Election 2024: The pensions industry reacts

Sir Keir Starmer is the new prime minister after his Labour Party won a landslide victory in yesterday’s general election.

Labour won 412 seats. Support for the Conservative Party collapsed, with Reform and the Liberal Democrats both making significant gains.

As we await news of the new cabinet, the pensions industry has already been laying out what it wants to see from the new government.

Labour’s pension system review
The party has been clear in its plan to review the UK’s pension system, having set out its intentions in February.

Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association, said: “There are two important issues we’d urge the government to resolve – the inadequacy of current pensions savings, and how to attract pension fund investment to support key policy goals such as climate change and UK growth.

“Labour’s planned pensions review provides the opportunity to consider these issues in depth. Whatever the outcomes, it is important that the solutions are right for scheme members and savers.”

Morten Nilsson, CEO of Brightwell, said: “It’s been 20 years since the Turner Commission examined the regime for UK private pensions and long-term savings, and while considerable progress has been made during that time, some major questions remain.”

He said the review needed to be “comprehensive” and take into account tax and investment as well as core pension policy.

Nilsson added: “Labour has an opportunity to create an over-arching, long-term vision of what the pension system is trying to achieve and set a framework for reform that can underpin consistent policymaking and unlock greater value over the coming years.”

Tim Middleton, director of policy and external affairs at the Pensions Management Institute, highlighted the need for clarity on the scope of the review, as well as Labour’s plans for the Defined Benefit Funding Code and changes to auto-enrolment.

David Lane, chief executive of TPT Retirement Solutions, said: “This review will be welcomed if it creates a long-term plan for the new government’s time in office.”

In particular, he called for government support for the creation of multi-employer collective defined contribution schemes and for scheme consolidation.

Primed for change?
Patrick Heath-Lay, chief executive of People’s Partnership, provider of The People’s Pension, said: “A change of government is an opportunity to think creatively, with pace, about the future of pensions in the UK. I hope that Labour’s pensions review will help revitalise the consensus that drove forward the success of automatic enrolment and create a roadmap for the future.

“It’s crucial that government and the pensions sector can work constructively to enable greater pension fund investment in priority sectors, while ensuring the interests of pensions savers are at the heart of decisions.

“It would also be welcome if there were a Pensions Schemes Bill in the King’s Speech, as there is a need for legislation on value for money and on small pots consolidation that should not wait.”

Iain McLellan, director at Isio, said the scale of Labour’s victory – and the strong majority it will have in parliament – meant that it may “be more radical and grasp some of the thornier pensions issues”.

He said: “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.”

David Fairs, partner at LCP, said: “What has been a theme of the election campaign is where government spending is going to come from given the Labour party have ruled out any increases to the three main taxes. This does mean that an early review of pensions tax could be on the cards.”

Sophia Singleton, president of the Society of Pension Professionals, said: “Taking time over decision making, consulting thoroughly with industry and allowing a sufficient period for any changes to be implemented, maximises the chances of policy success and impact whilst simultaneously minimising the risks of unintended consequences.”

Tom McPhail, director of public affairs at consultancy company The Lang Cat, predicted a “significant upheaval” – but said “balance needs to be struck” by the new government between delivering on its goals and “the sector’s capacity for change”, as there was a limit to how fast things could be implemented.

The pensions minister
Phil Wadsworth, chief actuary at administration firm Aptia, called for the next pensions minister to embrace the role and engage with the sector.

“For the pensions industry to meet the goals Labour has set, we need a committed minister who gets to grips with the issues and is there for the long term,” he said. “Too often, the position of pensions minister is seen as a stepping-stone to a more high-profile role in government.

“Making sure people have enough money to live on in retirement is a vitally important job. We hope Sir Keir appoints a minister who will work with the industry and stay in post to implement the review’s findings in the best interests of members and policyholders.”

Improving DC
Calls have been growing all year for an expansion of the auto-enrolment regime, including lowering the earnings and age limits and raising the minimum contribution level.

Aegon has issued a renewed call for a Pensions and Savings Commission to lead the review. Pensions director Steven Cameron said that, despite Labour’s majority, a cross-party consensus would “offer stability and certainty” to pension policy.

“We need a well-thought-through, logically-sequenced reform agenda, and the pensions industry stands ready to support this,” he said.

George Currie, senior consultant at LCP, said the new government should take the opportunity to “tackle long-standing challenges” in the defined contribution (DC) sector.

He highlighted “five great evils” that were holding back DC pension savers: inadequacy, inequality, irretrievability, inefficiency and insecurity.

“These are the themes that should be at the centre of any review, as the solutions to these issues will form the basis of a sustainable, equitable DC pensions system for all,” Currie said.