The UK General Election, scheduled for 4th July, 2024, is poised to be a pivotal event with significant implications for the financial landscape. As the Conservative Party and Labour Party vie for control, their differing policy approaches could distinctly impact your pensions. Whilst both parties have claimed that their objective is to improve stability and living conditions for pensioners, there are differing policies.
Conservative Party's Potential Impact
The Triple Lock Plus
The Conservatives’ "Triple Lock Plus" is a proposed enhancement to the UK's state pension system. It builds on the existing "triple lock" mechanism, which guarantees that the state pension increases each year by the highest of three measures: average earnings growth, inflation, or 2.5%. The "plus" in Triple Lock Plus typically refers to additional measures or guarantees aimed at further protecting pensioners' incomes, such as incorporating other economic indicators or providing even higher minimum increases. This proposal aims to ensure that pensions keep pace with the cost of living and improve the financial security of retirees.
The Pensions Tax Guarantee
The pension tax guarantee from the Conservative Party is a commitment to not raise taxes on pensions. This means that under this policy, the government promises to keep the current tax rates on pensions unchanged, providing stability and predictability for pensioners. The current 25% tax free lump sum and contributions policies will remain unchanged.
The Tories also intend to maintain current benefits available to pensioners such as free prescriptions, winter fuel payments and free TV Licencing. This guarantee is intended to protect retirees' incomes and ensure that they can rely on their pension savings without worrying about future tax increases.
Labour Parties Potential Impact
The Triple Lock
Similarly to the Conservative manifesto, Labour references plan for the current Triple Lock: “Labour will protect the triple lock on pensions and increase the state pension each year in line with inflation, average earnings, or by 2.5 per cent, whichever is higher.”
Pension Reform
Labour also plans to conduct a comprehensive review of the pensions landscape to enhance retirement outcomes and increase investment from pension funds in UK markets. The review will consider reforms to improve the security of retirement incomes and ensure workplace pensions offer better value for savers.
Additionally, Labour intends to address specific pension issues, such as reforming the Mineworkers’ Pension Scheme to address perceived injustices and ensuring that financial institutions develop plans aligning with climate goals. They also emphasize the importance of collective defined contribution (CDC) pensions and the need for further collaboration between employers and workers to strengthen pension contributions and planning.
The outcome of the UK General Election on 4th July will significantly influence financial planning and investment strategies. As your Advisers, we will keep you informed about any significant impacts to your pensions and investments. No matter who comes to power, understanding the potential changes in wealth, pensions, investments, and tax is crucial for optimising financial outcomes in the post-election landscape.
