The lang cat | 25 June 2024

The main parties have now all unveiled their 2024 General Election manifestos. But what do these pledges mean for financial services? We take a look at what we know so far about the different parties’ plans for pensions, taxation and the economy.

Pension reform

Although not in the manifesto itself, the industry breathed a sigh of relieve when Labour indicated that it would not be reintroducing the Lifetime Allowance (LTA) after all. Since the abolition of the allowance was announced in the 2023 Spring Budget, platforms, providers and advisers have been grappling with implementing the change. The prospect of reversing that work would have been challenging to say the least, and the decision to shelve the plans also brings some welcome certainty for retirees and their advisers around pension planning.

Labour has, however, pledged to conduct a comprehensive review of the pensions landscape to determine necessary improvements for better pension outcomes and increased investment in UK markets. Although we don’t yet have much detail on what this review might involve, Labour has tended to agree with the current government’s drive towards fewer, larger, and better-managed schemes. There is scope here for addressing long-term challenges in helping individuals accumulate larger pension pots that provide a sustainable income in retirement.

The Conservative, Labour, LibDem and SNP manifestos each contained pledges for the state pension, as the parties seek to secure older voters. Labour, LibDems and the SNP have committed to maintaining the triple lock, whereas the Conservatives have tried to go one better by proposing a “triple lock plus”, would ensure pensioners have a tax-free personal allowance this keeps pace with the full new state pension. The SNP also pledged there would be no future increases in state pension age. The Green Party bucks the trend with a pledge to move to a double lock where pensions rise with either inflation or wages, but the third measure of 2.5% is dropped.

While maintaining the triple lock may appeal to a specific demographic, it is expected to cost around £1.5 billion per year by 2029–30 according to the Institute for Fiscal Studies[i]. The next government will need to address core issues regarding funding and the possibility of further increases to the state pension age. 

Taxation

When it comes to tax, Labour has pledged not to increase taxes for ‘working people’ ruling out hikes in income tax, national insurance, and VAT. However, the VAT freeze does not extend to private schools with Labour’s proposal to introduce VAT on private school fees grabbing headlines. For parents sending their children to private schools, this could mean an additional financial burden on top of recent substantial fee hikes.

Neither the Conservatives nor Labour have tackled the issue of frozen tax thresholds, which have pushed millions into higher income tax brackets. The Office for Budget Responsibility estimates that the number of higher-rate taxpayers is projected to increase to 2.7 million by April 2029[ii]. Labour has also not yet announced whether they would extend temporary tax cuts such as the 5p fuel duty reduction and the stamp duty holiday, both scheduled to expire next year.

The Green Party bucks the trend on taxation and includes a number of tax increases in its manifesto, aimed at tackling climate change. They also propose, in the long term, moving to a system of a universal basic income.

Reform UK also proposes a pensions review, and a review of social care, but goes the other way on taxes, proposing around £90 billion of annual tax cuts, coupled with a £50 billion increase in spending per year, paid for through reductions in spending on public services, debt interest and benefits.

The economy

On the economy, the Conservative manifesto highlights plans to continue restoring economic stability, setting out a five point plan that includes reducing debt, backing business and transitioning to affordable domestic energy.

Stimulating economic growth is one of Labour’s key priorities, which it aims to do by balancing the budget, partnering with business, investing in jobs and banning zero-hour contracts. The LibDems similarly have the gig economy in their sights, committing to a review of rules relating to taxation of workers, and also promise economic stability and growth. 

However, while the emphasis on economic growth from the main parties is welcome, it will take time to come to fruition. The next government will face a considerable immediate challenge in needing to fund increasingly costly public services, having pledged not to increase taxation.

With less than a week until the General Election, it won’t be long until we find out which party’s manifesto will be put into action.

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[i] https://ifs.org.uk/publications/pensions-five-key-decisions-next-government

[ii] 3.39, page 67 https://obr.uk/docs/dlm_uploads/E03057758_OBR_EFO-March-2024_Web-AccessibleFinal.pdf