Four areas we know the new Labour government will explore

“The vacuum created by a failure to communicate will quickly be filled with rumour, misrepresentations, drivel and poison.”

This neat quote, from British naval historian and writer, C. Northcote Parkinson, sums up the current rumours circulating on changes Labour could make to pensions and savings.

Our industry loves a rumour. No impending Budget or Fiscal Statement is allowed to go by without assertions the government is cutting tax-free cash or scrapping pensions tax relief. So, a cash-strapped new government was never going to take the reins without the rumour mill going into overdrive.

But what do we actually know? Granted, Labour in opposition didn’t say much, but by looking at the Labour manifesto and Labour’s plan for financial services published last January, we can identify four areas they are going to tackle.

1. ISA simplification: Labour has committed to review the ISA landscape to make it as easy as possible for people to save and invest their money. Part of this is increasing the number of people using stocks and shares ISAs.
   
   This may not be a priority for the new government, but it is welcome, nevertheless. There are six different types of ISA – with the last government threatening to introduce a seventh in the form of a UK ISA. We need to cut the confusion people face and give them confidence to make that jump to become a saver or investor.
    
2. Review the pensions landscape: The big takeaway from the Labour manifesto was their intention to review pensions. The temptation is to throw everything, including pensions tax relief and automatic enrolment, into that bucket. However, Labour is focused on consolidation and achieving scale to deliver better returns for UK savers and greater productive investment in the UK.
   
   There is a supposed ‘untapped’ £2.5 trillion in pension funds that could be, in part, pushed to UK investment. However, much of the UK pension wealth is held in closed private sector defined benefit scheme funds sat in risk-averse funds. To encourage more risk-taking Labour wants to consolidate these funds by using the PPF (Pension Protection Fund). This – and encouraging more UK investment by mastertrust default funds – is expected to be the thrust of the pensions review, at least in the short term.
    
3. Advice and guidance: In its Financial Services paper, Labour showed its support for the on-going FCA and Treasury Advice Guidance Boundary Review, and we can expect the new government to keep the pressure on driving these changes forward.

   
   The proposal to enable more personalised ‘targeted support’ guidance has the potential to be a game changer. More useful guidance, higher take-up of regulated advice and simpler products could provide the foundation for a saving and investing revolution in the UK.

4. Encouraging saving: As well as increasing access to financial literacy education in schools and colleges, Labour has said it will work with the industry to pilot innovative approaches for encouraging savings, such as ‘sidecar’ savings.

All this gives a clear agenda for Labour’s initial moves. No doubt there are planned changes which they didn’t want to share with the public before the election. But the industry needs to be careful about filling in the blanks and allowing rumours to take over the narrative.