PENSION PAIN
Labour manifesto promises huge pensions overhaul as it confirms triple lock will remain for pensioners
We explain what the pledges mean for you
THE LABOUR Party has pledged a huge shake-up to workplace pensions in its election manifesto today.
In good news for pensioners, the party committed to keeping the pensions triple lock, which increases the state pension each year in line with the highest of inflation, earnings or 2.5%.
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In its manifesto, Labour said: "Our system of state, private and workplace pensions provides the basis for security in retirement.
"Labour will retain the triple lock for the state pension."
However, in a shocking twist, the party said it also plans to reform workplace pensions to "deliver better outcomes for UK savers and pensioners".
Its manifesto said: "We will also undertake a review of the pensions landscape to consider what further steps are needed to improve pension outcomes and increase investment in UK markets."
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The manifesto was scant on further detail about what the review will entail.
But a review with the aim of increasing people's pension savings would be good news for workers who are increasingly worrying about the rising cost of retirement, with the state pension age projected to keep rising.
David Lane, chief executive of TPT Retirement Solutions, said: "Labour’s plan to review workplace pensions will be welcomed by voters and the pension industry.
"Our research found nearly nine in ten (88%) working people want the next government to do more to help people save for retirement, as 57% are worried they are not saving enough in their pension.
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"The party’s commitment to retaining the triple lock will prove popular with older votes, as 63% of those aged 55 or older want it to be maintained.”
Tom McPhail, director of public affairs at consultants The Lang Cat, added that while the commitment to reform pensions is good news for consumers, the pensions industry will have to face new demands.
"On the other side of the election, whoever wins, demands will be placed on pension schemes and their investment strategies to adapt to meet the political agenda.
“The industry should prepare for some robust conversations ahead on how fiduciary duty is defined and interpreted," he said.
The triple-lock pledge is welcome news for pensioners struggling with the cost of living - but experts said the plan has its challenges.
Jon Greer, head of retirement policy at wealth manager Quilter, said: “Labour has unsurprisingly pledged to uphold the triple lock in its manifesto. While sensible in terms of winning votes the continuation of the triple lock is fraught with problems.”
He said the triple lock “presents a significant fiscal challenge that no party has been willing to fully address”.
Mr Greer added: “If Labour wins, then during its announced review of the pensions landscape, the triple lock should be put under a microscope.
“The central dilemma is finding a balance between protecting current pensioners and ensuring inter-generational fairness, especially given the UK has an ageing population that will continue to make the state pension ever more expensive.”
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, added: “It’s hoped that the state pension is also included in this review to make sure it remains sustainable in the long term and that the state pension age doesn’t need to be hiked further in a bid to manage burgeoning costs.”
Becky O’Connor, director of public affairs at pension provider PensionBee, said the state pension is a "vital safety net" for most retired households and must be preserved at a meaningful level.
“To preserve the state pension, some form of index-linking is necessary as without decent and reliable rises to the state pension, it will be today’s young workers who suffer most when they reach their 60s and 70s, as personal and workplace pension savings are not currently at a level where they could even come close to replacing state pension benefits," she said.
The Labour party did not match the Conservatives’ manifesto pledge to increase the personal allowance for pensioners in line with the state pension
This would be bad news for pensioners worrying about the prospect of paying tax on their state pension in the near future.
The state pension is expected to be higher than the personal tax allowance by 2027, according to the Office for Budget Responsibility.
This is due to tax thresholds being frozen until April 2028 by the current Government.
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At the Labour manifesto launch, Sir Keir Starmer also...
- Ruled out raising income tax, national insurance, or VAT
- Committed to keeping the pensions triple lock, which increases the state pension each year in line with the highest of inflation, earnings or 2.5%
- Promised a benefits shake-up, working with local authorities to get more disabled and sick people back into employment.
- Pledged to remove the ‘discriminatory’ age bands affecting the National Minimum Wage
- Vowed to ban advertising junk food to children along with the sale of high-caffeine energy drinks to under-16
- Promised to hike defence spending to 2.5% of GDP
- Promised to slap VAT on private schools to fund 6,500 new teachers
- Pledged to build 1.5million new homes
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How does the state pension work?
AT the moment the current state pension is paid to both men and women from age 66 - but it's due to rise to 67 by 2028 and 68 by 2046.
The state pension is a recurring payment from the government most Brits start getting when they reach State Pension age.
But not everyone gets the same amount, and you are awarded depending on your National Insurance record.
For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings.
The new state pension is based on people's National Insurance records.
Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension.
You earn National Insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit.
If you have gaps, you can top up your record by paying in voluntary National Insurance contributions.
To get the old, full basic state pension, you will need 30 years of contributions or credits.
You will need at least 10 years on your NI record to get any state pension.
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