Key pension reforms are likely to be derailed by decision to call a General Election on 4th July.
This is likely to include legislation to extend auto-enrolment to younger and part-time employees, which gained Royal Assent in Parliament last year.
Draft regulation to set up multi-employer CDC (collective defined contribution schemes) and proposals to give DB schemes the flexibility to access surplus funds will also now be delayed with Parliament set to be prorogued on tomorrow (24 May) and dissolved on 30 May.
These could be significantly changed or abandoned entirely if the new administration sets out different priorities for pension reform.
During next week MPs will sit as normal, but any parliamentary business not completed by the end of that period will not enter law and cannot be continued in the next parliament.
TPT Retirement Solutions commercial director Nicholas Clapp says: “The announcement of the general election means the progress of several important pension reforms is now up the air.
“The expansion of automatic enrolment to those aged under 22 and those in part-time work will now be delayed until we know the result of the election and the new administration’s intentions, which will delay people from building up their savings for retirement.”
The Pensions Management Institute director of policy and external affairs Tim Middleton says: “The Pensions (Extension of Automatic Enrolment) Act 2023 gained Royal Assent in September last year, but as yet we are still awaiting the regulations needed to implement the changes.
“It would be extremely frustrating for these overdue reforms to be delayed any longer. When the coalition government came to power in 2010, one of their first reforms was to the drawdown rules. I would hope that an incoming government would consider reforms to the Freedom and Choice regime as a priority. There is clear evidence that members are making poor decumulation decisions and an initiative to address this would be most welcome.”
Those across the industry have called for both parties to set out their priorities when it comes to future pension reform, with the PMI saying it hopes to see clearer direction from Labour on this issue.
“Perhaps my biggest concern at this point is that there is no Shadow Pensions Minister. This is something that must be rectified as a matter of urgency,” adds Middleton.
The Pensions and Lifetime Savings Association director of policy & advocacy Nigel Peaple says: “Whoever wins the forthcoming general election, we ask that the new Government does three things: firstly, it sets out a plan for increasing workplace pension contributions so more people have an adequate pension in retirement; secondly, it ensures people approaching retirement receive more support and the right products; and, thirdly, it works in partnership with the pensions sector on how to attract pension fund investment to meet policy goals such as UK growth and the transition to net zero.”
Hargreaves Lansdown head of retirement analysis Helen Morrissey says: “After a period of fevered anticipation, the general election has finally been called and pensions will be a key focus.
“The state pension will continue to grab headlines, with both Conservatives and Labour confirming their commitment to the triple lock in recent weeks. It’s a controversial issue that divides the generations, with well over half of the over 55s saying a pledge to continue the reform would make them more likely to vote for a party. However, younger voters are much less sure with only 16 per cent saying such an expensive policy would earn a tick in the box come polling day. In fact, 10 per cent of younger voters said they would actually be less likely to vote for a party that protected the triple lock.”
She adds: “Pensions are something we all need to be in for the long haul and yet they’ve been subject to the whims of the electoral cycle. Such an approach risks undermining people’s confidence in their retirement planning when they need stability and predictability in areas such as pensions taxation. This will give them the confidence that the money they save today, will fund their retirement rather than disappear into the hands of the taxman.
“One key example is the status of the recently abolished lifetime allowance. Mere moments after being announced with a flourish during the 2023 Budget, Labour definitively hit back saying it would reinstate this allowance if elected. The party has since gone quiet about how and when it will do this, and the pressure will be on to release more detail.
“There are also other important areas such as the work around lifetime pensions that need to continue into the next government regardless of which party wins. Pensions are the ultimate long-term issue and should not be viewed through a short-term lens to garner votes.”
