Labour's Plans For Your Pensions - King's Speech Special

On the 17th July 2024 we had the first King’s Speech of the new government and found out more about Labour’s plans for pensions.

This was because, surprisingly, there was a new Pensions Scheme Bill announced in the speech.

I’ve now gone through the briefing notes that accompany the King’s Speech and what’s been said since by Labour ministers. So, let’s look at how Labour’s plans for pensions might impact you.

Before we start, I must say that many of the measures that are to be included in the Pension Schemes Bill were raised by the previous Conservative government. You can read more on their thought process by reading Jeremy Hunt’s Mansion House Reforms.

Labour have taken these reforms on and say their will go further.

Within the King’s Speech background briefing notes, the Pensions Scheme Bill is number three on the list of new bills discussed behind just the Budget Responsibility Bill and the National Wealth Bill.

There were over 35 bills announced in the King’s Speech so should we read into this that the Pensions Scheme Bill is an important one for Labour?

The overall aim of the bill is apparently “to increase the amount available for pension savers and could help an average earner, who saves over their lifetime in a defined contribution scheme, to have over £11,000 more in their pension pots with which to secure their retirement income.”

There is already plenty to unpack from this statement and lots wrong with it.

Firstly, no government can control what returns pension savers will make. Returns will be down to two things, the amount saved into a pension and the performance of the underlying investments.

Governments don’t control where investment fund managers invest…. yet!

It’s really misleading to communicate that government meddling is going to be able to produce a larger retirement pot and specially to put a figure on it.

If you are going to mislead the public, you would have thought they would have used a higher figure than £11,000.

One of the first points of the briefing notes confirming Labour’s plans for pensions, states that the bill will consolidate individual deferred small pension pots. So, this means pensions that are no longer being paid into. Most likely a pension you have from a previous employer.

Whilst it’s generally a good thing to consolidate pension pots to make the administration easier, lower costs and be better able to manage your overall investment strategy, caution is needed here.

Many older pension schemes still have valuable benefits available to members which would be lost if the pension was transferred.

Next the briefing notes mention a ‘Value for Money Framework’ where they aim to force pension providers to demonstrate they are providing value for money.

I would argue, if you look for it the market for pensions has already produced a pretty good value for money proposition.

A further worrying statement in the briefing notes was around pension schemes having to offer a “retirement income solution”.

This sounds like further control from the government and pension providers on how retirees can take their money out of pensions.

We have recently had an attempt to do something similar with pension saving funds, known as lifestyle funds.

These types of lifestyle funds fell off a cliff during the days following Liz Truss’ famous ‘mini-budget’ wrecking lots of people’s retirement.

Defined Benefit pension schemes were also mentioned in the briefing notes and again it was around consolidating schemes.

Good for the unfunded poorly run schemes, not so good for the well-funded, well-run schemes that have to accommodate the others.

The big theme for Labour’s plan for pensions is to ensure greater investment into the UK economy. They want a slice of the pension market to fund infrastructure, the green agenda and investment into private companies.

On the plus side there was no mention in the King’s Speech or the briefing notes about changes to the pension Annual Allowance, Lifetime Allowance or tax relief.

What I suggest you should be doing now is carrying out a review of all your pensions with a view to potentially consolidating them into a solution that you choose before it is chosen for you.

Before you transfer any pension remember to check for protected benefits.

The biggest decision you need to make with any pension you have is the underlying investment strategy you take.

For the best results over the longer term an investment into global equity will be the most prudent but look at how your pension investments fit into your overall wealth investment strategy.

Overall, it is good to be diversified across assets from a protection point of view.

It feels like the government want more control over your money, so you might want to consider things you can do to take away this control and ensure you are in charge.

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