A Labour government would require pension funds to have transition plans in line with the Paris Agreement, the party said in its election manifesto published on Thursday. It would also launch a review of pensions as previously announced, while pension funds would be encouraged to consolidate and invest in the UK.

Labour's manifesto largely reiterates what the party said about pensions and productive investment in its ‘Plan for Financial Services’ in February.   
   

 

However, it now includes a green transition requirement. The party called climate change "the greatest long-term challenge of our age”, adding: “Labour 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.”  

On Monday, the Liberal Democrats said in their manifesto they would require pension funds and managers “to show that their portfolio investments are consistent with the Paris Agreement".  

But it was not just climate that Labour highlighted on the pension investment side – like recent Conservative governments, it will look to pension funds for the private capital it thinks is needed to kickstart the UK economy, and sees consolidation as a precondition for this.  

“We 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,” the party that is tipped to win the election said.   

The previously trailed big review of pensions has not been forgotten, although Labour remains vague on what this could include and if it would set up an independent commission.   

A sentence stating that Labour, which is currently without a shadow pensions minister, would “adopt reforms to workplace pensions to deliver better outcomes for UK savers and pensioners” could be referring to implementation of the auto-enrolment reforms for which powers were created last year. This would bring 18 to 22-year-olds into the pension system and would mean contributions are paid from the first pound earned.   
   

 

The manifesto adds: “Our 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." 

It is unclear if ‘further steps to improve security in retirement’ would mean increasing minimum auto-enrolment contributions, a key demand of the pensions industry.  

As tends to be the case, the manifesto also contains reassurance for grey voters on retaining the triple lock.

In addition, those in former mining towns are being considered as the Mineworkers’ Pension Scheme received a special mention, with a pledge to overturn a surplus sharing arrangement perceived as unfair by its pensioners.   
 

 

On social care, Labour said it would build consensus for longer-term reform to create a National Care Service and would explore how to best support an ageing population, but it remained silent on funding.     

Master trust providers have welcomed the continued focus on consolidation. David Lane, chief executive of TPT Retirement Solutions, said: “Encouraging consolidation could provide better value to the schemes, incorporate the highest levels of stewardship and, ultimately, deliver better outcomes for pension savers.” 

 

He notes that a review of workplace pensions could be popular with voters, many of whom feel they need help with saving for retirement. TPT found 57% are worried they are not saving enough, and 88% want the next government to do more to help people save for retirement. 

  

Although it is unclear what specific outcomes Labour’s proposed pensios review would achieve, it is important that a thorough review takes place, said Tim Middleton, director of policy and external Affairs at the Pensions Management Institute.  

“We are encouraged that the Labour party has committed to better retirement outcomes for pension savers and that its review will seek to identify the best way to achieve this," he said.  

Becky O’Connor, director of public affairs at provider PensionBee, pointed out that the manifesto makes no mention of the lifetime allowance, the tax threshold scrapped by chancellor Jeremy Hunt. It was previously reported that Labour had dropped its pledge to bring back the pension savings limit.  

 

 

She also said the firm’s own research has found “a strong consumer desire for a comprehensive review of the pensions and retirement system to take place”. 

On the party’s plan to mirror Conservative policies and get pension funds investing in productive assets, O’Connor said reforms could lead to increased investment in alternatives but that questions remain about whether these investments will deliver the promised returns. 

 

Others went further, advising caution on trying to move pensions money into private markets. “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,” said David Brooks, head of policy at consulting firm Broadstone. 

  

Brooks believes there are no unexpected changes ahead when it comes to pensions. “Given the Conservatives’ plans are similarly light on new policy ideas, it suggests the pensions sector can prepare for welcome continuity over the next five years. This is pleasing given the huge number of policies that are already progressing through regulatory and legislative processes,” he said.