Labor won the general election in a landslide and now all eyes will be on whether they deliver on their promises.
The party has made a series of promises to protect people’s pensions and improve outcomes for savers if Sir Keir Starmer secures the keys to Downing Street.
But what are they – and what do they mean for your future retirement savings?
TRIPLE LOCK
Pensioners will breathe a sigh of relief that Labor has promised to keep the triple lock guarantee.
The ‘triple lock’ ensures that the state pension does not lose value by increasing it each year in accordance with inflationaverage earnings, or 2.5% – whichever is higher.
However, the party did not fulfill the Tories’ promise to increase the personal allowance in line with the state pension.
Labor has said it will keep the freeze on tax thresholds until 2028, first introduced by the Conservatives in 2021.
This could spell bad news for pensioners, as many are being dragged into paying tax for the first time when claiming the Fair State Pension.
Freezing tax thresholds means that more people are drawn into paying tax or paying a higher rate of tax as incomes, including pensions, rise, but the thresholds remain the same.
Currently the State Pension is £11,502 a year and the Personal Allowance is £12,570.
But office for Budget Responsibility (OBR) has warned that the state pension will exceed the personal allowance by 2027.
Gary Smith, of financial planning firm Evelyn Partners, said: “Labour pledged to keep the triple lock, but failed to deliver on the Conservatives’ ambitious triple lock-plus.
“This raises the prospect that pensioners will soon be taxed on their state pension income.
“The OBR predicts that the state pension will overtake the level of personal allowances by 2027, but this could happen sooner if inflation or wage growth unexpectedly boosts the state pension.”
REVIEW OF WORKPLACE PENSIONS
Labor has also promised to carry out a review of workplace pensions to boost people’s retirement savings.
In her manifesto, she said: “We will undertake a review of the pensions landscape to consider what further steps are needed to improve pension outcomes and increase investment in UK markets.”
However, he has yet to give further details on what this review will entail.
Jon Greer, head of pensions policy at financial planning firm Quilter, said: “Labour’s pension overhaul aims to overhaul the current system, potentially extending auto-enrolment and adjusting contribution limits to make workplace pensions more affordable.
“This is essential to ensure more people save more for later life.”
Steve Webb, former pensions minister and partner at LCP, also wrote in Citywire that the “inevitable” focus of the review will be on pension tax relief.
Pension tax relief is where the money you would have paid in tax goes back into your pension. It’s basically a reward from the government for saving for retirement.
He added that Labor may want to look at expanding the minimum amount that workers and employers have to pay into their pensions through “auto-enrolment”, where you automatically join your employer’s company pension scheme.
But he added that Labor was “reluctant to make the cost of living worse for people on low incomes and will not want to increase the overall tax relief bill”.
Labor added in a statement that it would give the Pensions Regulator, which oversees workplace pension schemes, new powers to intervene where schemes are not offering good value for their members.
LIFETIME ALLOWANCE
All eyes have been on whether Labor will bring back the lifetime allowance, which caps the amount you can save for retirement during your lifetime without paying tax.
This was previously capped at £1,073,100.
The party had previously insisted it would bring back the cap after it was scrapped by the Conservative Party in April this year.
However, this promise has faced significant opposition from the financial industry, with experts saying it would be too complicated to renew.
The policy has also been blamed for forcing some doctors into early retirement.
Then the policy did not appear in Labour’s election manifesto – much to the relief of the pensions industry.
David Brookshead of policy at pensions consultancy Broadstone, said: “With no mention of a lifetime allowance in Labour’s manifesto, we can probably assume it will not go ahead with previously announced plans to reverse the Tories’ repeal of this tax.
“But more details will be needed to close the fine print on its implementation.”
PENSION PANEL
The introduction of “pension panels” will now take place during Labour’s term in government.
These dashboards, which must be active by 31 October 2026, will allow savers to view all their pensions and information about their pension savings online in one place.
Currently, it is estimated that millions of pension funds are “missing” because many people change jobs several times during their careers and start a new pension in each job.
So the goal of the dashboard is to help workers track down savings they might have missed out on.
Tom Selby, director of public policy at broker AJ Bell, said: “It is estimated that around £27bn of pension money will be ‘lost’ in the UK, in part because every job move can create a new automatic pension fund.
What is automatic pension enrollment?
HERE’S what you need to know about automatic pension enrolment:
What is auto-enrolment?
From October 2012, employers must sign up their employees to workplace pension schemes as part of a government initiative to encourage people to save more for retirement.
When does automatic registration apply?
You will automatically be included in the pension system if you meet the following criteria:
- You are not yet in a qualifying work program.
- You are at least 22 years old.
- You are below the state pension age.
- You will earn over £10,000 a year
- You work in the UK.
How much do I contribute?
There are minimum contributions that you and your employer must pay.
Your minimum contribution applies to anything you earn above £6,240, up to a limit of £50,270 in the current tax year. This includes overtime and bonuses.
A minimum of 8% must be contributed to the pension, with you contributing 5% and your employer paying a minimum of 3%.
What if I have more than one job?
For people with more than one job, each job is processed separately for automatic enrollment purposes.
Each of your employers will check whether you are eligible to participate in their pension scheme. If so, you will automatically be included in the employer’s pension scheme.
Can I unsubscribe?
You can choose to opt out, but you will lose contributions from the government and your employer. If you choose to log out, you can log back in later.
“Reforms to create pension dashboards to allow people to see all their pension pots in one place should make a big difference.
“The timetable has been delayed several times, so it is crucial that the new government moves forward with the introduction of the dashboards as planned.”
The question remains whether Labor will push ahead with the Conservative government’s plans to introduce a “pot for life” model for pensions, where workers have one pension for life.