The surprise result of June’s general election has left investors wondering whether a softer Brexit deal is now on the cards, and has given advisers fresh doubts about the fate of pensions policy.
Theresa May’s Conservative party failed to secure its expected majority on June 8, leaving some to suggest that the prime minister will have to water down plans for a hard Brexit deal.
“The result piles uncertainty on uncertainty. The good news is that it may pave the way for more consultative government and a realistic approach to the forthcoming Brexit negotiations,” said Neil Dwane, global strategist at Allianz Global Investors.
But David Page, senior economist at Axa IM, commented: “The difficulty for any government would be that there is no Brexit consensus to deliver: supporters were drawn to Brexit for diverse (and sometimes diametrically opposed) reasons. The problem for this government is that its new fragility increases the difficulty in driving through its version of Brexit, raising the chances of a chaotic Brexit with no deal in place.”
Amid speculation that few Conservatives want to trigger a leadership challenge and therefore risk a second election at a time of slumping poll numbers, Ms May has retained her position as prime minister. But the Queen’s Speech on June 21 saw the government row back on a number of manifesto proposals.
Many advisers may welcome an absence of further tinkering with pensions policies, but David Newman, head of pensions at Close Brothers Asset Management, stressed that outstanding issues still had to be resolved.
“A ‘business as usual’ approach may be no bad thing for UK savers for the time being, as they adjust to new options and products. However, there are still elements we need clarity on. The future of the triple lock and confusion around the Money Purchase [Annual] Allowance to name but two.
“This may become clearer in due course, as we see the new pensions minister settle into the role, but it’s clear that major reform is off the table.”
The government had proposed scrapping the triple lock in its manifesto, but the plan was not included in the Queen’s Speech. The planned cut to the Money Purchase Annual Allowance was postponed in advance of the election in order to ensure a pared-down Finance Bill was passed before Parliament was dissolved.
Rachael Griffin, tax and financial planning expert at Old Mutual Wealth, added: “Several policies remain in limbo as the fate of the Finance Bill remains in the air. With limited time on their hands, the Parliament is likely to push it aside until April 2018.
“This leaves policies covering deemed domicile, non-domiciles holding property in overseas structures and the pension Money Purchase Annual Allowance in limbo despite the fact that they had ‘technically’ already come into force since they applied from 6 April 2017.”
dan.jones@ft.com
