By Tom McPhail and Alison Gay

So there we have it. The main manifestos have been published, the headlines have been dominated, and we’re left wondering: what does it all actually mean?

From our respective policy desks (i.e. our home office desks), we think that overall financial services has a bit of work to do to get ready for the next government of whatever shape and hue.

Let’s start with what we know, before we get into what might happen next and any policy changes that might result come 5 July.

What we heard: Labour

The starting gun hadn’t even been fired on Manifesto Week (among the most exciting of all the weeks) before we had word of Labour’s latest plans for pensions, in particular its stance on the lifetime allowance.

After the lifetime allowance was scrapped in last year’s Budget, shadow chancellor Rachel Reeves threatened to reintroduce it, saying it was “the wrong priority, at the wrong time, for the wrong people.” She added there would be specific carve outs for NHS staff.

But when the time came to commit those pledges to paper, the plans to bring back the lifetime allowance were shelved, with the news breaking a good three days ahead of Labour’s manifesto being formally published.

Along with the wider pensions industry, we feel this is the right move.

The actual abolition of the LTA has proved extremely challenging in itself (see our conversations with Quilter’s Jon Greer and AJ Bell’s Rachel Vahey for two great discussions on LTA trials and tribulations). So reversing it would have proved even more challenging. For a party whose stump speeches are all about stability and eschewing ‘rabbits out of hats’, reintroducing the LTA would seem to go against that.

We already had an overview of Labour’s thoughts on financial services from its Financing Growth paper published earlier this year, which went into some detail on what it thinks its priorities for the sector should be.

Once we had the actual manifesto, we could see it has echoed the existing direction of travel of ‘bigger, better run’ workplace pension schemes. But it wants to go further, saying it will:

“… undertake a review of the pensions landscape to consider what further steps are needed to improve pension outcomes and increase investment in UK markets.”

It’s unclear yet what the scope of this review will be, how broadly or narrowly it will be drawn, and whether it will be carried out on an independent basis.

What we heard: Conservatives

The Conservatives continue to set out their stall on taxes, with an initial 2p cut in National Insurance and ultimately abolishing NI completely. The party also wants to abolish the main rate of self-employed NI by the end of the parliament.

This begs wider questions about the sustainability of the state pension (funded by NI), which we’ll return to later.

Elsewhere on tax, the Conservatives have promised a two-year abolition of capital gains tax for landlords selling to tenants, and to remove stamp duty on properties up to  £425,000 for first-time buyers, with no increase in stamp duty for everyone else.

On pensions, and again ahead of the formal manifesto launch, we had commitment to a ‘triple lock plus’. This is a pledge to retain the triple lock and increase the tax-free allowance for pensioners by the same measures, so the state pension is always below the tax-free threshold. Fiscal drag is okay for the rest of us it seems, but not retirees.

Staying with pensions, the Conservatives have put forward a ‘pensions tax guarantee’, where they vow not to introduce any new taxes on pensions. They’ve pledged to keep tax-free cash at 25%, keep pension tax relief as it is and say they won’t extend NI to employer pension contributions.

This concept of promising to leave pensions alone is a nice idea in theory, but it’s a bit like saying to a child: “I’ve decided not to make you eat spinach”, when the child didn’t know you were going to make them eat spinach in the first place.

What we heard: Elsewhere

The LibDems made a point of committing to a review of rules for the gig economy, which is only going to become more significant and is therefore a sensible thing to think about, and a mention of addressing the pensions gender gap, but without giving any detail about what that might involve.

The Green Party has taken a more radical approach in its manifesto, with a number of tax increases, as you might expect, geared towards addressing climate change, but also a proposal for a universal basic income in the longer term.

Meanwhile the SNP has put forward the idea of a ‘wellbeing pension’. While at this stage it’s not clear what this means, if it’s a proposal to consider how state pensions and benefits work together to provide income in later life. then that could be very interesting (more on this in our latest podcast episode below).

What was missed, and what (could be) next

Returning to Labour, we haven’t had any explicit mentions of changes to pension freedoms, or any ruling out of said changes.

Labour gave the reforms a cautious welcome when they came in, but has since commissioned research highlighting the risks. There may yet be a raid or at least a review of death benefits, particularly on larger accounts, which may well be an easy tax-raising target to go at.

Given the demographics we’re faced with, a new government of whatever stripe may have some tough decisions to make around things like the age at which savers can access their private pension, or requiring a source of minimum long-term income before cash can be taken out.   

The sad fact is that for all the pledges related to financial services, there is a lack of serious discussion about the best way forward, and the harsh realities that need to be met head on.

Take pensions as an example. On one side we have talk of a broad brush review, on the other we have promises to cut NI while retaining the triple lock, with neither wanting to grasp the nettle of whether the state pension can continue to be uplifted on its current basis.

It’s a drum we’ve been banging for a while, but the need for a long-term savings commission is growing more urgent by the day.

The idea is the commission would look at all changes in the round, but also start with the end goal in mind of a sustainable and adequate and pension system, rather than piecemeal changes that make an already complex framework even more so.

We are now 20 years on from the first report by The Pensions Commission, commonly known as the Turner Commission after its lead author Lord Adair Turner. This work is now seen as a case study in building industry and political consensus, and led to major reforms including the increase to the state pension age, a single state pension and the rollout of auto-enrolment.

If, as looks likely, there is to be a change of party in government, they should hit the ground running and engage as quickly as possible with the industry and other stakeholders to address the problem of funding for later life.

Let’s hope we don’t have to wait another 20 years for consensus and positive change on a similar scale – both for pensions, and for the financial services sector more broadly.

For more from Tom and Alison on what’s in store for financial services in the wake of the election, listen to our latest podcast: