Matt Tickle, Partner and Chief Investment Officer
"Yesterday’s general election has produced a substantial majority for Labour, which is expected to result in the largest majority achieved by any UK Government since 1935. This outcome has been predicted in the opinion polls for some time and therefore was already largely priced-in to markets. As markets opened this morning; UK gilt yields, UK equities and the sterling exchange rate have remained largely unchanged.?
Not every election is such a forgone conclusion. The French National Assembly election had its first round on 30 June and will have its second round on 7 July. In the first round, Marine Le Pen’s National Rally emerged as the largest party as expected, but the two round system makes the outcome difficult to predict. French yields have risen over fears that National Rally could win a majority and some volatility, potentially large enough to impact global yields, is likely on 8 July as the results become clear."
Steve Hitchiner, Partner and Senior Actuary
"One priority for the new Government should be reform of the levy that is payable for the existing PPF compensation scheme.? The current legislation is no longer fit for purpose and is causing the PPF to collect hundreds of millions from levy payers that it no longer needs.?
We would also encourage the Government to introduce a legislative regime for capital-backed consolidators.?While interim guidance from The Pensions Regulator (TPR) has allowed the first such transactions to be completed, a proper framework is still needed for these vehicles, and would provide greater confidence to trustees who believe them to be in the best interests of their members.
On a wider point, new governments often lead to industry calls for wide-ranging reviews of pension policy, or the establishment of pension commissions.? However, I would be against such proposals.? There are already a significant number of important initiatives that are long overdue (e.g. DB funding, pensions dashboards, auto enrolment amendments, CDC regulations) and any wide-ranging policy review will inevitably lead to further delays in these areas."
Richard Gibson, Risk Transfer Partner
By far the biggest prize for any Chancellor looking to get assets working for the UK economy is the nearly £1.5trillion locked up in private sector defined benefit (DB) pension schemes. The near-term focus of the Mansion House reforms is on defined contribution (DC) pensions, but Labour’s manifesto is clearly committed to pursuing the plans first proposed by the Tony Blair Institute, to bring together hundreds of the smallest private sector DB pension schemes into a single fund, backed and overseen by the public sector.
This is a sensible strategy. Those schemes could deliver economies of scale and improve asset returns. Many pension schemes are already doing this and will move over £200 billion to the buy-out insurance market over the course of the next parliament. If the new Government really wants to plan ahead, it must look at how insurers can use that capital for long-term infrastructure and investment in UK markets.
Melissa Blissett, Senior Consultant and Pay Gap Analytics Lead
“The new Government sees a woman holding the position of Chancellor for the first time in UK history. With a promised fair pay manifesto pledge this could be the catalyst needed to shift the stagnant reduction in the gender pay gap seen in recent years.
For employers, we are expecting a mandatory requirement for clear pay gap action plans, an expansion into ethnicity and disability reporting and a wider focus on policies that support women in the workplace, enhancements to flexible working and childcare support.
We are interested in the opportunity this has for employers to rethink and reshape their workforce ethos and policies, and enhancing their use of data analytics. Reducing gender, ethnicity and other pay gaps is not only good for employees but could unleash an enormous economic benefit and productivity of workers who are currently working below their skill sets."
Riaan van Wyk, Senior Wellbeing Data Consultant
“The focus of the new Government should not be solely on health and protection products and supports. Instead, a radical shift is needed towards a more grassroots and back-to-basics approach.
They need to deal with a two-pronged issue. Firstly, an aging workforce that is not adequately prepared for retirement, leading to healthcare issues within the workforce. This problem could be exacerbated by bias and discrimination in the workplace. Employers need to ensure they have adequate insurance and policies in place, the issue needs to be addressed before it escalates into a larger problem.
Secondly, they need to tackle the challenges faced by the younger generation, particularly in the wake of Covid-19. Flexible working and lack of social interaction in the workplace have led to an increase in mental health issues. The Government needs to acknowledge these real problems and support businesses in tackling these issues. A smarter approach is needed, one that acknowledges where the real issues are and addresses them before they become problems.
Unfortunately, there is no fresh indication of these issues being addressed in any of the parties’ manifestos. The same old stories persist, and promises made have not come to fruition, particularly in relation to workers’ rights."
James Jones-Tinsley, SIPP specialist
Where pensions are concerned, arguably the top priority is to finalise the outstanding legislation in connection with the abolition of the Lifetime Allowance.
The Labour manifesto speaks of a “review of the pensions landscape”; a broad-brush statement, with no time limits attached.
However, given that the incoming Chancellor, Rachel Reeves, has stressed which taxes she will not increase, one wonders if an emergency Budget in the near future might focus on the ‘low hanging fruit’ that pensions offer the new government, in their bid to raise funds from elsewhere.
Firstly, pensions tax relief, which currently costs the government over £40 billion each year. The last nine years have seen reforms to pensions tax relief discussed at many junctures, but to date, individuals can still obtain pensions tax relief at their highest marginal rate of income tax.
An incoming government with a significant majority will always deliver bad news to the country early on in their tenure, and so expect reform of pensions tax relief; potentially a move to a single percentage rate of relief for all individuals, regardless of how much income tax they pay. If this was as low as 20%, it would save the government billions of pounds each year, at a stroke.
Secondly, the tax treatment of pension death benefits for those individuals who pass away below the age of 75. The ability to pass on these benefits to surviving recipients free of income tax for the rest of their lives has been criticised by think-tanks including the Institute for Fiscal Studies as “overly generous”, and so a move to impose the payment of income tax on these pre-age 75 distributions would undoubtedly be tempting to a new government.
Thirdly, Inheritance Tax (IHT) was not included in Ms Reeves’ list of taxes that will remain untouched, and one wonders if the current exemption from IHT that trust-based pensions enjoy, may be under threat.
Fourthly, maintaining the ‘pensions triple-lock’ for annual increases to the State Pension. The Labour manifesto stressed they would maintain this promise, in order to secure the pensioner vote, but its affordability over time will only increase, and so I fully expect the new government to call for a(nother) review of increasing the State Pension Age to 68 and beyond, far earlier than is currently set out in legislation.
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