As the UK gears up for the next general election, voters are closely examining the manifestos of the major political parties. With polls heavily suggesting a Labour win, all eyes are on two main parties. So what are the existing Conservative government proposing for pensions? And what could a new Labour government under Sir Keir Starmer mean for your retirement savings? Here’s a breakdown of their manifestos and the potential impact on your pension.
The Conservative Party manifesto - what are the changes to pensions?
Triple lock maintained and ‘triple lock plus’ confirmed
The current triple lock ensures that the State Pension increases each year by the highest of inflation, average earnings growth, or 2.5%. The Conservative party has pledged to go a step further by introducing the ‘triple lock plus‘. This means that as the new State Pension increases, it would remain below the taxable income level, sheltering many pensioners from paying more tax.
Director (VP) Public Affairs at PensionBee; Becky O’Connor says: “The State Pension is a vital safety net for most retired households and must be preserved at a meaningful level. An enhanced triple lock policy raises the question of whether a continually rising State Pension age may be required to manage escalating costs.”
National Insurance cuts
The Conservative party has proposed to cut National Insurance (NI) from 12% to 6%. This move would leave workers with more take-home pay and more opportunities to save for the future.
Abolish National Insurance for self-employed
The party will remove Class 4 NI contributions for the self-employed. This will be the second NI cut after Class 2 NI contributions were cut in April 2024. The Conservative party has said this won’t impact entitlement to the State Pension which is currently linked to an individual’s NI record. This means self-employed people would see an increase in their take-home pay, encouraging them to save more for the future.
Reforms to Child Benefit
First mentioned in the Chancellor’s Spring Statement back in March, the manifesto promises to reform Child Benefit. What does this mean for pensions? The complexity in the current system has resulted in many parents missing out on NI credits. This has had a knock-on effect to their State Pension entitlement. The reform would also mean that families would be able to claim Child Benefit until their combined household income reaches £120,000.
What’s missing?
While the Conservative party’s manifesto pledged to protect pensions - there were a few notable policies missing. The manifesto, released on 11 June 2024, failed to mention changes to Auto-Enrolment or the introduction of a lifetime pension. Here’s a recap of what the party has previously said.
Changes to Auto-Enrolment - the party has previously suggested plans to expand Auto-Enrolment. A Conservative-backed bill from March 2023 included lowering the minimum age to 18 and the removal of the lower earnings limit. This would mean young workers could start saving earlier and from the first pound earned.
Introduction of ‘pot for life’ - in last year’s Autumn Statement, the Chancellor announced plans for a pension ‘pot for life’. This would give workers the power to choose their pension provider. Plus it would solve the problem of workers collecting multiple small pots throughout their career.
The Labour Party manifesto - what are the changes to pensions?
Triple lock maintained
The Labour manifesto echoes the Consevative’s promise to maintain the current triple lock on the State Pension. A Labour win would mean the State Pension continues to increase each year by inflation, average earnings growth, or 2.5% - whichever is highest.
Reforms to the pension landscape
The manifesto also promises to reform the pension landscape and improve security in retirement. The Labour party has stated it’ll review workplace pensions and aims to improve outcomes for UK savers and pensioners alike.
Director (VP) Public Affairs at PensionBee; Becky O’Connor says: “The ‘pot for life’ concept could be popular and relatively easy to introduce. So it’s disappointing that further details on the next steps of this process weren’t outlined.”
Increased investment in UK pension funds
The Labour party has said it’s also committed to boosting the economy by incentivising pension funds to invest in UK businesses. It’s said the increased investment from pension funds to UK markets would also deliver better returns for UK savers. In January, the party’s Plan for Financial Services included a plan to create a British ‘Tibi’ scheme, although this hasn’t been outlined in the manifesto.
What’s missing?
No mention of the Lifetime Allowance or ‘pot for life’ was included in the Labour manifesto, released on 13 June 2024. Here’s what the party has previously said on these policies.
Reintroducing the Lifetime Allowance (LTA) - the Conservative government scrapped the LTA in April 2024. The LTA was the limit at which an individual would be taxed at when withdrawing their pension. The Labour party had previously suggested it might reintroduce the limit. However, they’ve since made a u-turn.
Introduction of ‘pot for life’ - while Labour has promised to review pensions, its manifesto failed to mention specific policies such as a pension ‘pot for life’.
Summary
While change can often feel uncertain, it’s important to remember that your pension is a long-term investment. This means you have plenty of time to top it up, track its progress and plan for your retirement. Making regular contributions to your pension is a good way to benefit from any potential market volatility around elections.
Have a question? Get in touch!
Do you want to know more about your pension plan with PensionBee? You can check out our Plans page to learn how your money is invested in different assets and locations, or log in to your BeeHive to see your specific plan. You can always send comments and questions to our team via [email protected].
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.
