Politics eh? That was the least surprising overall Election outcome and still the most interesting set of results I can remember in my baby-boomer adjacent lifetime. In a minute we’ll get into what it means for our world of financial services and what we’ve already learned in these first few days. But first a word of congratulation for all of you who were in front of a screen at around 7am on Friday, to witness the Portillo Moment of the night. Whatever your political allegiances, it was hard not to savour the defenestration of the ignoble Liz Truss.
And while we’re at it, did anyone have on their bingo card for this week, the French electing a hard-left government? We live in interesting times. Perhaps they were trying to elect a hard-right government but having got themselves into a scoring position, just repeatedly failed to hit the target? (For any confused Scottish readers, that was a football reference.)
So on to the new Government, which is still moving up through the gears but is already showing signs of quite enjoying itself. So what can we expect? We know Rachel Reeves favours workers over wealth, because she’s said so repeatedly in the past. This speech from 2018 in particular, proposes increased taxation on pension funds, inheritances, capital gains and investment income. Her speech on Monday, which referred to the worst set of circumstances since the Second World War and announced an immediate Treasury review of our spending inheritance (a phrase she used repeatedly, (not our fault, just cleaning up the mess)), is laying the ground-work for any backsliding on election promises that might prove politically necessary in the weeks to come. This will not involve cuts to spending; it could possibly involve some extra borrowing to invest but is most likely to involve tax increases of some sort and yes, that might affect you and your clients.
We’ve not had anything yet to match the 1997 announcement of independence for the Bank of England. We have had early announcements on planning, house-building and the reintroduction of on-shore wind farm developments, because this is government that Gets Things Done.
With a review of pensions promised before the election, my expectation is for an announcement any day now. In her speech on Monday, Reeves said “…we will turn our attention to the pensions system, to drive investment in homegrown businesses and deliver greater returns to pension savers.” The ‘and’ in that sentence is doing some heavy lifting: driving investment in homegrown businesses may deliver greater returns for pension savers and if so, then great but what if it doesn’t? Which of those then competing priorities will prevail? This is set to be an interesting test for the pensions industry.
I’m also expecting the review to revisit the 2015 pension freedoms. This policy paper from earlier this year refers to an objective of sustainable retirement incomes. The DWP has already been working on a policy of default decumulation solutions for members of occupational pension schemes, so it wouldn’t be much of stretch to broaden out this work.
There are myriad other policy initiatives already in train, such as the pension Dashboard and pension scheme consolidation (for a comprehensive and constantly updated view of current financial services policy work, have a look at the lang cat Tracker), many of which will no doubt continue. The FCA’s review of the advice/guidance boundary is important and relevant and targeted support looks an essential part of the solution. There’s a problem with it though, because targeted support is not going to do much for competition, in fact it is likely to undermine shopping around, which may be an acceptable trade-off but politically I think it could have consequences. Provided we help the new Government deliver on their economic objectives, deliver growth, support workers they’ll play nice, but we’re dancing to an altogether more interventionist tune now.
Government posts are still being announced at the time of writing. Stephen Timms is back at the DWP but we don’t yet know whether he’ll be on pensions or on work. Interestingly Emma Raynolds has been appointed Parliamentary Secretary for the Treasury and the DWP. Might that point to a pensions brief? Tulip Siddiq is Economic Secretary to the Treasury and City Minister. We’ll get the King’s Speech on 17th July and a Budget in the Autumn; Parliamentary committees will be appointed over the next few weeks and at some point soon the backed-up pre-election policy announcements should start to flow again.
Musical entertainment this week eschews the Polson penchant for avant-garde Scandinavian noise-fest and opts instead for something old-school: Meet the new boss…
