Prime Minister Rishi Sunak has announced a UK general election will be held on 4 July this year, earlier than many expected. What should a new government focus on in pensions?  

The election announcement comes after inflation fell to 2.3%, figures released on Wednesday show.  

Many had expected an autumn election with another fiscal event first. An election is now set in six weeks’ time, and Labour continues to lead in the polls. With so many big pension changes already in train – the notable exception being an increase to minimum auto-enrolment contributions – what does the pensions industry want to see from a new government?  

Labour has said it would conduct a review across the pensions spectrum, but not revealed what this would focus on.

The Pensions and Lifetime Savings Association's director of policy and advocacy, Nigel Peaple, said: “If Labour forms the next government, their promise of a pensions review should address pension adequacy and the role of pension investments in public policy goals like UK growth and net zero."

He said one of Labour’s key commitments has been to secure the highest sustained growth in the G7, with the party clear that pensions can contribute to this goal.

"As part of this work we expect them to continue the ongoing value for money initiative and the advice guidance boundary review," he said. “We look forward to seeing more of the detail of these policies if Labour forms the next government as they develop.”
 

   

   

“While the Conservatives’ pension policy is well understood, less is known about Labour’s policy position, and it’s likely to hinge on a future review of pensions. [The] key question is, what’s in the review and how long will it take? Could a review mean a pause while Labour consider policy options?" said Tim Gosling, head of policy at People’s Partnership.

“However, both parties see consolidation in the DC market as important and both are actively considering the wider role of pension funds in UK economy.”

Nicholas Clapp, commercial director of pension provider TPT Retirement Solutions, said 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 administration’s intentions, which will delay people from building up their savings for retirement," Clapp said.

Tim Middleton, director of policy and external affairs at the Pensions Management Institute, called the fact there is no shadow pensions minister perhaps his biggest concern, urging Labour to make an appointment “as a matter of urgency” after Gill Furniss recently stepped down for personal reasons.

 

 

Middleton agreed that aside from the shadow pensions minister issue, auto-enrolment should be the top priority. The Pensions (Extension of Automatic Enrolment) Act 2023 gained Royal Assent in September last year, but regulations needed to implement the changes have not yet been made, he pointed out.  

 

“It would be extremely frustrating for these overdue reforms to be delayed any longer,” he said.

 

The PMI also wants to see changes to pension freedoms. Middleton said: “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.”  

Implementing the recommendations from the 2017 Automatic Enrolment Review “is likely to be an early job for the next administration”, said Tom Selby, director of public policy at investment platform AJ Bell.  

He said there will also need to be decisions on the state pension. Both big parties have said they are committed to the triple lock, and Labour has in recent weeks sought to attract the pensioner vote by creating fear over abolishing national insurance. 
 

 

Any issues with the sustainability of the state pension are likely to be put on those still of working age, once more. Selby said that planned state pension age increases will come into focus for the next administration, noting that “there have been calls from various quarters to accelerate that timetable in order to save the Treasury money”. The current state pension age is 66 and is due to rise to 67 by 2028 and 68 by 2046.  

One of the few clear announcements Labour has made was that it would reintroduce the lifetime allowance.

Selby called this “a retrograde step, adding unwelcome complexity to an already complex system”.   

He added: “We’d urge all parties to focus on keeping pensions as simple as possible and avoid turning pension tax into a political football. By their very nature pensions are a tool for long-term planning and the public need to be confident that governments won’t move the goalposts every five minutes.” 

"Constant tinkering and overcomplication" undermine long-term planning and economic calculation, agreed Sam Roberts, director of investment consulting at Cartwright.

As for whether anything significant will change for pensions depending on who wins the election, he believes there is not much difference between Labour and the Tories.  

"Yes, the lifetime allowance will probably come back. And Labour will want its own review of the pensions industry. But sadly, either way, we can expect more uncertainty and delays in knowing the regulatory burden on the industry, more intervention and regulation, and more disincentives to save and invest for our long-term futures," Roberts said.

"Incredibly, both parties believe that they can allocate assets more productively through a political process instead of those who have their own money on the line. Yet another example of trying to artificially pump the economy for a bit longer," he added.