Experts say Labour must grasp pensions nettle

Leading industry pensions and advice sector experts have welcomed Labour’s victory as a chance to push forward some key financial reforms but some have raised questions about the clarity of Labour's pension and advice priorities. Financial Planning Today has collected some of today's key reactions. Alastair Black, head of savings policy at Abrdn, said: “In its manifesto, Labour outlined plans to set up a pensions commission. This would be a very positive first step if, as we hope, the aim is to improve participation and deliver better outcomes for savers. However, this should not distract political attention from other critical long-term Financial Planning issues that need to be addressed. “This includes making sure that people can access the right help to make financial decisions, when they need it. The Advice Guidance Boundary Review is an incredibly important piece of work in this area, and could lead to the best chance we have of closing the advice gap in a generation. We must maintain momentum in this critical area of reform. Luckily, Labour have already stated they are supportive in their “Financing growth” policy paper earlier this year.” Andrew Tully, technical services director at platform Nucleus, said: "We need to make UK Pensions Dashboards happen, make it soon and make it effective. This will simplify and speed up the process of finding and consolidating pension funds, a major obstacle for many consumers. “In terms of the advice/guidance boundary and simplified advice regime the aim is for consumers to get the help they want, at the time they need it, and at a cost that is affordable, to help them make informed financial decisions. But the solution to this challenge will not be met by changes to regulated advice alone. Labour covered this area within its Financing Growth paper in January 2024 (Financing-Growth.pdf (labour.org.uk) "It seems likely that Labour will not make any immediate changes to reintroduce the lifetime allowance – which was its original position last year. It will be a positive move if there is no further changes to these rules. "However, some of the legislation introduced in April to abolish the LTA was wrong and a variety of customers have been left in limbo awaiting correcting legislation before they can take benefits. It’s crucial this amending legislation is pushed through as quickly as possible to put people in the correct position and allow them to eventually take their benefits.” Jamie Jenkins, director of policy at Royal London, said: “One of the most important manifesto pledges from Labour for the financial services sector is its commitment to conducting a review of the pensions landscape. Pension assets are now considered a key ingredient in resolving the UK’s economic growth challenge and, as a result, have risen up the ranks of political priorities. But pensions are first and foremost there to provide people with an income in retirement. “The two things are not mutually exclusive, but any review needs to take a more holistic, longer-term view, considering the needs of all stakeholders. And the new Government will undoubtedly want to build on the success of automatic enrolment, originally conceived under a Labour Government, rather than make rash decisions that risk dismantling it.” Tom Selby, director of public policy at AJ Bell, said: “The pledge not to increase National Insurance, income tax or VAT led to feverish speculation of exactly what might be in new Chancellor Rachel Reeves’ fiscal crosshairs, particularly if growth remains as elusive as it has been for the past two decades. And if there is a vacuum for speculation about potential revenue raising tax measures, it is inevitable the prospect of a potential pension tax raid will rear its ugly head. It is vital savers and investors ignore the noise ahead of Reeves’ first major fiscal set-piece, likely in September or October, and focus instead on their long-term goals. “This is not just about tax, however, with a series of reforms already in train, issues requiring attention from different government departments and reviews promised. For millions of savers and retirees after years of constant chopping and changing of rules and limits, Reeves’ commitment to stability will have been welcome. Brits will be hoping the Chancellor practices what she preaches when it comes to retirement policy by delivering at least some certainty over the next five years.” Iain McLellan, director at pensions actuarial firm Isio, said: “With Labour securing a sizeable majority their promised pensions review has the potential to be more radical and grasp some of the thornier pensions issues. The government may feel it has clear licence to pursue the most ambitious form of its vision for UK pension schemes and their members. That could include sweeping changes to improve member outcomes, ensure schemes take advantage of consolidation and scale, and increase productive investment in UK markets, though it’s worth noting that the consolidation and productive investment themes are ones that were also being pursued by the previous government. “In the meantime it will be interesting to see who is appointed as Pensions Minister and what existing pensions policy developments they look to accelerate, put on the back-burner or bin altogether. Labour has dropped its plans to reintroduce the Lifetime Allowance and has no current plans for further changes to pensions taxation. However, this falls short of an outright commitment to leave pensions tax alone, and pensions might be seen as a convenient target for ‘stealth’ taxes when fiscal circumstances are tight.” Tom McPhail, director of public affairs at consultancy The Lang Cat, said: “Labour has already set out its stall around economic growth - using money from the pensions system to do this, and its planned review of the pensions landscape and reform of workplace provision. This may well include reviewing contribution levels for auto enrolment, and revisiting Pension Freedoms with a greater focus on ensuring people have a guaranteed long-term income. We can expect significant upheaval in the months ahead though balance needs to be struck between delivering this mandate with the sector’s capacity for change – there’s a limit to how fast things can move. “ Lily Megson, policy director at My Pension Expert, said, “A Labour victory was as close to inevitable as you could get. Yet, Starmer and his party must not be complacent. Britons have experienced a great deal of financial hardship throughout the final years of Conservative governance. Financial Planning – particularly retirement planning – has been an uphill battle for many Britons. “As such, it is vital that the incoming government work rapidly to ensure economic stability. Further, pension policy must be airtight. Leading the party’s plans for pension policy is a comprehensive pensions review – a much-needed initiative that should be a top priority. With millions not saving adequately for retirement, the review must result in reforms that improve access to financial education, boost pension engagement, and simplify savers’ experience of the sector. Indeed, closing the engagement gap must be top of the agenda for the new government.” “Above all, what we need is for the new government to actually deliver on its promises to transform pensions. Appointing a dedicated pensions minister with a clear action plan will be a crucial first step toward providing Britons with the knowledge and tools they need to achieve financial security in retirement. After a long period of instability and disillusionment, now is the time for definitive action. Your move, Labour.”

Experts say Labour must grasp pensions nettle

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