Manifesto pensions pledges in 2024: What retirement pot promises are being made – but also not made?

As the race for Number 10 gets as uncomfortably hot as the suddenly summery weather, the main three political parties are making some moves to secure the ‘grey vote.’

Contractors might feel like they’re too young and spritely to be included, but what the ‘big three’ are proposing in their election 2024 manifestos on pensions could conceivably affect everything from your warchest to your Plan B to the date you plan to hang up your contracting spurs for good.

So, asks Angela James of Yolo Wealth, what could we see from the next government relating to contractor retirement saving? Well, here is a breakdown of the main parties’ pensions pledges, as polling day on July 4th fast-approaches.

Labour

Labour has pledged to maintain the state pension triple lock. This pledge means a Keir Starmer-led government would maintain the annual pension increases each year in line with inflation, average earnings, or 2.5%, whichever is the greater.

Labour is also promising a review of the pension landscape, to consider if or what further steps need to be taken to improve pension outcomes for savers and increase investment into UK markets.

The party has pledged to adopt reforms to ensure that workplace pensions take advantage of scale and consolidation, to deliver better returns for UK savers.

A bit like the British ISA...

My sense is this has a similar feel to that of the British ISA -- launched at Spring Budget 2024, as all politicians know it must be right to boost growth and investment in the UK markets.

As most contractors will themselves know, ‘reviews’ and ‘reforms’ are buzzwords at both budgets and elections but, further as expected, no detail of Labour’s promised review has been made available. It’s therefore tricky to comment further on what this relooking could actually mean for pension investors.

Of course, for those contractors and self-employed workers who have little in the way of workplace pensions, and instead build their lifetime of pension savings up in private pensions, this envisioned review by Labour of workplace pension schemes is likely to mean very little.

No mention of reintroducing Lifetime Allowance

Missing from Labour’s 2024 election manifesto is any pledge to reintroduce the lifetime allowance or cap on pensions. Under chancellor Jeremy Hunt’s watch, the Lifetime Allowance was abolished this year, meaning there is no longer a ceiling on how much you can build up in all your pension savings before a compulsory tax charge (N.B. investors are instead taxed at their own marginal rate).

Contractors will welcome the omission, because Labour had previously suggested they would be inclined to bring back the LTA. However the lack of even a mention of this area strongly indicates the party has (fortunately) U-turned.

Conservatives

The previous coalition government of the Conservatives and Lib Dems introduced the state pension triple lock, back in 2010.

Today’s Conservative Party has confirmed that, like Labour, they intend to maintain this promise to pensioners should they be returned to power on July 4th.

But the Tories are pledging to take this a step further, with the introduction of an ‘age-related’ personal allowance.

Not one but two guarantees...

Specifically, from April 2025, the Conservatives claim they will increase the tax-free personal allowance for pensioners, even going as far as to say they “guarantee” that the new state pension will always remain below the tax-free income allowance.

The Conservative manifesto also introduces a “Pensions Tax Guarantee.”

This statement is a vow to not introduce any new taxes on pensions, while maintaining the tax-free pension commencement sum of 25% and maintaining tax relief on pension contributions at investors’ marginal rate of tax.

The pot (for life) is still on the shelf

What is missing from the Tory manifesto is the “one pot for life” concept which Mr Hunt talked about at Autumn Statement 2023.

The idea was to give a worker the power to choose their own pensions whereby the employer would be obliged to pay into the pension of the worker’s choosing.

This was missing from Spring Budget 2024, too. Industry back then felt this ‘one pension pot’ concept perhaps had been put on the shelf -- and my sense is this has almost certainly now been shelved.

Liberal Democrats

The Liberal Democrats’ manifesto mentions very little on the pension front -- no promises on pensions change, and hardly any promises on pensions retaining.

The only commitment from a Sir Ed Davey-led government is that they would maintain the state pension triple lock.

With the other two parties vowing the same, this is of no surprise.

Another to-do list featuring triple-lock maintenance

Given inflation and the costs-of-living crisis over the last few years, it’s still a vital promise however. And that’s because it’s vital for all pensioners to make sure their foundations of income in retirement will keep in line with inflation.

So it’s good to see all parties have ‘triple-lock maintenance’ on their to-do list, even if it is hardly groundbreaking.

Interestingly, the Lib Dem manifesto talks of giving everyone the chance to enjoy a decent retirement.

Decent retirement (cont.)

Yet then a bit like Labour’s not fleshed out but promised review, there’s then not much detail of what and how this “decent retirement” will be delivered, in practice.

None of three aspects of the pledge does vow to improve state pension helplines and systems to resolve queries faster, and another speaks of developing measures to “end the gender pension gap” in the private pensions sector.

Hear, Hear. I would love to see some initiatives in this area to support women and their pension savings more. Perhaps something that helps women to maintain pension savings when taking maternity leave to have children? But as with any envisaged consultation or review, the devil will likely be in the detail, and with no detail to look at, all we have to go on is the welcome but not expanded upon principle.

Final thought – not much more than a wrapper separates the big three parties on pensions

Sadly, the Lib Dems aren’t alone here. Whichever way you choose to vote this year, red, blue, orange or even green, none of the political parties have provided any red meat relating to increases to allowances – even a morsel would have been welcome by those contractors currently maximising their full pension allowances. On the flip side, no reviews or changes in the manifestos have been suggested to the tax and HMRC regime of pensions, so pensions continue to represent a tax haven for contractors and savers alike.