Mansion House reforms
Steve Webb, partner at consultants LCP, said it is hard to see any government having an issue with the chancellor’s Mansion House reforms.
The Chancellor’s ‘Mansion House’ speech in July 2023 set out a range of measures including a pledge by many of the big workplace pension providers to invest at least 5 per cent of default fund assets in unlisted equities by 2030.
“Any government will find it hard to tax or borrow more, yet will need to make sure that tens of billions of pounds are found for investment in infrastructure such as the need to upgrade the power grid for a world dominated by renewable energy,” Webb said.
“Given that DB pension funds are already sitting on over £1trn in assets and workplace DC funds could reach a similar level by the end of the next Parliament, there is plenty of potential for pension funds to do more in this space.”
Webb explained that in the run-up to the Autumn Statement, shadow chancellor, Rachel Reeves promised a ‘sweeping review’ of the pensions landscape with the twin aims of boosting return for savers and getting more money invested in ‘fast growing’ firms.
“This suggests that the present chancellor’s enthusiasm for investing in unlisted equities is likely to be shared by his likely successor,’ Webb said.
“The incoming government is also likely to be more explicit about measures to drive investment specifically into the UK economy.”
There are other policies that Labour may also be on board with.
Steven Cameron, pensions director at Aegon, explained that the DWP wants to see pension freedoms extended to all members of trust-based schemes.
“In 2024, I expect there to be more focus on trustees making sure their members have access to drawdown, either within their scheme or through a partnership arrangement (likely a master trust already offering drawdown),” he said.
“The government would also like to see trustees voluntarily advancing backstop decumulation strategies for non-engaged members, a complex undertaking where advice will be essential. I see no particular reason why a Labour government would be against these proposals.”
There is also the task of extending auto-enrolment so that the minimum age is lowered and the salary offset is eliminated.
Kate Smith, head of pension at Aegon, said: “Implementation could begin in April 2025, and while these changes are likely to receive cross-party support, employer support for the timeline is crucial.
“While this is a positive step for member’s retirement outcomes, it may not be enough to provide an adequate replacement income for medium to higher earners. We expect conversations to start on mandating higher auto-enrolment contributions, possibly split equally between employers and employees, and greater saving flexibilities.”
