For the most part, nobody likes uncertainty. It can get in the way of progress and stop us moving forward with plans for the future – and these don’t get more important than retirement plans. With a general election on the way, there’s been a lot of guesswork in the world of pensions as to what impact it’ll have on our retirement savings.
With polls heavily suggesting a Labour win later this year, all eyes have been on the party’s Plan for Financial Services. This document answered some, but not all, of the questions around how it might act should it win. Let’s take a look at what a potential change in government could mean for your pension.
1. The Lifetime Allowance
In last year’s Spring Statement the Conservative Party announced it would be scrapping the Lifetime Allowance. This change is due to come into effect in April 2024. The Conservatives intended to encourage inactive individuals to return to work and remove the incentives to stop working. Labour has previously stated it would reverse this decision and reinstate the Lifetime Allowance should it get the opportunity. However, readers of the latest plan may have noted its exclusion, suggesting it might be subject to review.
2. Mansion House Reforms
There’s unlikely to be much divergence between the main parties on the Mansion House Reforms. Announced by Chancellor Jeremy Hunt in July 2023, the reforms are designed to seek ways to incentivise pension funds to invest more in the UK. In its latest plan, Labour announced it would create a British ‘Tibi’ scheme (akin to the French version which has created a €5 billion fund of institutional investment for French tech companies). If this were to happen in the UK, we could see increased investment into companies identified as having high growth potential. How would this impact pensions? Well, it would give UK pension funds, and with them its pension savers, an opportunity to invest in Britain’s most promising businesses.
3. Changes to Auto-Enrolment
A Conservative-backed bill has previously suggested changes to Auto-Enrolment which included:
lowering the minimum age from 22 to 18 - giving young workers the opportunity to start saving four years earlier; and
removing the qualifying earnings band - meaning contributions could be paid from the first pound earned.
Labour looks keen to expand Auto-Enrolment. This won’t come as much of a surprise as Labour initially developed Auto-Enrolment legislation as part of the Pensions Act 2008, before it was rolled out by the Conservative and Liberal Democrat coalition government from 2012-2018.
4. The State Pension and the triple lock
As we know from PensionBee’s Pension Confidence Index, the State Pension is an important factor for many of the UK’s pension savers. So the triple lock is a hot topic for any government, incoming or otherwise. Last year, the Chancellor maintained the triple lock and the State Pension will rise by 8.5%, in line with average earnings, from April. So the Conservatives have protected it for now but Labour’s position is unclear.
Last year, Deputy Leader of the Labour Party; Angela Rayner failed to confirm Labour’s commitment to the triple lock. While more recently Shadow Secretary of State for Work and Pensions; Liz Kendall stated there were no plans to change the triple lock. With the State Pension creating a sizable burden on the public purse, the triple lock is likely to continue to face scrutiny.
5. ‘Pot for life’ or lifetime pensions
Last year’s Autumn Statement saw the Chancellor unveiling plans for a ‘pot for life’. This would give employees the power to choose their own pension provider. Plus, it would help solve the problem of multiple small pots. Meanwhile, Labour has announced it’ll give the The Pensions Regulator new powers to bring about consolidation on certain defined contribution schemes. It has also criticised the delays to the Pensions Dashboards – which are designed to give savers access to all of their pensions data in one place. After several delays, the current timeline puts launch at 31 October 2026.
Gabriella Griffith is a freelance business journalist having worked across The Times, Sunday Times, The Telegraph and City AM. She also hosts the Find Your Business Voice podcast and co-hosts the Big Fat Negative podcast. She has a particular passion for start-up and SME stories, personal finance and women’s health.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
