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09 / 07 / 2024
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What does a new Labour government mean for the pensions sector?
During the election campaign, pensions was a hot topic. But the focus was squarely on the state pension with the Triple Lock and ‘Triple Lock Plus’ the main battlegrounds.
However, turn the pages of the Labour Party Manifesto and you’d find 15 mentions of ‘pension’ or ‘pensioner’.
Now that Sir Keir Starmer has the keys to Downing Street what can the pensions industry expect?
There are a number of areas that Labour have outlined in their manifesto that we anticipate will move at pace.
Most notably, Labour has committed to undertaking a review of the pensions landscape to “consider what steps are needed to improve pension outcomes and increase investment in UK markets”.
It’s been 20 years since the Turner Commission examined the regime for UK private pensions and long-term savings and while considerable progress has been made during that time, some major questions remain. As such, taking stock before setting the direction of travel is a wise move. But for this review to be meaningful it needs to be comprehensive and look at the system as a whole – both pensions policy (the remit of DWP) and taxation and investment (the remit of HM Treasury).
In recent years there have been a number of somewhat ad hoc initiatives and there’s a lot of work in progress – superfund legislation, pensions dashboards and the DB funding code to name just three.
If the review can help create an over-arching vision of what the pension system is trying to achieve and set a framework for reform that forms the basis for consistent policymaking over the coming years, then the industry would rejoice. The top priority must be addressing the question of DC adequacy to prevent future generations sleepwalking into poverty in retirement.
Labour has made it clear that they’ll continue the previous government’s focus on encouraging greater investment from UK pension schemes in UK productive finance. One of their key initiatives is a National Wealth Fund which will give pension funds the ability to co-invest alongside the government in funding the green energy transition.
Despite the prevailing narrative, UK pension schemes are already major investors in the UK and would fiercely resist any attempt to cut across their fiduciary duty mandating them to invest in specific asset classes or geographies. But if the National Wealth Fund is designed in the right way there would certainly be interest from the industry. The key to its success will be securing cross-party support so investors have confidence it will have longevity beyond one Parliament.
A Labour government may be supportive of using the Pension Protection Fund (PPF) as a public sector consolidator, as this would support Labour’s objective for greater consolidation in the sector and could allow the government to have greater influence over the PPF’s investment strategy.
The other opportunity which Labour could capitalise on is unlocking DB scheme surplus. The recent options for DB schemes consultation outlined proposals to make it easier to return surplus to sponsors or share with DB or DC scheme members.
If done right, this could give Labour the opportunity to support UK growth by returning some of this money directly to sponsors to re-invest in their business priorities.
The to-do list for the new Pensions Minister is a long one, but the industry has its door open and is committed to working with government to help ensure the best outcomes for savers for the long-term.
If you’d like to know more about Brightwell, get in touch at: hello@brightwellpensions.com
