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What does Labour’s general election victory mean for pensions?

IFS highlights five key pension decisions for the next government

Written by Retirement Line

What does Labour’s 4 July 2024 general election victory mean for people receiving pension income, or due to retire in the next few years? Here’s our quick roundup of what we can expect – and what may lie ahead.

Prime Minister Keir Starmer will no doubt be wading through a huge in-box as he gets settled into a new job and a new home at 10 Downing Street. For millions of UK pensioners – and those with retirement in the not-too-distant future – there is understandably a degree of uncertainty about what the change of government could mean.

It’s worth reflecting on what Labour said about pension matters in the run-up to their historic victory. We’ll also look at pensions issues that weren’t prominent in Labour’s campaign, but that will nonetheless affect millions in the coming years.  

The State Pension

The future of the State Pension was at times a hotly debated subject during the election campaign. Now that the dust has settled, what can we expect from the new government?

The Triple Lock

In the run-up to the election, Labour pledged to maintain the triple lock on State Pensions. This established protocol ensures that the State Pension increases annually by the highest of these three measures of inflation: the Consumer Price Index (CPI), average earnings growth, or a minimum of 2.5%. 

However, there are other decisions about the future of the State Pension that remain to be confirmed by Labour. One of vital interest to many people is the timetable for raising the State Pension age to 68. 

The personal tax allowance

Unlike the Conservatives, Labour didn’t pledge to introduce a so-called ‘triple lock plus’ that would raise the personal allowance for pensioners. This measure would keep their State Pension income below the level at which income tax liability begins.

However, that doesn’t rule out the prospect of the new government monitoring the effect of further annual triple lock State Pension rises and rethinking the personal allowance accordingly.

Increases to the State Pension age

The State Pension age is currently 66 for men and women. The timetable for raising it currently looks like this:

  • An increase from 66 to 67 – between April 2026 and April 2028

  • An increase from 67 to 68 – between April 2044 and April 2046

However, under the previous government there were plans for a further review within two years of the next Parliament. This would reconsider the rise of the State Pension age to 68, with a commitment to provide ten years’ notice of any changes. 

In other words, the increase from 67 to 68 would be reviewed, and the date for the increase could change. Only time will tell whether the new government will go ahead with such a review, and if so when this will happen.

Compensation for ‘WASPI’ women

The Labour manifesto made no mention of the potential for compensation for so-called WASPI women. These are women born in the 1950s who believe they weren’t properly informed about the change in the State Pension age from 60 to 65, and then 66. (See our guide to WASPI for more information.)

Earlier this year, the Parliamentary and Health Ombudsman suggested compensation payments of between £1,000 and £2,950 to women affected. However, it is up to the Department for Work and Pensions – and ultimately the new government – whether compensation will be paid and, if so, how much.

Private/personal pensions

As we previously reported, Labour’s manifesto included mention of some planned changes to the UK pensions landscape if elected. This included an aim for pension schemes to deliver better returns for savers by ensuring that pension schemes “take advantage of consolidation and scale”.

Furthermore, Labour promised a wider review of the pension system: “We will also undertake a review of the pensions landscape to consider what further steps are needed to improve pension outcomes and increase investment in UK markets.”

Labour has also pledged to give the Pensions Regulator “new powers to intervene where schemes fail to offer sufficient value for their members”.

The precise scope, scale and timeframe for the review has not been communicated, so it remains to be seen how much of an impact it will have. In addition, some issues that may fall under the new government’s focus have not been mentioned in the context of the review, including:

  • Whether changes to any aspect of pensions taxation will be considered.

  • Looking at an increase in minimum workplace pension contributions and, if so, the impact on low earners in particular of a reduction in take-home pay. 

  • How to increase the level of pension saving among the self-employed: only around 20% of self-employed workers save into a private pension, compared to 50% in 1998. 

Appointment of a Pensions Minister

Some in the pensions industry have been frustrated by the fact that there have been 17 different Pensions Ministers since 1998 – an average of a new minister every eighteen months.

Retirement Line’s Mark Ormston says: “Whoever Keir Starmer appoints as Pensions Minister, I hope it will be someone who engages fully with the industry and consumers alike. 

“I also hope they will be able to stay in post for a number of years to ensure the continuity that’s needed in such a crucial role.”

Interesting times ahead

Regardless of campaign promises and manifesto pledges, pensions policy is likely to be an ever-changing landscape in the coming years. With an ageing population and constraints on the public purse, governments of every political persuasion will continue to look for solutions to ongoing challenges. 

Sources:

Labour’s pledge to maintain triple lock and Labour’s pledge to give Pensions Regulator new powers: Labour Party pensions policy. Labour Party. Accessed 04/07/2024. 

Conservatives’ pledge for triple lock plus: The triple lock plus. Conservative Party. Accessed 04/07/2024.

State Pension age timetable: State Pension age review. gov.uk. Accessed 04/07/2024. 

WASPI/Ombudsman information: Women’s State Pension: our findings on injustice and associated issues. Parliamentary and Health Service Ombudsman. Accessed 04/07/2024. 

Labour’s pledge for a pensions review: Labour Party Manifesto. Labour Party. Accessed 04/07/2024. 

Level of self-employed people contributing to a pension scheme: Pensions: five key decisions for the next government. IFS. Accessed 04/07/2024. 

There have been 17 Pensions Ministers since 1998: New pensions minister as Laura Trott promoted to Treasury role. Professional Pensions. Accessed 04/07/2024.

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