July 20, 2024

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What are the political parties’ pension policies and is it enough?

With the general election fast approaching, political parties in the UK have set out the steps they propose to take with regards to pension schemes in their manifestos.

When in government, the Conservative party used the Autumn Statement and Spring Budget to announce their plans to make pensions more productive for the UK economy.

In April, the party applied the triple lock in full to the state pension for 2024-2025 (an 8.5% increase) and confirmed the abolishment of the lifetime allowance, while also proposing measures such as a pension ‘pot for life’ and the consolidation of small defined contribution pension funds.

The Conservative party has reaffirmed its commitment to the triple lock in its manifesto, introducing the ‘Triple Lock Plus’ which ensures that both the state pension and the tax free allowance for pensioners always rise with the highest rate of inflation, earnings or 2.5%.

The majority of the other political parties, from the national Labour and Liberal Democrats parties to the regional parties Plaid Cymru and the SNP who do not have devolved control of pension policy, are also committed to the triple lock.

The exceptions are Reform UK, who did not specifically mention the triple lock within their ‘Contract with the People’, and the Green Party who suggest that they would replace it with a double lock system linked to inflation and earnings, moving to a flat rate of pension tax relief in line with the basic rate of income tax.

Stuart Price, partner and actuary at Quantum Advisory, said: “Pensions are a key policy area for political parties as most voters will receive the state pension and employees are contributing to workplace pensions throughout their professional life.

“The increase in the state pension earlier this year thanks to the triple lock was welcome news for pensioners – a demographic likely to turn out for elections. The triple lock was especially welcomed by those who rely on this as their main source of income and is also an increasingly popular policy decision amongst adults over 40, with a recent survey by My Pension Expert revealing that over half (51%) of respondents stated that a commitment to maintaining the triple lock would significantly influence their voting intentions in the general election.

“Therefore, it is not surprising that many of the political parties across the country have stated within their manifestos that they will retain the triple lock. It is interesting to note that proposals to reform pension schemes are also being highlighted.”

Labour intends to review the pensions landscape and adopt reforms to ensure that workplace pension schemes take advantage of consolidation and scale, increase productive investment and boost the country’s growth. Green finance is also high on the party’s agenda, with a requirement for pension funds to develop and implement transition plans that align with the Paris Agreement, a plan also echoed in the Liberal Democrats and Green Party’s manifestos.

Other suggested reforms include the Liberal Democrats investing in helplines to ensure quicker responses to queries and underpayments for the state pension, the Green Party working closely with the higher education sector to tackle challenges regarding the Teachers’ Pension Scheme and Reform UK aiming to review pension provision and minimise the complexity of the system.

Stuart Price added: “Reforms to pension systems are good political strategies to enable growth and economic prosperity. However, what we really need is a full review of our pension system as it is clear that the younger generation are not saving enough, which will lead to huge problems in the longer term. The only real answer in my opinion is a legislative increase into the minimum contributions required under auto enrolment legislation from say, an 8% total to at least 12%. From what I have seen this is not mentioned in any of the political parties’ manifestos, which is disappointing.”