Heading into week 4 – What have we learnt this week about the pension commitments in the manifestos?

Its just over three weeks since the General Election was called on 22 May and the Labour, Conservative, and Liberal Democrat parties’ manifestos have all now been published at different stages this week. 

There are no particular showstoppers coming out of any of them and it is fair to say that most of the pension commitments are pitched at a fairly high level. As a result, there has been some discontent expressed within the pensions industry at the lack of specific mention of various ongoing pension initiatives and policies (e.g. the pot for life model, extension of pensions auto-enrolment requirements etc).

We take a look below at the key pension commitments from each of these parties’ manifestos and where that leaves us in terms of the various ongoing pensions policies and initiatives, which we set out in our very first General Election blog. 

Key parties’ manifestos – main pension commitments

Liberal Democrats 

The Liberal Democrats were the first to publish their manifesto on Monday. Whilst there is nothing particularly unexpected in it, what is striking is that it contains far more by way of specific pensions commitments than any of the other manifestos. It also has a particular focus on strengthening climate-change related commitments and requirements – far more than the other two main parties' manifestos.

The key commitments in the Lib Dem's manifesto are as follows:-

• Net zero – to introduce a requirement for pension funds and investment managers to align investments with the UK's commitment under the Paris Agreement – to "reduce emissions by at least 68% from 1990 levels by 2030".
• Climate change – a pledge to regulate financial services to "encourage climate-friendly investments" and including a requirement that pension funds and managers demonstrate their investments are consistent with the Paris Agreement.
• Climate change – to create "new powers" for regulators to act if "banks and other investors are not managing climate risks properly".
• Gig economy – introduce measures to improve employment rights, including a target to review pension rules "so that those in the gig economy don't lose out, and portability between roles is protected".
• Implementation of measures to "end the gender pension gap in private pensions" as well as a target to "ensure working-age carers can save properly for retirement".
• Support pensioners by protecting the triple lock so that pensions always rise in line with inflation, wages or 2.5% – whichever is highest.
• Ensure that the WASPI women born in the 1950s are finally treated fairly and properly compensated;
• State pension – lost top-up payments - improve the "processing system and providing proper receipts" so that "the scandal of lost top-up payments" for pensions is resolved.
• State pensions – administration – improve the State Pension system by investing in helplines to ensure quick responses to queries and resolution of underpayments. 

An interesting point to draw out from the above, wrapped up in the proposed gig economy measures, is the reference to “and portability between roles is protected”. We assume this is a reference to the “pot follows member”/lifetime provider” and / or small pots default consolidator propositions, albeit it is not specifically stated. So it seems that Lib Dems are committing to reviewing the rules around pension portability. It is the only party to reference that particular pensions initiative. 

Conservatives 

The key pension commitments contained in the Conservative manifesto, published on Tuesday, are as follows:- 

• A reaffirmation of the party’s commitment to maintain the state pension triple lock and introduction of the “triple lock plus” which will mean that the tax-free pension allowance will increase every year in line with average wages, inflation, or 2.5 per cent – whichever is the highest.
• The “Pensions Tax Guarantee” – it committed to not introducing any new taxes on pensions. It will maintain the 25% tax free lump sum and maintain tax relief on pension contributions at their marginal rate. It will not extend National Insurance to employer pension contributions. It will maintain all current pensioner benefits, including free bus passes, Winter Fuel Payments, free prescriptions and TV licences.
• Pensions taxation – War Pensions and Armed Forces Compensation Scheme – it will bring forward measures so that awards from these schemes are not counted as income for the purposes of benefits and pensions. 
• It is carefully considering the Ombudsman report into WASPI women (referring to the category of women known as the “WASPI women” who claim they were not properly informed of changes to the state pension) and will work with Parliament to provide an appropriate and swift response.
• National Insurance for the self-employed will be abolished entirely by the end of the next Parliament. 
• National Insurance for employees will be cut by a further 2p, taking the tax to 6 per cent by April 2027.

So there were no new pension surprises in the manifesto (the new “triple lock plus” having already been announced ahead of the manifesto launch) and it did not touch on any of the pensions-specific Mansion House reforms announced by the Government last year and expanded on at the 2024 Budget.

Labour

Labour was the last of the three main parties to issue their manifesto yesterday lunchtime. However, in the run-up to that, they had already let slip the answer to one of the most talked about General Election pensions-related issues– was the party still proposing to re-introduce the Lifetime Allowance? A spokesperson confirmed earlier in the week that it would not be included in the manifesto. We suspect that was met with a collective sigh of relief within the pensions industry that the work to bed in the recent changes may not need revisiting!

There are a number of other key pension commitments in Labour’s manifesto which, not surprisingly, cover much of the same ground as its January paper entitled “Financing Growth” (see our earlier blog which covered this):-

• It will act to increase investment from pension funds in UK markets. 
• It will adopt reforms to ensure that workplace pension schemes take advantage of consolidation and scale, to deliver better returns for UK savers and greater productive investment for UK PLC. 
• It will undertake a review of the pensions landscape to consider what further steps are needed to improve pension outcomes and increase investment in UK markets.
• It will end the injustice of the Mineworkers' Pension Scheme. It will “review the unfair surplus arrangements and transfer the Investment Reserve Fund back to members, so that the mineworkers who powered the country receive a fairer pension”.
• It will make the UK the green finance capital of the world, mandating UK-regulated financial institutions – including banks, asset managers, pension funds, and insurers – and FTSE 100 companies to develop and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement.
• It will retain the state pension triple lock. 
• It will adopt reforms to workplace pensions to deliver better outcomes for UK savers and pensioners. 
• Its pensions review will consider what further steps are needed to improve security in retirement, as well as to increase productive investment in the UK economy.

Therefore, Labour’s manifesto is the only one to contain proposals that specifically address a number of the Mansion House reforms. Many of them had already achieved cross-party consensus, but it was surprising nonetheless that the Conservative manifesto did not specifically address any of them given it was the current Government that initiated them. 

As set out above, there is also a specific commitment from Labour to review the surplus sharing arrangements of the Mineworkers’ Pension Scheme – this may at first glance seem surprising as a key priority. However, Labour committed to reviewing this at the start of the year in response to increasing pressure for former miners to benefit more from scheme surplus.  In return for guaranteeing member benefits, the Government is entitled to half the surplus cash from the scheme under an agreement signed many years ago when British Coal was privatised.  The BBC reported earlier this year that the Government had received more than £420million from the scheme in the last 3 years under the arrangement). In response to increased scrutiny of this arrangement, Shadow Secretary of State of Climate Change and Net Zero, Ed Miliband, had already committed Labour to reviewing the agreement if it wins power, to "deliver the justice to which miners are entitled”.

No further details were in the manifesto on Labour’s promise to bring outsourced public services back in house and “bring about the biggest wave of insourcing of public services in a generation” which we reported on last week.

Specific pensions policies and initiatives

In our very first General Election blog, we set out those particular points of interest where we would be keeping a close eye on the main parties’ manifestos and pension commitments to see which of them they covered. 

However, as mentioned above, very few of them have been touched on by the manifestos – those shown in italicised font below are the only ones that have been mentioned in the main parties’ manifestos. As also mentioned, this has been viewed as disappointing by many within the industry but is perhaps not surprising as the parties’ pension commitments have, in the main, been fairly high-level, lacking specific detail.

Labour and Liberal Democrats manifestos have each picked up on most of the issues shown in italics in the table below. 

Comment

Labour’s manifesto would appear to go the furthest in terms of promising to deliver many of the Mansion House reforms, as well as a wholesale review of the pensions landscape. It also includes of a specific climate change commitment unlike the Conservative manifesto. Interestingly, the Liberal Democrats manifesto may be viewed as the most “green-focussed” out of the three main parties. 

It is notable that the Conservatives did not touch on any of the Mansion House reforms in the context of pensions and instead focussed on the state pension and triple lock plus and maintenance of the status quo in terms of the pensions taxation regime as their big ticket items.

Next week’s Pensions and General Election blog will focus on ESG and climate change considerations and what the main parties’ manifesto commitments to those might mean for pension schemes.