When will Labour reveal its policies on pensions?

An interesting observation was made by Patrick Hosking in today’s Times that Labour has a blank where its pensions policy should be. He has a fair point. For a party on the verge of power, it has said astonishingly little about an issue that affects – or will affect – most of us.

Pensions not always the most interesting of policy topics. There has been none of debate and internal wrangling in Labour circles that, say, green finance or workers’ rights has caused. Yet pensions really matter – they are crucial to our wellbeing, they are electorally potent (one in five of UK adults are in retirement age) and perhaps most importantly in these financially constrained times – they contain vast amounts of wealth. According to the IFS, total private pension wealth in Great Britain was £6.1 trillion, translating to 42% of our total wealth (£1 trillion more than housing). So, setting out a policy on pensions is not just a matter of determining what to do with our retirement – it is what to do with the country’s wealth.

It is clear though that Labour are not prioritising this policy area at the moment. They currently have no shadow pensions minister, following the resignation of Gill Furniss last week, and appear to be in no rush to replace her.  So far, the big policy announcement from the Party has been on the state pensions, with Keir Starmer confirming last month (via the Daily Express) that Labour would keep the triple lock for at least five years (this was a more likely a calculated act from the leadership designed to reassure a key voter demographic, rather than the result of any detailed policy thinking).

Labour’s one stated policy on workplace pensions, announced by Rachel Reeves, is to “undertake an in-government pensions and retirement savings review” once they get into government. This review would cover all type of pension (defined benefit, defined contribution, and public sector schemes) with the purpose of ensuring “savers are getting the best possible returns, and to identify and tackle the barriers to pension schemes investing more into UK productive assets.”

Some would say remit of this review is so broad it could almost be meaningless – and the review doesn’t shed light on what Labour’s priorities are. Of course, the advantage of announcing a review, is that it allows you to park the difficult issues until after the election and focus on the more pressing matters of bashing the government. Vicky Foxcroft MP, acting as Labour’s pension spokesperson in a House of Commons debate last week, focused much of her contributions highlighting the Conservative government’s failings, most notably the LDI crisis prompted by Liz Truss’ mini-Budget.

Yet there is a pressing need to look at challenges in the current pensions landscape. The transition from defined benefit schemes to defined contribution schemes among businesses is well advanced. Auto enrolment has been a success, but the basic problem is that most people are not saving enough for retirement. Recent analysis from the Pensions and Lifetime Savings Association (PLSA) suggest that four out of five people are not saving enough for a “moderate” retirement (approximately £31,300 a year). The solutions to plugging this gap appear to range from the unpopular to the too difficult – e.g. mandating higher contributions from workers or from employers, providing more generous tax incentives, or somehow achieving better returns from everyone.

The modern nature of work also presents particular challenges to retirement saving, with the rise of the gig economy and people changing jobs more regularly. These challenges need to be recognised and managed. The introduction of the Pensions Dashboard, which has been designed to help savers, will need to be addressed after being repeatedly delayed.

There is also a question about what to do with the UK’s remaining DB schemes, many of which are well-matured. With improved funding levels, many schemes are now considering ‘buy ins’ or ‘buy outs’ with insurance companies, or consolidating with other schemes. These developments have implications for members of these schemes as well as for the sponsor companies and are now under scrutiny. For instance, a recent government consultation has looked at how best to use the surplus of these pension schemes (often worth billions).

Finally, there is the question of whether a Labour government take a more active role in mobilising the vast amounts of assets in private pension schemes to pursue policy objectives. Specifically, should UK pension schemes be encouraged and/or mandated to be invested in UK ‘productive finance’ (e.g. in UK infrastructure or start-up companies) and used to support the UK economy. The indications so far is that Labour Government would embrace this position, with Rachel Reeves pledging to ‘go further’ than the current government in investing more pension scheme cash into the UK economy. This seems to be an important basis for Labour’s industrial strategy.   

Some will note a degree of the tension between Labour’s twin objectives of achieving ‘best possible returns’ for UK savers while also investing more in the UK (unless you happened to believe that all the best returns can be found in the recession-hit UK economy, as opposed to the rest of the world). This position could also put pension scheme trustees in a difficult position, given that they have a fiduciary duty to act in the members’ interests (and not necessarily to support the UK economy). These would be issues for Labour to address if/when they are in government. For the moment, however, it appears that Labour’s pension policy has been subsumed into its broader position of addressing wider economic questions about increasing business investment and productivity.