As the country prepares to vote in the General Election on 4 July 2024 the major political parties have released their manifestos detailing what changes they would make if they were given the majority vote to run the country. Pensions is an area of which the government needs to take some vital decisions on, some of them urgently.

Labour

Pension reforms

Labour’s manifesto has pledged to reform workplace pensions in a bid to ‘deliver better outcomes’ for retirees and savers, with plans of launching a pension review to establish if extra steps are required to improve ‘security in retirement’ and increase investment in the UK economy.

The party committed to reviewing the UK pensions landscape if it gets into power after the general election on 4 July. This would include the commitment to ending the unfairness of the Mineworkers’ Pension Scheme, with the party confirming its pledge to review the "unfair" surplus arrangements and transfer the ‘Investment Reserve Fund’ back to scheme members.

Life time allowance, National Insurance & taxation

Labour did not mention any plans to reinstate the lifetime allowance, which indicates that the party may have dropped its previous plan to reintroduce the tax, if elected.

Labour pledged there will be no tax rises for working people. They have specifically ruled out rises to income tax, National Insurance and VAT.

Other issues

Labour has vowed to increase investment from pension funds in UK markets, by implementing changes to guarantee that workplace pension schemes take advantage of consolidation as well as to scale and provide better returns for UK savers.

Concerning climate change efforts, the party emphasised the importance of utilising the financial services industry which plays a "major role" in assembling trillions in private capital to address the "greatest long-term challenge of our age".  Consequently, the manifesto pledges to consider authorising UK-regulated financial institutions to develop and apply transition plans which align with the 1.5°C goal of the Paris Agreement.

Conservative

Pension reforms  

The Conservative party manifesto upheld the already proposed pension reforms, and to continue with a number of the existing reforms which are currently going through the legislative process.

Life time allowance, National Insurance & taxation

Their manifesto also included a pledge to maintain the 25% tax-free lump sum, as well as to keep tax relief on pension contributions, at their marginal rate.

They will not seek to extend National Insurance to employer pension contributions and, have proposed a National Insurance cut for the self-employed, which would reportedly save the average worker £449.00 a year.

The Conservatives pledge to continue working towards providing pensioners with ‘dignity in retirement’, by implementing the new initiative to safeguard the proposal that the new state pension is not income taxed.

However, other notable Conservative pension policies such as the lifetime provider or ‘pot for life’ concept were missing.

Other issues

The party also committed to giving more power to ‘The Pensions Regulator’, by permitting it to block acquisitions and mergers and, make it a criminal offence for companies to intentionally sabotage a scheme.

The manifesto also confirmed that, the Ombudsman's report remains under consideration on concerns over women's state pensions, and the party intends to collaborate with Parliament.

The manifesto also comes with a promise to maintain current pensioner benefits, including free bus passes, Winter Fuel Payments, free prescriptions and TV licences.

Liberal Democrats

Pension reforms

The party manifesto provided plans to create measures to end the gender pension gap and improve the state pension system for example, by investing in helplines to ensure rapid responses to enquiries and assist with quicker resolutions to underpayments.

The party further pledged to end the “scandal” of lost top-up payments by revamping the processing system and providing adequate receipts.

Life time allowance, National Insurance & taxation

The Liberal Democrats want to cut income tax by raising the tax-free personal allowance, according to the party's manifesto. It has vowed to consider introducing an ‘increased single rate’ of pension tax relief, to simplify the way that pension schemes are administered and, to scrap any remaining marriage inequalities when it comes to pensions.

In support of the above, Leader Ed Davey said the said the party has put health and care at the heart of its manifesto, saying the NHS and care in the UK were in crisis.

Other issues

Concerning climate change, the manifesto promises to require pension funds and scheme managers to demonstrate that their portfolio investments are consistent with the Paris Agreement.  

The Liberal Democrats also promised new powers for regulators permitting them to take action against banks and other investors that are not managing climate risks properly.

More broadly, the party pledged to find a way to “give everyone the chance to enjoy a decent retirement” with several pension-related policies covering both workplace and state pensions, such as ensuring working-age carers can save properly for retirement.

There was no mention to widen auto-enrolment reforms in their manifesto.

The Green Party

Reforms

The green party made no mention to the proposed pension reforms, and/or indication as to whether it would continue with a number of the existing reforms which are currently going through the legislative process.

Their manifesto pledges to collaborate with the higher education sector to address the challenges created by changes to employer contributions for the Teachers’ Pension Scheme (TPS).

Lifetime Allowance, National Insurance & Taxation

The party have pledged to introduce a ‘wealth tax’ on the country’s richest and, announced that under new plans people would be entitled to pension tax relief at a flat rate of 20 per cent, whereas currently pension tax relief is granted at whatever rate of income tax the person is paying.

The party seek to increase National Insurance costs for anyone earning more than £50,270. Currently people pay a lower rate of National Insurance once they reach this threshold, with employed people, seeing the rate drop from 8% down to 2%. The higher band would be abolished, presumably meaning people would be charged 8% on their entire salary over the Personal Allowance.

Other issues

The Green party’s manifesto revealed that, it would require UK pension funds to remove fossil fuel assets from their investment portfolios by 2030, and vows to equate the rate of pension tax relief with the basic rate of income tax to help fund social care for elderly and disabled people.

They also pledged to require non-banking financial institutions, to remove fossil fuel assets from their investment portfolios, securities transactions and balance sheets by 2030.

Reform UK

Reforms

The Reform Party has vowed to review the UK pension system indicating that it would replicate similar systems in other countries, such as Australia.  No mention was made as to whether it would continue with a number of the existing reforms which are currently going through the legislative process.

Lifetime Allowance, National Insurance & Taxation

Their reforms proposed increasing the minimum income threshold for income tax to £20,000, which would save “every worker almost £1,500 per year.”

The party propose a national plan for a ‘sustainable social care system’. Stating that the ‘sector needs flexibility, tax incentives, VAT breaks and less waste’. They propose ‘simplifying social care through a single funding stream, instead of the split between NHS and Local Authorities. More funding will be needed when a national plan is agreed’.

Other issues

Assurance to “end the Mineworkers Pension Scandal”,  was provided by the party who fully accepted the ‘Business, Energy and Industrial Strategy Committee 2021 recommendations’ to amend the Mineworkers Pension Scheme arrangements.

More broadly, the Reform party pledged to introduce a new ownership model for critical national infrastructure and the manifesto mentions encouraging pension schemes to invest in the UK.  Their manifesto describes a 50/50 infrastructure investment model to fund national infrastructure and utilities, funded by investment from UK pension funds and the other half publicly owned.

The manifesto further outlined bold plans whereby 50 per cent of each national utility would be managed by the UK’s pension funds, though the document did not go into detail as to how this would operate.

Conclusion

It is highly likely that detailed consideration will be given to public sector pension schemes, in terms of funding/affordability, and benefit structure. Any subsequent reforms could only be contemplated and implemented once a proper consultation had occurred with the unions.

How Capsticks can help

Capsticks has significant experience supporting employers on a wide variety of pension issues. We will be keeping up to date on all developments throughout the General Election and will be providing further updates on any new policies by the newly elected government.

If you have any further questions our expert pension team would be delighted to assist you. More information of support available at Capsticks can be found here.