Sir Keir Starmer is the UK’s new Prime Minister after a landslide win for Labour in the 2024 general election. So what does his appointment mean for your pensions and savings?
The Prime Minister outlined his party’s stance on pensions and savings in the Labour manifesto but more policy priorities will be set out later in the year. Firstly, in the King’s Speech on 17 July then at the Labour conference in September and finally in this year’s Autumn Statement.
As the new government takes shape, we summarise the Labour party’s key intentions for your pensions, savings and investments.
Triple lock State Pension protection
Labour has promised the triple lock will remain in place for now. This means the State Pension increases each year by either:
- inflation;
- average earnings; or by
- 2.5% - whichever is highest.
However, Labour hasn’t specified how long the triple lock will remain in place.
Labour has also said it’ll not increase the annual tax-free personal allowance for those receiving the State Pension. The State Pension is currently £11,502 (2024/25) and the personal allowance is £12,570 (2024/25). This could mean pensioners end up paying income tax on their State Pension as it rises each year.
Stock market movements
With polls and markets predicting a Labour victory in advance of the general election, Labour’s win has so far not rocked stock markets. This means the value of your private pension or other investments may not have fluctuated too much over the past few days in response to the news.
Obviously no one can predict where markets will move next as more Labour policies are clarified or implemented. More details about the new government’s tax, spending and economic growth plans should be revealed in the Autumn Statement. This is likely to take place any time between September or November.
There are a record number of elections taking place worldwide this year, including the US presidential election, that could also impact global stock markets.
No plans to re-introduce the lifetime allowance
The Conservative party scrapped the pension lifetime allowance (LTA) in the Spring Budget 2023. Before it was scrapped, the LTA meant you could save a total of £1,073,100 into pensions before facing tax penalties. Labour originally said it’d reintroduce the LTA however then-shadow Chancellor Rachel Reeves later made a u-turn. There was no mention of the LTA in the Labour manifesto - although of course this doesn’t mean it’ll never be reintroduced again.
Pension system overhaul
The Labour government plans to undertake a pensions review to look at where improvements can be made in the current system. Liz Kendall is the UK’s Secretary of State for Work and Pensions under the new Labour government.
Becky O’Connor, Director (VP) Public Affairs at PensionBee says: “Labour’s commitment to a comprehensive review of the pensions and retirement savings system is promising and could provide a real benefit to millions of pension savers.”
The Prime Minister has said Labour will adopt ‘reforms to workplace pensions to deliver better outcomes for UK savers and pensioners’. This review will consider what further steps are needed to improve finances in retirement but there is no further detail on this yet.
It’s also expected the new Labour Government will continue with plans already in place to extend Auto-Enrolment in 2024. This means the age at which employees will automatically be enrolled into a workplace pension scheme will fall from 22 to 18. The result could mean that people start paying into pensions from a lower age, allowing more time for contributions to grow over time.
It’s also possible that ‘pot for life’ and the much-delayed pension dashboard will be included in Labour’s pensions review. However, neither policy was mentioned in their manifesto.
The value of pensions
The Labour party ruled out increasing income tax or National Insurance in its manifesto. However, nothing was said about Capital Gains Tax (CGT) or taxes on dividends. The CGT allowance has already dropped in early 2023 from £12,300 to £3,000. While the dividend allowance has fallen from £2,000 to £500.
Meanwhile, the personal allowance has been frozen at £12,570 since 2022 and is likely to stay at this level until 2028. The amount you can earn tax-free from savings has been frozen at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers since 2015.
To keep more of your money, consider putting savings into ISAs or pensions. With ISAs, gains from savings or investments are tax-free, whereas a pension will reduce your income tax bill on the way in and any investment growth can build up tax-free. When you later come to withdraw money from your pension in retirement, the first 25% is tax-free before income tax may be due. Remember, you can contribute up to £60,000 a year (2024/25) into a pension and still receive tax relief.
Key points
- triple lock on the State Pension has been maintained;
- annual tax-free personal allowance remains at £12,570 (2024/25);
- no reintroduction of the LTA;
- no increase to income tax or National Insurance;
- Auto-Enrolment extension likely; and
- further reforms to workplace and personal pensions are anticipated.
Elizabeth Anderson is a Personal Finance Journalist and Editor (Daily Mail, Times Money, Metro and i paper).
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.
