Pensions, productive finance and green investments all feature in the Labour Party’s manifesto, published today ahead of next month’s general election.
However pension experts said there were ‘no big surprises’ when it came to pension policy, with plans for the sector being widely trailed ahead of the manifesto publication.
The manifesto confirmed Labour’s commitment to maintain the triple lock on the state pension. It has also pledged for a wide-ranging pensions review, with the aim of improving outcomes for savers.
The manifesto shows that the Labour Party remains supportive of a number of planks of existing pension policy, most notably to encourage greater consolidation in the workplace pensions market and the DB sector. It will also continue to explore ways to encourage wider DC investment in private markets and ‘productive finance’, particularly in relation to furthering the country’s net zero ambitions.
However, there was no mention of the lifetime allowance in the manifesto, suggests that Labour would not be re-introducing this pension limit. Shadow chancellor Rachel Reeves had earlier pledged to do this, but it emerged over the weekend that these plans had been dropped.
Broadstone head of policy David Brooks says: “Labour’s manifesto contained no notable big-ticket ideas for the pensions’ sector, confirming plans to progress with the productive finance agenda and encourage further consolidation in the workplace pension market.
“The Labour Party has pledged a wide-ranging ‘pensions review’, but the devil will be in the detail as to what that covers before we can anticipate any potential outcomes.
“Labour has also, as expected, committed to the State Pension triple-lock and there now seems to be political consensus that this is untouchable. The encouragement for green-focused investments also appears to have achieved cross-party consensus.”
He adds: “The push for productive finance comes with a caution warning as there may be a disappointing uptake from defined benefit schemes but an ongoing review into VFM may allow more schemes to allocate long-term illiquid assets to this space.
“Whatever government we have in three weeks, we would counsel caution in this space as these assets are not a one way bet and the long-term interests of pension savers will need to be carefully balanced with the short-term needs of the country.”
Barnett Waddingham partner Richard Gibson adds: “By far the biggest prize for any Chancellor looking to get assets working for the UK economy is the nearly £1.5trillion locked up in private sector DB pension schemes. The near-term focus of the Mansion House reforms is on DC pensions, but Labour’s manifesto is clearly committed to pursuing the plans first proposed by the Tony Blair Institute, to bring together hundreds of the smallest private sector DB pension schemes into a single fund, backed and overseen by the public sector.”
He says: ”This is a sensible strategy. Those schemes could deliver economies of scale and improve asset returns. Many pension schemes are already doing this, and will move over £200 billion to the buy-out insurance market over the course of the next parliament. If the new Government really wants to plan ahead, it must look at how insurers can use that capital for long-term infrastructure and investment in UK markets.”
Broadstone adds that the pensions sector can prepare for welcome continuity over the next five years, particularly with the Conservatives manifesto being “similarly light on new policy ideas”.
He adds: “This is pleasing given the huge number of policies that are already progressing through regulatory and legislative processes.”