Pensions policy – will Labour deliver on its promises?

5 July 2024

With the general election results confirming the widely-anticipated news that Labour will form the next government following a landslide win, attention turns to how it will deliver on its pension promises.

In its manifesto published last month, Labour pledged to conduct a wide-ranging ‘pensions review’ and industry experts said this is likely to cover auto-enrolment, given concerns over pension adequacy, as well as ways that consolidation could improve outcomes in the workplace pension market.

Jon Greer, head of retirement policy at Quilter, said a focus on extending auto-enrolment and adjusting contribution thresholds is critical to ensure more people are saving for their future.

Greer said: “The pension review is also likely to explore productive investment strategies, leveraging pensions to stimulate the UK economy in a continuation of Jeremy Hunt’s Mansion House reforms encouraging pension funds to disclose and invest more in UK assets.

“The introduction of Collective Defined Contribution schemes, where both employers and employees contribute to a collective pot, are likely to be on the agenda, however, the practical implications of these proposals remain to be seen. The government must provide clear, actionable steps to ensure these reforms effectively enhance retirement security.”

Aegon said the party’s promised review of the pensions landscape could have “far-reaching implications” for workplace and private pensions. As such, it has called upon Labour to establish an independent ‘Pension and Savings Commission’ within its first 100 days of office.

Steven Cameron, pensions director at Aegon, said: “Labour is coming to power with many of the previous government’s pension plans still under development. To allow progress, we need clarity on which will continue, change or be cancelled.

“With pensions being such an important long-term savings vehicle for millions, changes shouldn’t be rushed. And, however ‘super’ the Labour majority, cross-party support can offer stability and certainty. We need a well thought through, logically-sequenced reform agenda and the pensions industry stands ready to support this.”

Aegon has also urged Labour to push ahead with the ‘targeted support’ proposals from the FCA and Treasury, offering a new form of financial help to those unable or unwilling to pay for full financial advice and continue with implementing pension dashboards.

“These could be game changing for individuals to track and engage with all of their pension and we urge Labour to make sure these go live by the 2026 target date,” Cameron added.

With no mention of the Lifetime Allowance in Labour’s manifesto, it is expected that Labour will continue with previously-announced plans to reverse the Conservatives’ abolition of this tax, but further detail will be needed around the small print.

Similarly, Sir Keir Starmer will also need to tackle the State Pension, particularly the state pension triple lock which has seen pensions rise considerably in recent years and raised questions about the policy’s long-term sustainability.

Greer said: “At present no government has had the boldness to tackle what is an unsustainable policy for fear of losing votes. Despite Labour’s manifesto pledges, we need policy that works for the long-term and a state pension uprating system that is pegged to average earnings would be a fairer option that should make the state pension sustainable for future generations.

“Rather than the triple lock being used as a political tool, its future policy should be better set by an independent pension commission to ensure the right balance of long term outcomes for UK retirees and the economy.”

David Brooks, head of policy at Broadstone, added: “With a Pensions Minister to be appointed and a Kings Speech in just two weeks’ time, policy is likely to move quickly but we broadly expect continuity in the pensions market. There are already significant legislative processes underway which we anticipate will be continued – with the possible exception of the controversial pot for life proposals.”

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