The pensions industry has expressed its relief and appreciation that aspects of proposed pension policy will likely be retained if the Labour Party wins the next general election.

Labour published its Plan for Financial Services yesterday (31 January), which outlined the party’s plans for pension policy if it comes into power, including a review of pensions and retirement savings.

“It is interesting that the Labour Party is keen to continue the journey of encouraging more investment in long-term illiquid assets such as productive finance,” commented Broadstone head of policy, David Brooks.

“The continuity in pensions policy, despite any potential change in government, will please the industry and is to be welcomed.”

However, Brooks noted that scepticism remained around the speed of change required to meet the government’s aims, given the pace of consolidation needed to release the required levels of investment.

“Labour is proposing stronger regulatory powers to force the wind up of under-performing defined contribution (DC) pension schemes,” he noted. “This is an interesting development which could increase the pressure on The Pensions Regulator (TPR) to become more ‘hands on’ with underperforming schemes.”

LCP partner, Steve Webb, agreed that a large part of Labour’s agenda represented continuity with the current government’s plans rather than a radical change of direction.

“The main difference seems to be a slightly more interventionist approach,” Webb stated.
“In particular, a Labour government would strengthen the powers of TPR to force consolidation among smaller DC schemes and would take a closer interest in the investment strategy of the Local Government Pension Scheme (LGPS).

“But if the government had produced today’s document rather than the Labour Party, it would have represented further evolution rather than revolution.”

Pensions Management Institute (PMI) director of policy and external affairs, Tim Middleton, said the PMI was encouraged that the Labour Party shared the current government’s commitment to increasing investment in UK equities.

“The establishment of a UK counterpart to the ‘Tibi’ scheme would be a constructive development which would facilitate greater investment in illiquid assets by DC schemes and so improve longer-term returns for members,” he continued.

“However, whilst the Labour Party also recognises the need to close the ‘advice gap,’ we would have liked to have seen bolder suggestions over helping members manage decumulation effectively.”

Labour’s continuation of the government’s policies gave some clarity to the industry, added PensionBee director of public affairs, Becky O’Connor.

“A pensions review has the potential to give impetus to new initiatives too, such as the lifetime provider model,” she said. “It’s also encouraging to note Labour's support of streamlining regulation in line with the FCA’s Consumer Duty and its focus on outcomes.”

Commenting on Labour’s plans for the LGPS, Hymans Robertson senior investment consultant, Iain Campbell, said: “While much more detail is needed on Labour’s full plans for the LGPS, it is clear that the general plans for the growth and acceleration of pooling and the LGPS’s role in investing in the UK will be continued if there is a change of government in the next general election.

“As ever, our focus will remain on helping our clients with any changes and new requirements placed on their funds, to make sure they can continue to deliver on the purpose of their funds - paying pensions and keeping contribution rates stable and affordable for employers.”

While some in the industry welcomed Labour’s planned review, Spence & Partners managing director, Alan Collins, said it made him “sigh at the prospect” of another review, “particularly given how long recent funding code and scheme governance changes have taken to come to fruition".

AJ Bell director of public policy, Tom Selby, noted that the fact the paper did not mention the party’s previous pledge to reintroduce the lifetime allowance, “something which would create more complexity in an already complicated landscape”, was “hopefully a positive sign that policy will be quietly shelved”.

Now Pensions director of public affairs and policy, Lizzy Holliday, concluded: “We’re pleased to see Labour providing clarity on its future outlook for the financial services industry, particularly its position on important themes notably sustainable finance, innovation within the sector and financial inclusion.

“We welcome the concept of a pension and retirement savings review; pensions are a significant and essential part of all of our lives, and the wider economy. But often this isn’t realised until it’s too late.

“However, to have the greatest impact on millions of savers we believe joint work on developing a roadmap for auto-enrolment, including tackling the challenging topic of pensions adequacy, will be key.”

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