unlikely to see any changes to the pension freedoms. But if we get a Labour government I think we’ll start to see some adjustments.”

He predicts that the maximum tax-free lump sum people are allowed to draw may be changed, “and there could be some rolling back of the freedom to draw your pension pot out, such as the re-introduction a minimum income requirement.”

Given the high likelihood of a hung parliament, what about the impact of the smaller parties? “They could all end up having an influence on government policy,” Mr McPhail points out.

But the biggest change could affect the state pension, he reckons. “We’ve got a new state pension system coming in 2016 but the implementation is still pretty complicated. There are still uncertainties around increasing the state pension age in the future, so it would be surprising if we didn’t see some further tinkering from the government.

“Whether we see any of the fringe benefits withdrawn, such as bus passes or winter fuel allowance, will depend on who wins. The Tories are very keen to maintain these free handouts to pensioners, as they see it as a good way of buying votes. Meanwhile Labour has said it would look to means test some of the benefits for higher-earners in retirement – what’s the point of giving a free bus pass to a millionaire?”

But the greatest change after the election will be around the taxation of private pensions, he predicts. “We’ve seen so much change so quickly that it would be surprising if we didn’t see the next government tinkering and adjusting further on that front.”

Watch the video for the full interview with Mr McPhail.