What has happened in the last week?

A week after the surprise announcement of the General Election on the 4 July (which we reported on here last week), what have we gleaned about each of the main parties' commitments on pensions-related matters?

Well, so far, as might have been predicted, the big ticket in terms of pensions policy has been the ever-present matter of the state pension.

State pension and triple lock….plus

The headline pensions news this week is that the Conservatives have promised to cut taxes for pensioners by creating a new "age-related" tax-free allowance – being coined (no pun intended!) as the "triple lock plus".

Currently, pensioners receive £12,570 a year of their pensions tax-free before income tax kicks in. This is the same amount as the personal allowance which applies to people in employment. 

But the Conservative party is now proposing that if it wins the general election, a pensioner's tax-free allowance would rise in line with either average earnings, inflation or by 2.5% - whichever is higher - from next April, which mirrors the rules on the state pension increases.

According to the Conservatives, the policy would cost £2.4bn a year by 2029–30 and would be funded through previously announced plans to raise extra revenue by improving tax collection and clamping down on tax avoidance and evasion. 

Labour have indicated that they would protect the triple lock but have so far dismissed the Conservatives' “triple lock plus” pledge. The Liberal Democrats had already committed to protecting the state pension triple lock in the next parliament in an announcement which they made ahead of their Autumn party conference last year.

However, all three parties may be interested to note recent research by Opinium reported in the Daily Record quoting a Hargreaves Lansdown spokesperson.  The reported research shows that opinions vary with age, with well over half of over-55s more likely to vote for a party that kept the triple lock, against 16 percent of younger voters.  According to the spokesperson 10 percent of the younger voters said they would actually be less likely to vote for a party that protected the triple lock.

What other pension policies have been announced by main parties?

Other than the state pension, the two main parties have been quiet so far on the matter of pensions, albeit we are of course only one week in.  The Conservatives' starting point would likely be based on the many pension policies and initiatives they have instigated during their time in government, particularly those announced in the last year (including those known as the Mansion House reforms). A number remain in development.

However, a good indication of Labour’s potential position in relation to some key pension policies can be gleaned from the party’s paper entitled “Financing Growth” which it published in January this year. In the paper, Labour made a number of pensions-related pledges as follows:-

  • It committed to undertaking an in-government pensions and retirement savings review if the party was elected at the next general election. The purpose of which would be to assess whether the current framework is delivering sustainable retirement incomes.

    Labour said its review would look at the entire pensions ecosystem across all of the different types of pension scheme (defined benefit (DB), defined contribution (DC) and public service pension schemes), as well as looking at corporate sponsors, asset managers, venture capital (VC) and private equity.

It said that the review would form part of its efforts to "reinvigorate" the UK's capital markets which it argued was "key" to driving "innovation and investment" in the economy. This is of also reflective of the general intention behind many of the Mansion house reforms – see below. 

  • Labour promised that it would pave the way for greater consolidation across all pension schemes to enable them to have the necessary access, expertise and risk profile to increase investment in long-term illiquid assets, which it said it would deliver higher returns for savers.
  • In relation to DC schemes, Labour said it would provide the Pensions Regulator (TPR) with new powers to introduce consolidation where schemes are failing to provide members with value  (again reflective of one of the Mansion house reform proposals). And that it would also ask TPR to provide "explicit" guidance on strategy and suitability alongside an expectation of a "default cohort investment approach". 
  • Labour also announced plans to set up an opt-in scheme for DC funds to invest a proportion of their assets under management into UK growth assets, split between venture capital, small cap growth equity and infrastructure investment. Again, this is is consistent with the general drivers underlying a number of the Mansion House reforms announced last year. 

Cross-party consensus on certain pensions topics

Given the huge amount of complex legislative, regulatory and policy changes in the pensions industry over the last few years, the above and other prevoius statements indicate that there are actually a number of ongoing key pension policies in development which already have cross-party consensus, at least at the level of principle. 

These include: the extension of pensions auto-enrolment to more workers by lowering the minimum eligible age to 18 and reducing the lower earnings trigger; the introduction of pensions dashboards; and, as mentioned above, the Mansion House reforms, in particular those aimed at targeting pension scheme funds to reinvest back into the UK economy. The latter in particular is probably the area in which there is most consensus amongst the different parties, although we will be interested to understand the proposals for implementation in more detail. 

Where does it leave the publication of the Pensions Regulator’s DB Funding Code?

As we covered in our article last week, there are a large number of pensions initiatives, policies and draft legislation that have potentially been delayed by the calling of the General Election. 

However, one outstanding matter that has garnered the most attention and caused no small degree of concern within the pensions industry since the General Election was called is – what does it mean for the eagerly awaited DB Funding Code?

The Code was due to come into force in September but as we highlighted in our earlier blog, this will no longer be possible because of the requirement for it to be laid before Parliament for 40 days before it comes into force. 

There have now been some calls within the industry to delay its introduction until next year but as yet, the position of the Code is still up in the air. 

TPR has yet to specifically comment on potential implications for the Code (and other initiatives) of the summer election. As reported in the pensions press, a spokesperson for TPR has simply said:

 “During the pre-election period we will continue to regulate in line with our statutory objectives. Employers and trustees must continue to comply with their pension duties.

"We are working with government and other regulators on any implications for the timetable of our work.”

What is the industry asking the new government to focus on in its first 100 days in office? 

As is to be expected, there have been a flurry of suggestions within the pensions industry regarding what should be the new government’s focus in terms of pensions in its first few months in office.

However, the most commonly mentioned topics and issues which should be given priority are as follows:-

  • Continuing with the extension of pensions auto-enrolment requirements – regulations are still required in order to bring into force the Pensions (Extension of Automatic Enrolment) Act 2023 which gained Royal Asset last year;
  • Helping pension scheme members receive the support and advice and access to the right products that they need at retirement which is universally agreed upon as a key objective; and
  • Completion of the various existing pension initiatives that already had broad cross-party support (as mentioned above). 

Finally, there have also been calls since the Election was announced, for Labour to confirm whether, if it wins, it still intends to reinstate the Lifetime Allowance (LTA). This is of particular interest to those in the pensions industry who have spent the last few months trying to grapple with the LTA abolition and the large amount of technical detail in the related legislation and guidance. Some of the announced details are still to be addressed in a further set of rectifying regulations (one amending set of regulations already having been introduced), the delay of which will be another knock-on consequence of the calling of the General Election. 

Keep watching this space and tune in each week for our General Election pensions blogs, which will also look at discrete pensions hot topics and possible impact on them of the General Election. 

This article is current as at 29 May 2024.