Hargreaves Lansdown head of pensions research Tom McPhail says the strength of the political mandate given to the Conservative Party increases the likelihood of further changes to pension tax relief.
Broadstone technical director David Brooks argues that the decisive nature of the Conservative’s success in the general election means it is now more likely that the plan to create a secondary market in annuities will go ahead.
McPhail also argues that recent increases in bond yields could create some respite for annuities in future. But some analysts are arguing a renewed commitment to austerity will put downward pressure on gilts.
Brooks says: “We know the Conservatives have plans to roll back the tax relief for people earning over £150,000 – so those high earners interested in making the most of the benefits of contributing to a pension scheme should do so before the shutters come down later this year.
“The rest of the Conservative’s manifesto was relatively quiet on pensions and so we can, perhaps, expect a quieter time for pensions. There was no mention in the manifesto of the sale of annuities, although incoming Consumer minister Ros Altmann is in favour of the policy and so it may yet get a second wind. She has also spoken in favour of lowering the level where advice is required for a transfer from a DB scheme to £10,000 so we may yet have further changes to make.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “After the seismic changes in the 2014 Budget, further changes to pension taxation seem inevitable, particularly for higher earners. In particular given the manifesto proposals, anyone with plans to make pension contributions in the immediate future and particularly those paying higher rates of tax should consider acting sooner rather than later.
“We’ve also seen bond yields edging upwards in recent weeks, with 15 year Gilt up from 1.7 per cent on 30th January to 2.3 per cent on 7th May, which could mean annuity rates getting pulled upwards in the days and weeks to come, but we have had so many false dawns in the annuity market over the past 5 years that investors should be wary of pinning their hopes on a significant improvement in the rates.”
UBS Wealth Management head of UK investment office Bill O’Neill says: “A renewed commitment to austerity should support gilts. With certainty will come a renewed confidence from investors in a more stable and transparent policy climate. For now, let’s enjoy the relief rally.”
Investec Wealth & Investment head of investment strategy John Wyn-Evans says: “The markets’ reaction to the result has been predictably positive, with the pound being the initial beneficiary. Gilt yields have also fallen on the prospect of more austerity and a lower deficit while shares are rising, unsurprisingly led by house builders, domestic retail banks and regulated utilities and outsourcing companies.
