Labour’s plans for pensions – what we know so far

Following the news that Labour has won the 2024 UK general election, Pensions Age takes a look at what we know so far about the party’s plans for pensions.

The exact detail on much of Labour’s pension policy is yet to be shared, although the 2024 manifesto provided some insight into the party’s plans, including its pledge to conduct a pensions review to consider what further steps are needed to improve security in retirement, and increase productive investment in the UK economy.

But many industry experts have suggested that, despite the change in government, there could be some continuity in pensions policy, particularly in relation to the push for more investment in UK productive assets, and consolidation.

“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,” Broadstone head of policy, David Brooks, said.

LCP partner, David Fairs, agreed, suggesting that a “new colour of government doesn’t mean a radically different path for pensions policy”.

“We will see a lot of continuity around some of the big themes such as collective defined contribution (CDC), dashboards and auto-enrolment (AE) reform, and we expect to see the adaptation of the PPF to establish a public sector consolidator.

“Supporting growth by encouraging pension schemes to invest in the UK economy is likely to be high on the agenda.”

And whilst initially a focus for the former Conservative government, Hargreaves Lansdown head of retirement analysis, Helen Morrissey, pointed out that Rachel Reeves has also championed plans to encourage pension investment in UK businesses, “so we can expect movement on this in the near future, whatever the outcome of the election”.

Indeed, in its manifesto, Labour said that it would act to increase investment from pension funds in UK markets, by adopting reforms to ensure that workplace pension schemes take advantage of consolidation and scale, and to deliver better returns for UK savers and greater productive investment for UK PLC.

“We will also adopt reforms to workplace pensions to deliver better outcomes for UK savers and pensioners,” the manifesto stated.

“Our pensions review will consider what further steps are needed to improve security in retirement, as well as to increase productive investment in the UK economy”.

The role of pensions in climate change efforts was also highlighted in the Labour manifesto, as the party argued that the financial services industry has a “major role” to play in mobilising trillions of pounds in private capital to address the “greatest long-term challenge of our age”.

Given this, it said that it will look to mandate UK-regulated financial institutions, including banks, asset managers, pension funds, and insurers, and FTSE 100 companies to develop and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement.

In addition to this, Labour also said that it will look to end the injustice of the Mineworkers’ Pension Scheme, confirming its intent to review the “unfair” surplus arrangements and transfer the Investment Reserve Fund back to members.

One area of relief was the news that Labour seemingly has no plans to reinstate the lifetime allowance, having been omitted from the Party’s 2024 manifesto, following reports that the party had dropped plans to reintroduce the tax as a result of industry concerns around the uncertainty for savers and the complexity involved.

However, Isio director, Iain McLellan, cautioned that “this falls short of an outright commitment to leave pensions tax alone, and pensions might be seen as a convenient target for ‘stealth’ taxes when fiscal circumstances are tight”.

This is not the only area that the industry is awaiting further detail on, as industry experts have also continued to question the potential scope of Labour’s promised pensions reviews, raising queries as to what will and will not be in scope of the party’s promised pensions review.

In particular, organisations expressed disappointment over the omission of the AE reforms in Labour’s election campaigning, as well as whether it would look to push ahead with plans for a pot for life model, and how it will look to provide a pipeline of investible assets for UK pension funds.

However, there are hopes that AE reform could be an area on the party’s agenda, as former Labour pensions minister and work and pensions committee chair, Stephen Timms, who was also re-elected as MP of East Ham, recently said that increasing minimum auto-enrolment contributions to 12 per cent “must” be a priority over the next decade.

The pension industry’s immediate focus, however, will likely be set on getting some key initiatives over the line, after the general election threw the timing of the long-awaited DB Funding Code into question.

But Fairs warned that, if the government wants to pursue a different approach, there could be a significant delay before the new code is laid.