In this insight we look at what the pensions industry should expect from the new Labour government along with some initial reactions from the pensions industry. We also provide our usual update of recent key pensions developments.
A Labour victory and what this means for the pensions industry
The UK general election results are in, with Labour winning by a significant majority, Sir Keir Starmer at the helm as the new prime minister and Liz Kendall as the new Work and Pensions Secretary. (Stephen Timms and Alison McGovern have also been appointed ministers of state in the Department for Work and Pensions although at the time of writing, the exact roles had not been confirmed.)
What does this mean for pensions?
We know from Labour’s manifesto, that there will be a review of pensions to see what needs to be done to “improve pension outcomes and increase investment in UK markets” alongside reforms that will allow schemes to benefit from consolidation and scale which it is hoped will improve returns and increase UK productive investment.
The precise scope of the pension review was not set out in the manifesto although we know from Labour’s January 2024 Financing Growth paper that it is likely to be wide-ranging and potentially cover the “current state of the pensions and retirement savings landscape following the reforms of the early 2000s and the welcome introduction of auto-enrolment in 2012 to evaluate whether the current framework will deliver sustainable retirement incomes for individuals … the review will look … at all types of pensions and retirement savings plans, at corporate sponsors, at asset managers, and at VCs and private equity…”.
Labour has also committed to maintaining the state pension triple lock and introducing requirements for financial institutions and FTSE 100 companies to have transition plans for net zero. It has also said that it will not “increase National Insurance, the basic, higher or additional rates of Income Tax, or VAT”.
Other pensions matters
There are also several pensions matters that were put on hold during the run up to the general election and which the new government will need to attend to and/ or which can now be progressed. These include:
- The Pensions Regulator’s revised defined benefit (DB) scheme funding code of practice which will form part of the new DB funding and investment framework applicable to valuations with effective dates on and after 22 September 2024.
- Extension of the automatic enrolment regime and implementation of pensions dashboards both of which we expect to be taken forward by the new government.
- Responses/ direction of travel on the various government pension consultations that formed part of the Mansion House/ Autumn Statement 2023 pension reforms which include a new value for money framework, deferred defined contribution (DC) small pots, potential expansion of the collective defined contribution regime, changes to the return of surplus in DB schemes, and the possible introduction of the Pension Protection Fund as a public consolidator vehicle – given there is a lot of common ground between the aims of the Mansion House reforms and Labour’s wish to see more consolidation and scale of pensions, improved pension outcomes and improved UK investment, we expect these reforms to continue in some form.
- Progressing the lifetime allowance (LTA) regulations which are needed to deal with a number of issues with the LTA removal regime (which we understand Labour has decided will not be reversed, contrary to its initial stance that it would undo the abolition of the LTA).
Pensions industry commentary
The pensions industry has begun putting forward its views on the general election outcome including the PLSA which has called on the new government to consider the following:
- “supporting adequate pension saving,
- helping savers navigate choices at retirement,
- supporting well-run defined benefit schemes,
- bridging the pensions and growth gap, and
- supporting the Local Government Pension Scheme…”.
We look forward to seeing relevant pensions matters being progressed now that the hiatus on parliamentary business has ended. We also await with interest how the new government’s pension plans will be implemented and what it intends to do pensions-wise both as part of the pensions review and possibly outside of the manifesto commitments.
TPO updated factsheet on signposting
On 25 June 2024, the Pensions Ombudsman’s (TPO) office, produced an updated Signposting Factsheet which schemes and other relevant stakeholders, and FCA regulated businesses can use to ‘signpost’ members to TPO.
The generic signposting wording refers to TPO’s jurisdiction, timescales for submitting a complaint to TPO and TPO contact details – schemes can use this when referring to TPO’s services in relevant communications to complainants during the Internal Dispute Resolution Procedures (IDRP)/ resolution process. (Regulation 2 of the Occupational Pension Schemes (Internal Dispute Resolution Procedures Consequential and Miscellaneous Amendment) Regulations 2008 require applicants to be given certain information about TPO when informing an applicant about a trustee/ manager decision under the IDRP).
There are also short and long form versions of the wording that can be used by stakeholders on their website regarding TPO – the long form option refers to the need to use the pension arrangement’s complaints process before going to TPO, TPO’s jurisdiction, details of TPO’s financial awards, time limits and contact details.
SPP ESG guide for trustees for engaging with asset managers
The Society of Pensions Professionals (SPP) has published a guide to assist trustees when engaging with asset managers on environmental, social and governance (ESG) matters. It builds on the SPP’s 2023 ESG guide and outlines the legislative ESG requirements for trustees, regulatory ESG requirements for asset managers, what information trustees require from their asset managers and what part investment consultants play in ESG.
Bank of England publishes its Financial Stability Report and FPC Summary and Record
The Bank of England (BoE) has published the Financial Policy Summary and Record (FPSR) of the meeting of its Financial Policy Committee (FPC). The FPSR covered topics including:
- Private Equity – the FPC observes that sector vulnerabilities could be reduced by improving transparency over valuation practices and overall levels of leverage.
- UK banking sector resilience – the UK banking system was referenced by the FPC as being well capitalised with a strong liquidity position. However, it must include system-wide trends within its liquidity management and forward planning.
- Liability driven investment funds – the FPC has closed its November 2022 and March 2023 LDI resilience recommendations due to the material advances made during the last 18 months.
- UK countercyclical capital buffer rate - to be retained at 2%.
- BoE’s system wide exploratory scenario exercise – the BoE is testing the resilience of the UK banking system and looking at assumptions behind participants’ actions and how this may result in different market outcomes. The exercise results will be published in Q4 2024.
Financial Regulators Complaints Commissioner publishes statement on BSPS complaints
The Office of the Financial Regulators Complaints Commissioner (the Office) has confirmed that it has continued to receive various complaints about the Financial Conduct Authority (the FCA) following completion of the FCA’s investigation and decision relating to its dealings with the British Steel Pension Scheme – the FCA concluded that although there were lessons to be learned it took “appropriate regulatory action based on the information available at the time”. The Office plans to issue a statement by 19 October 2024, although timings may vary depending on case complexity.