After a landslide win for Labour in the 2024 general election, Rachel Reeves has been appointed Chancellor of the Exchequer. It’s a milestone moment for British politics as she’ll be the first woman to occupy the position since it was created 800 years ago. A great moment for women, but what does it mean for you and your pension savings?
Labour’s manifesto highlighted a strong focus on economic stability and growth, but now the Chancellor’s been in office for a month, her plans are starting to unfold.
Here’s a summary of what we’ve seen so far and what might be to come.
Winter Fuel Payments
The new Chancellor’s hit the ground running with a big change to Winter Fuel Payments. The allowance applied to everyone over State Pension age (66 rising to 67 in 2028) before, but will now only be available to pensioners already receiving other state benefits like Pension Credit.
Pension tax-relief
There’s conversation around whether the Chancellor will change how pensions are taxed to help cover the shortfall in the public finances. For example, we may see a change to the amount of pension tax relief savers receive, or to the 25% tax-free cash pensioners can withdraw.
The Chancellor’s argued in favour of a flat rate of 33% tax relief for everyone in the past. The Labour party have so far said it’s not policy.
Triple lock State Pension protection
Before the election, Labour ruled out matching the Conservatives’ ‘triple lock plus’ pledge. This would have seen the tax-free pension allowance rise every year in line with the triple lock. It means more pensioners could face tax on their retirement income as the State Pension will continue to rise each year by; inflation, average earnings or 2.5% - whichever is highest.
Gender pension gap
The Chancellor has made no secret of her ambition to drive progress for women, and the role that this will play in Labour’s vision for economic growth.
Possible measures such as better maternity leave, improved conditions for part-time workers and flexible working arrangements could impact the gender pension gap too.
A review of workplace pensions
Labour has committed to a review of workplace pensions and the Chancellor launched a two-part pensions review this month. Whilst the details are yet to be shared, the 2024 manifesto pledged to consider what further steps will improve security in retirement, and increase productive investment in the UK economy.
Pension Schemes Bill
During the King’s Speech in July 2024 the Pension Schemes Bill was announced. It aims to create a private pensions market that focuses on value and outcomes for members.
The bill includes measures to combine “micro” pension pots of less than £1,000 into one place;
so people don’t lose track;
to ensure all members are saving into pension schemes that deliver value;
to focus on poor performing default funds; and
to require pension schemes to offer a retirement income solution or range of solutions to their members.
Auto-Enrolment changes
The Pensions (Extension of Automatic Enrolment) Act was passed in 2023 but is yet to be applied. It would extend Auto-Enrolment to 18 to 21-year-olds and may get rid of the lower earnings limit. This would mean more contributions but a potential reduction in take-home-pay.
Minimum pension age increase
The minimum pension age is the age at which you can access your pension. It’s currently 55 (rising to 57 in 2028) for workplace and private pensions and for the State Pension it’s aged 66 (rising to 67 in 2028). The age at which you can access your pension is rumoured to be within the wider pension review. It’s believed that making people wait longer before they access their money could help in making retirement funds more likely to last into the future.
The Autumn Budget is set for 30 October, where we expect to find out how these areas will develop and see new measures announced.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
