As the UK gears up for a general election, experts question what this means for pensions policy going into 2024.
Pension commentators have questioned what a Labour government could mean for retirement savings policy in the UK, saying at this stage there are more questions than answers.
Details are expected to emerge once each party’s manifesto documents are released but as it currently stands the UK has been left in the dark as to how pensions could change in the years ahead.
Polling data suggests that Keir Starmer could become the next prime minister with an election widely anticipated by Autumn 2024.
So if Labour does triumph, could the pensions world look very different?
Lifetime allowance
When the Conservative government announced in the March 2023 Budget that it would scrap the lifetime allowance, shadow chancellor Rachel Reeves came out to say that a Labour government would reinstate it.
This has created a great deal of uncertainty for advisers and their clients with the current government pushing to remove the LTA by April 2024.
Claire Trott, divisional director, retirement and holistic planning at St James’s Place, said: “We hope the manifestos of the main parties will give us something to work with, but they may not go into the detail of pensions to the extent which we would like.
“There has already been, what could be called, back tracking with comments about reviewing pensions rather than focussing on the issues of the lifetime allowance on its own. We know there will be a new regime for testing the tax-free cash and tax-free lump sums on ill-health and death by the time any election happens so reversing the abolition will mean there’s a lot more legislation to write.
“There would also need to be some consideration given to the actions taken in the last year, following the abolition of the charges and relaxation of the lifetime protection regime and ensuring this is factored into any legislative changes.”
Tom Selby, director of public policy at AJ Bell, said Labour’s position has created unwelcome confusion for clients who might crystallise their retirement pots before the general election in the hope of avoiding a future lifetime allowance tax charge if the policy is reinstated.
“Such uncertainty over tax policy is never good, so the sooner Labour sets out clearly its plans on pensions taxation, the better,” Selby said.
“The fact the government is, from April 2024, replacing the lifetime allowance altogether with two primary new allowances – the ‘lump sum allowance’ and the ‘lump sum and death benefit allowance’ – makes reintroducing the lifetime allowance even more difficult.
“It may be that Labour, should it win the election, decides a wider review of pensions taxation, ideally focused on simplification of the rules and boosting retirement saving, is necessary instead.”
