With just 10 days to go until the 2024 UK General Election, Britons will understandably be wondering what the outcome of the vote will mean for their finances.
In this guide, you can see what some of the parties have promised in terms of pensions and retirement, plus plenty of reaction from financial experts.
The Labour Party
Labour has vowed to protect the state pension triple lock – meaning the state pension would increase each year in line with the highest figure out of inflation, average earnings or 2.5 per cent.
However, Labour has not promised to raise the basic rate income tax threshold, which the Conservative Government froze at £12,570 until 2028, meaning pensioners face being taxed on their state pension as the triple lock rises.
Becky O’Connor, Director of Public Affairs at PensionBee, said Labour’s triple lock pledge is “likely to be popular” but warned it doesn’t go as far as the Conservatives’ new “triple lock plus” pledge – which is intended to stop pensioners being dragged into income tax on the state pension.
She said: “The state pension is a vital safety net for most retired households and must be preserved at a meaningful level. This is relevant not only for today’s pensioners but also for future generations.
“To preserve the state pension, some form of index-linking is necessary as without decent and reliable rises to the state pension, it will be today’s young workers who suffer most when they reach their sixties and seventies, as personal and workplace pension savings are not currently at a level where they could even come close to replacing state pension benefits.”
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Keir Starmer’s Labour Party has pledged to protect the state pension triple lock
PA
Criticising the Conservatives for raising the tax burden to a 70-year high, Labour promised to ensure taxes on working people “are kept as low as possible”.
The manifesto continued: “Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.”
The party has pledged a pensions review to “consider what further steps are needed to improve security in retirement, as well as to increase productive investment in the UK economy”. The party added: “We will also adopt reforms to workplace pensions to deliver better outcomes for UK savers and pensioners.”
Labour has dropped plans to reintroduce the pensions lifetime allowance, which was scrapped for good earlier this year. The party had previously pledged to reverse the Conservative Government’s policy and bring the LTA back.
Tom Selby, AJ Bell director of public policy, said Labour “deserves credit for recognising the decision to scrap the pensions lifetime allowance for good was both necessary and sensible”.
He added: “Reintroducing the limit would have risked hitting senior public servants, including doctors, with huge tax bills, added unwelcome complexity to the pensions tax system and unfairly penalised those who enjoy strong investment growth.”
The Conservative Party
The Conservatives have renewed their commitment to the state pension triple lock in their manifesto, which would mean the state pension is uprated in line with the highest of prices, earnings or 2.5 per cent each year.
As the six-year freeze to income tax thresholds continues, more and more pensioners are facing being taxed on their state pension income, as it rises each year.
The Conservatives have not U-turned on their threshold freeze but instead pledged to increase the tax-free allowance for pensioners, with a new “triple lock plus” promise.
It would mean from next year, the tax-free personal allowance for pensioners rises by the highest of prices, earnings or 2.5 per cent. The party claimed this measure will “guarantee that the new state pension is always below the tax-free threshold”.
The Conservatives claim it would mean eight million pensioners are £100 better off next year.
However, analysis by LCP suggests that nearly 2.5 million pensioners would still pay tax on their state pension under the “triple lock plus” policy.
Their modelling found the triple lock plus would not deliver the stated objective of ensuring their state pension is “completely free of income tax” for around one in five pensioners.
Becky O’Connor, Director of Public Affairs at PensionBee, said: “Over 60 per cent of people aged 65+ paid income tax last year, as the tax-free allowance for pensioners has been cut in real terms, leaving many older people worse off in retirement.”
O’Connor also pointed out the enhanced triple lock policy would be expensive, suggesting it could raise the “question of whether a continually rising state pension age may be required to manage escalating costs”.
The Conservatives have promised to cut the employee National Insurance rate again by two pence. It stood at 12 per cent at the beginning of 2024, and under this plan, would reach six per cent by April 2027.
Mike Ambery, Retirement Savings Director at Standard Life, part of Phoenix Group, addressed what cutting National Insurance could mean for the state pension.
He said: “Notionally National Insurance is intended to fund the state pension, so any cut adds to the long-running question over how it is funded.
“The reality is more complex and so long as the government of the day is committed to the state pension, the money will be found.”
The Conservatives have also announced a new Pensions Tax Guarantee, meaning they would not introduce any new taxes on pensions.
They would also maintain the 25 per cent tax-free lump sum and maintain tax relief on pension contributions at their marginal rate. The Tories have said they will not extend National Insurance to employer pension contributions.
The party has also promised to maintain all current pensioner benefits, including free bus passes, Winter Fuel Payments, free prescriptions and the free TV licence for over 75s on Pension Credit.
On the state pension age changes which affected 1950s-born women, the Conservatives said: “We are carefully considering the Ombudsman report into WASPI women and will work with Parliament to provide an appropriate and swift response.”
Reform UK
There was no mention of the state pension triple lock in Reform UK’s “contract”.
Reform UK plans to increase the personal allowance from the £12,570 it’s currently frozen at to £20,000, which Reform UK leader Nigel Farage said would help pensioners.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said that while the state pension has “loomed large” in other party manifestos, it’s not the case with Reform UK.
She said: “Far from rushing to support, or even enhance the triple lock, it doesn’t even get a mention in this document.
“This could mean that it is so ingrained within the system that it doesn’t need to be mentioned or it could mean it’s for the chop.
“Instead, the party’s plans to increase the minimum income threshold for income tax to £20,000 would act as a boost for pensioners who have found frozen thresholds are pulling them into tax-paying territory.”
Morrissey said the pledge to increase the basic rate tax threshold would “land better” with working-age people, who wouldn’t benefit from the Conservative party’s triple lock plus pledge.
In Reform UK’s “contract”, the party pledged to review pension provision, stating: “The current pension system is riddled with complexity, huge cost and poor returns leading to less uptake. Countries like Australia do savings and pensions much better and cheaper than we do and from a much younger age.”
The party also outlined a plan to boost UK pension scheme investment in infrastructure.
Morrissey commented: “Other parties have also promised to do an overarching review, and it is sorely needed to make sure people get the best retirement outcomes they can.
“Reform UK is highlighting the Australian model as somewhere that does pensions better than us, so we could see a push to increase minimum pension contributions as well as a move towards scheme consolidation.
“Reform UK has also outlined its plans to get pension schemes investing in the UK – something both the Conservatives and Labour have championed.
“It has outlined bold plans whereby 50 per cent of each national utility would be managed by the UK’s pension funds though details as to how this would work are scant.”
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Liberal Democrat leader Sir Ed Davey and co-leaders for the Green Party, Carla Denyer and Adrian Ramsay, in pictures
PA
Liberal Democrats
The Liberal Democrats have pledged to protect the state pension triple lock.
In their 2024 manifesto, the Lib Dems showed support for the WASPI (Women Against State Pension Inequality) campaign and women hit by historic state pension age changes, promising to “ensure that women born in the 1950s are finally treated fairly and properly compensated.
They also promised to: “Give everyone the chance to enjoy a decent retirement by:
- Developing measures to end the gender pension gap in private pensions and ensure working-age carers can save properly for retirement.
- Improving the state pension system by investing in helplines to ensure quicker responses to queries and resolution of underpayments.
- Ending the scandal of lost top-up payments by overhauling the processing system and providing proper receipts.”
The Green Party
The Green Party said elected Greens would campaign to “ensure that pensions are always uprated in line with inflation and keep pace with wage rises across the economy”.
They also promised to equate the rate of pension tax relief with the basic rate of income tax to “help fund the social care that will allow elderly and disabled people on low incomes to live in dignity”.
