Welcome to a TCWU in which we absolutely won’t be talking about last Friday night’s cosmic Northern Lights show and how this is just one more way in which the North is just the best place to be. There, I’m glad that’s sorted. 

It will not have escaped the attention of the keen-eyed observers and political enthusiasts among you we’re due a General Election soon. The very last possible date would be Tuesday 28th January 2025, if Rishi Sunak deep in his Downing Street bunker really chooses to deny the encircling communist troops until the very last moment. Earlier seems likely though and there’s more than a passing chance Keir Starmer will asked by the King to form the next government, so shall we take a moment to reflect on what a Labour government might mean for financial services?  

It’s worth noting in passing, Labour doesn’t currently have a shadow pensions minister. So, echoing the old cooking instruction gag on how to make a chicken chasseur (first, catch your chicken…no? Just me that finds that funny then), appointing someone to do the job of pensions minister would be a good start. Recent names in the frame include Stephen Timms, Gregg McClymont and Jeanie Drake, all of whom would do an excellent job (at least one of whom would require an emergency ennoblement and two thirds of whom have been guests on the lang cat podcat – links below). 

Labour has very sensibly said very little about its intended policies; why give your opponents anything to work with when you’re a gazillion miles ahead in the polls? Especially if it might involve difficult decisions. We’ve got some thoughts though on what could be on their minds, so here then is some speculation on what might await us on the other side.  

The abolition of the Lifetime Allowance (LTA) should have been the cause of unbridled celebrations, bunting, street parties and cake-baking. Casting a shadow over the festivities has been first the Shadow Chancellor, Rachel Reeves, who was quick to assert that a Labour government would reintroduce the LTA. This has then been followed by the astonishingly complicated, intricately bureaucratic and surprisingly inept implementation of the policy by our good friends at HMRC. Calling it a s41tshow would be an injustice to sewage workers. Also, I think Labour have moved on; my guess is the ululations of despair with which the industry and HMRC alike would greet any proposals to reintroduce the LTA, will be enough to put Labour off bringing it back.  

I don’t think pension taxation is off the hook. It is just possible they’ll do a review of pension tax relief; though they’ll need a big majority and a public finance squeeze to warrant the complications that would bring. More likely I think is to reverse in some form of death tax/IHT onto pension freedoms.  

This is not just because it is a soft target, it’s also because, well whisper it quietly but pension freedom isn’t working so well. Labour have always been uncomfortable with the risks posed by the freedoms. There is now a worrying lack of evidence to show retiring investors are making prudent long-term decisions with their DC pots. The industry is failing to make the case that pension freedom is a good thing. If anything, the opposite is true and a new government might feel impelled to act to protect investors for their own good. The regulatory trend in recent years has been the (re)introduction of guardrails and defaults, such as investment pathways, simpler wake-up packs, stronger nudge and default decumulation solutions from occupational schemes. I’d be surprised not to see more of this, and an increase in pension death taxes for wealthier investors would fit with this agenda.  

We’ll also hear a lot more about Collective Defined Contribution schemes, good socialisation of investment and longevity risks that they are. The current government are fans of these schemes, the next government is likely to be even more so. They’ll also be keen to drive hard the agenda of consolidation of pension provision, through mechanisms such as Value for Money and yes, price caps too.  

Auto-enrolment is looking more impressive an achievement, the further it recedes into the rear-view mirror. Having pulled off this huge one-rep max deadlift of getting millions of people back into workplace pensions, the whole policy agenda is now lying exhausted on the floor in a crumpled heap. It was agreed back in 2017 we should bring in 18 year olds and extend the earnings definition: IT STILL HASN’T HAPPENED. Politicians don’t like doing unpopular things and taking money out of people’s pay packets is never a vote-winner. The other side of an election and given a decent majority, I think Labour will get the 2017 reforms on the books and maybe bump up the employer contribution to 4% too. Anything more than that looks optimistic. 

Away from pensions, the British ISA will almost certainly be quietly forgotten about, mainly because it is a silly idea; ISA simplification is more likely. And on the regulatory front, continuing the theme of guardrails and defaults, I expect the advice/guidance boundary work to continue apace. 

All this adds up to a different landscape, perhaps some areas of business will get shut down – I think CDC could eat some lunches but also, Labour has a funny way of being good for financial services. Watch this space. 

#LINKSANDSTUFF 

• After much sifting and debating of applications, we’re almost ready to announce the five firms gracing the AdviceTech Catwalk in June. Coming soon to an inbox near you – in the meantime book your place here.
• The Pension Scam Industry Group, PSIG to its friends, has a consultation out on its future strategy (you’d know this if you subscribed to the lang cat Tracker service). If you care about scams, transfers, standards and the like then get involved – The Pensions Scam Industry Group.
• Podcat: did I mention we’d interviewed Stephen Timms and Gregg McClymont? We spoil you lot. 
• Music this week comes from the incomparable Alabama 3 doing a more than passable reworking of the Joy Division classic Love will tear us apart: 

Tom