What has the Labour Party promised on pensions and what does it really mean?
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First out of the blocks in this year’s general election is the Labour Party who launched their 2015 manifesto this morning.
Fortunately, Pensions Insight has trawled through the 86 page strong document, hunting out the policies relevant to pensions, and evaluating what they mean.
Top rate earners
“Labour’s plan to balance the books means making tough, but fairer choices. We will reverse the Government’s top-rate tax cut so that the highest one per cent of earners, with an income of over £150,000, contribute a little more to help get the deficit down. We will stop paying Winter Fuel Payments to the richest five per cent of pensioners, and cap child benefit rises for two years.”
In a move that will surprise no one, Labour have pledged to reverse the Conservative’s top rate tax cut. Lumped in with the same group are the richest pensioners, who will lose their winter fuel allowance, a policy which Balls has been touting since as far back as 2013.
“Britain’s economy is being held back by the culture of short-termism, which is a major obstacle to the development of productive businesses and industries. We will reform corporate governance to protect our leading firms from the pressure to put tomorrow’s share price before long-term growth potential.
“Institutional investors will have a duty to act in the best interests of ordinary savers. They will have to prioritise long-term growth over short-term profits for the companies in which they are investing. We will change takeover rules to enhance the role of long-term investors by restricting voting to those already holding shares when a bid is made. In addition, we will strengthen the public interest test. “
Labour have pledged to do more to make sure institutional investors are better aligned with savers’ interests and put a stop once and for all to short-termism. More detail will be needed to understand exactly how this will work and how short-termism can be measured.
“We will improve the link between executive pay and performance by simplifying pay packages, and requiring investment and pension fund managers to disclose how they vote on top pay. And we will make sure employees have a voice when executive pay is set by requiring employee representation on remuneration committees.”
The executive pay reform will have little impact on the average pensioner, but pension funds managers will be forced to disclose how they chose to vote on matters of executive pay if Labour win the election.
“Labour will cut tuition fees from £9,000 to £6,000 a year, funded by restricting tax relief on pension contributions for the highest earners and clamping down on tax avoidance.”
There’s nothing new here as the Labour party announced this policy back in February. It’s also not a Labour-only policy, the conservatives have already announced a similar policy where the proceeds allow Cameron to scrap inheritance tax for assets up to £1m.
In fact, we can expect to see consensus across all the major parties. This is low-hanging fruit for the treasury coffers and no matter who ends up in government, we will likely see the higher tax relief scrapped or restricted.
The triple lock
“Older people deserve to live a fulfilling life, to continue working if they wish, and to enjoy a secure retirement. Older people have contributed all their lives and built the Britain that the next generation will inherit. So it is right that they are supported with a fair and sustainable pensions system, responsive health services and a system of care over which they have control. We will keep the triple-lock so that the state pension increases by inflation, earnings, or 2.5 per cent, whichever is highest. And while increases in the state retirement age are necessary to keep our pensions system affordable, we will ensure that people have time to plan for changes.”
This is another policy that enjoys cross-party consensus. Originally a Lib Dem brainchild every major party has committed to preserving the triple lock.
“Alongside a decent state pension, we must ensure private pensions are good value for those who have saved. We will reform the pensions market so that pension providers put savers first, and protect consumers from retirement rip-offs. We support greater flexibility for those drawing down their pension pots, but there must be proper guidance for people to avoid mis-selling.”
The Labour party confirms that it will leave the new freedoms more or less alone (hardly surprising when they are the most popular pensions reforms in living memory) but have left themselves some scope to tinker round the edges under the guise of providing more protections. The party has long been vocal on the importance of protecting savers from scams, so we would expect more policies based on this in the future.
This was a fairly solid manifesto from the Labour party in terms of pensions, so surprises, but no real giveaways for the grey vote either. Essentially, nothing that really rocks the boat.
This makes sense. Given the coaltion’s huge successes in pensions over the last five years, Ed Miliband was never going to use it as his main platform to pick the conservatives apart. Particularly he’s already indicated that Labour will fight this election on the NHS.
One question on everyone’s lips should be how much devolution of pensions are we likely to see if the SNP hold the keys to Westminster. Sturgeon has already committed to blocking a rise in State Pension Age, and it remains to be seen whether further pensions devolution would be on the cards.