Labour’s manifesto: triple lock would stay, but where’s the detail on workplace pensions and tax reform?
Leaked last week then revealed for real on Tuesday, Labour’s election manifesto is not short on references to pensions. Most focus around state provision, with commitments to maintain the triple-lock, postpone any further state pension age (SPA) increases beyond the age of 66 and commission a new review of state provision that will look at flexible retirement ages. Those searching for details on future workplace pensions policy, however, will be sorely disappointed.
For the time-poor, pension industry responses to the manifesto are best summarised as ‘it’ll cost yer’, and ‘where’s the plans for tax relief?’ More detail below…
Maintaining the triple-lock is “politically astute,” said Chris Noon, partner at Hymans Robertson. “It’s likely to be a low cost commitment over the course of the next parliament but will be received well by the electorate.”
Labour’s decision to halt increases to the SPA at 66 might also sound like a vote-winner, but it comes at a hefty price. “Keeping pension ages down simply means a bigger tax bill for the working age population,” said Steve Webb, director of policy at Royal London. “State pension ages are rising around the developed world. It would be burying our heads in the sand as a nation to think that we can somehow insulate ourselves from these trends.”
Tom McPhail head of policy of Hargreaves Lansdown added that to make the policy cost-neutral would mean a cut of £800 per year for all state pensions.“It’s not much good retiring earlier if you can’t afford to live,” he said, explaining that the measures would be likely to “ultimately lead to increased pensioner poverty.”
“The cost implications of Labour’s plans are enormous and as such are almost certainly unrealistic,” said Malcolm McLean, senior consultant at Barnett Waddingham. “Independent estimates have suggested that effectively capping the SPA at 66 might cost as much as £300 billion, whilst the plan for a flexible retirement age, initially considered in the recent Cridland review, was rejected as being ‘horrendously complicated’ to implement.”
Beyond a commitment to “restore faith in the workplace pensions system”, detail on corporate pensions is light. The manifesto supports creating fewer, larger workplace schemes - a theme already being explored elsewhere by the industry and by the recently-dissolved government. “This is a good idea,” said McPhail. “There are undoubtedly too many schemes and some of them, such as some of the smaller company schemes, are not particularly well run.”
Noon described Labour’s workplace pension plans as “very vague”. “For such a left-leaning manifesto, I’m surprised that they didn’t adopt collective final salary plans – similar to those that operate in the Netherlands. That would have been popular with the unions and helped the long-term saving crisis.”
Perhaps in reaction to last year’s collapse of BHS and ensuing pensions scandal, Labour has pledged to amend the takeover code, to “ensure every takeover proposal has a clear plan in place to protect workers and pensioners”. It has also made a specific commitment to an “immediate review of the mineworkers’ pension scheme and British Coal superannuation scheme surplus, sharing arrangements between government and scheme beneficiaries.”
WHAT’S NOT IN THERE ?
Detail on workplace pensions might be light, but pension tax relief and ways of addressing poor levels of personal retirement savings are lost without trace in the manifesto.
“The manifesto doesn’t address the severe level of under saving for retirement the UK,” said Noon. “There is no detail on how Labour would tackle the complexity of pension tax relief and incentivise individuals to save more.”
“I’m surprised that there has been no reference to tax-relief reform and, in particular, a shift to a more redistributive policy here,” added Richard Parkin head of pensions policy at Fidelity International. “The main reason pensions are so complex is the combination of government’s obsession with constantly moving the goalposts for future pension accrual while not rationalising the existing entitlements in the same regime.”
Regardless of party politics, Darren Philp, director of policy and market engagement at The People’s Pension called for “a long-term political consensus” when it comes to pensions, that focuses on “delivering transparent, good value and well-governed schemes.” He added: “We also must build on the successes of auto-enrolment to date by increasing coverage to excluded groups.”
“Overall,” concluded Parkin, “the pensions policies here seem more focused on playing to the house rather than putting forward a blueprint for a sustainable pensions system for the UK.”