With last night’s exit polls indicating a Labour landslide, the die was cast. Now, we know that Labour has secured a massive majority in the House of Commons following yesterday’s general election. The Labour leader, Sir Keir Starmer, has become Prime Minister and in his victory speech earlier this morning, he said ‘Change begins now’.
With many of us across the industry perhaps feeling a little jaded this morning after a long night watching proceedings unfold, there will be much to consider in the days, weeks and months ahead. What will be the impact on taxation, on pensions, on markets, on gilts, on the pound? We’ll be bringing you all the latest news and views from across the industry here on IFA Magazine.
Experts from across the industry have been sharing their reactions to today’s election landslide result with us as follows:
Simon Merchant, CEO of Flagstone says: “An August base rate cut looks highly likely, now that election distractions are out the way and the results have gone the way everyone predicted.
“The election result is hardly a surprise. What is less clear is how the new government’s policy decisions are going to affect the appetite and ability of savers around the country to save more.
“Savers would do well to take advantage now of the competitive rates available on long and shorter terms right across the market. From instant accounts to 5-year fixes, it’s not hard to find inflation beating rates that top 5%.
“8 million UK adults don’t have any cash put away in savings. A further 16 million have only one savings account.* As a nation, we’re not doing enough as it is to save for our later lives.
“The new government has a moral obligation to help more people around the country take control of their future finances, and that starts with encouraging people to make what they can afford to save work harder for them.”
Alec Collie, Head of Medical at Wesleyan, the specialist financial mutual for doctors, said: “A new government means there could be some changes when it comes to tax and savings policy. But this might not come immediately. Rachel Reeves has ruled out an emergency budget, so we may need to wait for the Autumn Budget, and probably September at the earliest, before the first concrete announcements are made.
“The pre-election manifesto gives us some flavour of what to expect. Labour has pledged that things like income tax, VAT and National Insurance won’t change. However, it may need to have some ability to raise taxes in order to deliver its other commitments. So, there’s a chance we could see changes to wealth-based taxes such as Capital Gains Tax (CGT) or Inheritance Tax (IHT).
“While Labour backtracked on plans to reinstate the Lifetime Allowance before the election – something that we celebrated as a real win for financial planning – it still plans to review the pensions system.
“We don’t currently have any detail on what this could involve. Our view is that if the government is going to pursue any pension reform, it must avoid making small tweaks and instead focus on fundamental changes that deliver simplification. Continuing to tinker with pension policy risks adding more confusion to any already complex regime at a time when doctors are already grappling with various pension scheme changes. A big picture, root-and-branch review is our best chance of delivering fair outcomes, and making pension saving something that people actually want to engage with.”
Iain McLellan, Director at Isio, comments: “With Labour securing a sizeable majority their promised pensions review has the potential to be more radical and grasp some of the thornier pensions issues. The government may feel it has clear license to pursue the most ambitious form of its vision for UK pension schemes and their members. That could include sweeping changes to improve member outcomes, ensure schemes take advantage of consolidation and scale, and increase productive investment in UK markets, though it’s worth noting that the consolidation and productive investment themes are ones that were also being pursued by the previous government.
“In the meantime it will be interesting to see who is appointed as Pensions Minister and what existing pensions policy developments they look to accelerate, put on the back-burner or bin altogether. Labour has dropped its plans to reintroduce the Lifetime Allowance and has no current plans for further changes to pensions taxation. However, this falls short of an outright commitment to leave pensions tax alone, and pensions might be seen as a convenient target for ‘stealth’ taxes when fiscal circumstances are tight.”
Lindsay James, investment strategist at Quilter Investors said: “Labour has won a landslide that is not just historic, but utterly devastating for opposition parties. Thanks to the quirks of the British electoral system, Labour has not had to increase its share of vote considerably to completely flip the make up of parliament. This highlights the precarious job they now have to govern a country that is experiencing difficult economic challenges that many in the population will expect to be fixed quickly.
“So far the financial market response has been fairly muted with the pound holding on to recent gains overnight. Businesses and investors have foreseen this result for some time and have been comfortable with the messages that have emanated from Labour. It will not want to upset the apple cart, although now it is in power it will be interesting to see how much they deviate. Labour has focused on economic growth being at the heart of everything they do. Boosting growth from its currently stagnant levels is going to be difficult to do given the tax and spending challenges facing the new government. Interest rate cuts are also not likely to be delivered at the pace that some in the party will like and as such Labour is inheriting a tough economic environment that has no easy quick fixes.
“And while the City is comfortable with a Labour government, it too will want to see substantial and concrete plans to reinvigorate the London market. Labour governments have not been considered natural allies in the past, but the demise of the London market will require it do give it some sort of stimulus, especially if it wants growth to return to the economy. Getting more businesses choosing to list in London would be a positive start, but a lot needs to be done to also prevent companies currently listed here moving elsewhere or going private.
“This is a fascinating election result and Labour will quickly discover the challenges that face them and the potential this has to hold back its agenda. Given how the votes have played out, it is unlikely the population will give them a long leash and as such clamour for change and improvements will be swift.”
Paras Anand, Chief Investment Officer of Artemis Investment Management, said: “That the outcome of the election has thrown up few surprises may be among the most important features of the results.
“In recent weeks and months there have arguably been more unexpected turns in elections around the globe, causing more rather than less uncertainty – and that’s before we get to the upheaval of the current election in France and the uncertainty of which Democrat will face Trump in November.
“All this could mean the UK, from being a poster child for political instability and volatility around economic strategy, could increasingly be seen as a bastion of relative stability.
“This dramatic pendulum swing could mean a material reassessment of the value of UK assets and recovery in the currency, which has devalued substantially over the past decade.
“We have already begun to see evidence of a growing focus on the UK market by international investors and corporates, but this has been based largely on absolute valuations. If the relative attraction of the UK continues to build, given uncertainty elsewhere, this process of revaluation has a long way to run.”
Tom McPhail, Director of public affairs at the lang cat said: “Labour has already set out its stall around economic growth – using money from the pensions system to do this, and its planned review of the pensions landscape and reform of workplace provision. This may well include reviewing contribution levels for auto enrolment, and revisiting pension freedoms with a greater focus on ensuring people have aguaranteed long-term income. We can expect significant upheaval in the months ahead though balance needs to be struck between delivering this mandate with the sector’s capacity for change – there’s a limit to how fast things can move.
“Our own research shows sector wide appetite to press ahead with implementing the legislation (through the Advice Guidance Boundary Review) that will deliver better support and protection for consumers. Clarity is now needed on direction of travel to provide some continuity to address the long-term challenges involved in providing a sustainable retirement income for all savers.”
Alastair Black, Head of Savings Policy at abrdn said: “In its manifesto, Labour outlined plans to set up a pensions commission. This would be a very positive first step if, as we hope, the aim is to improve participation and deliver better outcomes for savers. However, this should not distract political attention from other critical long-term financial planning issues that need to be addressed.
“This includes making sure that people can access the right help to make financial decisions, when they need it. The Advice Guidance Boundary Review is an incredibly important piece of work in this area, and could lead to the best chance we have of closing the advice gap in a generation. We must maintain momentum in this critical area of reform. Luckily, Labour have already stated they are supportive in their “Financing growth” policy paper earlier this year.
“Social care reform also can’t slip down the list – after pensions, it has to be the single biggest issue creating uncertainty for long-term planning. Currently, there’s a support vacuum that makes it very hard for people to plan with confidence. We need to see the government tackle this difficult, but important, issue head on, and not kick it into the long grass. We’ve already seen the planned social care cap pushed back into 2025.
“Ultimately, we want to see that any and all future policy changes are based on thoughtful reform, built around consensus and with a long-term view in mind. Change can absolutely deliver good outcomes. But toing and froing undermines long-term planning. It was welcome to see Labour commit to not reinstating the LTA with that in mind.”
Sharing his reaction, Jamie Jenkins, Director of Policy at Royal London, focused on the mutual sector, on pensions and on Labour’s plans for GB Energy as follows: “A widely overlooked commitment in Labour’s manifesto is its longstanding commitment to double the size of the mutual sector. In the UK, mutuals represent less than 10% of the market, compared to between 30% and 60% in many other developed economies. Mutuals provide an alternative for consumers, where profits can be shared with customers, as opposed to shareholders.
“The UK market would benefit from creating an environment where new and smaller mutuals can grow and compete on a level playing field with their shareholder-owned counterparts.”
“One of the most important manifesto pledges from Labour for the financial services sector is its commitment to conducting a review of the pensions landscape. Pension assets are now considered a key ingredient in resolving the UK’s economic growth challenge and, as a result, have risen up the ranks of political priorities. But pensions are first and foremost there to provide people with an income in retirement.
“The two things are not mutually exclusive, but any review needs to take a more holistic, longer-term view, considering the needs of all stakeholders.
“And the new Government will undoubtedly want to build on the success of automatic enrolment, originally conceived under a Labour Government, rather than make rash decisions that risk dismantling it.”
“If the plan for GB Energy is to better enable the various actors involved in the energy transition to collaborate on its delivery, this could just be the magic dust that is so desperately needed to accelerate investment in our country’s net zero ambition.”
Following the election of a new UK government, The Society of Pension Professionals (SPP) President Sophia Singleton said;
“The SPP looks forward to working with the new Labour government, especially as there are numerous outstanding issues that need addressing in the short-term, from transfer regulations and notifiable events to publishing the DB Funding Code.
In the longer term, the options for DB schemes; improving pensions adequacy and ensuring savers make better informed decisions at the point of retirement also require attention.
That said, we are acutely aware of the need to avoid decisions on pensions policy being made in haste.
Taking time over decision making, consulting thoroughly with industry and allowing a sufficient period for any changes to be implemented, maximises the chances of policy success and impact whilst simultaneously minimising the risks of unintended consequences.
There is much to do and the SPP, with its diverse and expert membership, is well placed to help.”
David Brooks, Head of Policy at independent consultancy Broadstone, previews where the new government is likely to take pensions policy saying: “With this morning’s General Election results confirming the long-expected news that Labour will form the next government, attention now turns to how it will deliver its pension promises and duties over the next five years.
“The manifesto contained a pledge to conduct a wide-ranging “pensions review” and we expect that this is likely to cover auto-enrolment given concerns over pension adequacy as well looking at ways consolidation can improve outcomes in the workplace pension market.
“Productive finance was another area Labour focused on in their manifesto but this push for comes with a caution warning as there may be a disappointing uptake from defined benefit schemes however an ongoing review into VFM may allow more schemes to allocate long-term illiquid assets to this space. We would counsel caution in this space as these assets are not a one way bet and the long-term interests of pension savers will need to be carefully balanced with the short-term needs of the country.
“With no mention of the Lifetime Allowance in Labour’s manifesto, we can probably assume it will not continue with previously announced plans to reverse the Conservatives’ abolition of this tax, but further detail will be needed around concluding the small print on its implementation.
“With a Pensions Minister to be appointed and a Kings Speech in just two weeks’ time, policy is likely to move quickly but we broadly expect continuity in the pensions market. There are already significant legislative processes underway which we anticipate will be continued – with the possible exception of the controversial pot for life proposals.”
Lily Megson, Policy Director at My Pension Expert said, “A Labour victory was as close to inevitable as you could get. Yet, Starmer and his party must not be complacent. Britons have experienced a great deal of financial hardship throughout the final years of Conservative governance. Financial planning – particularly retirement planning – has been an uphill battle for many Britons.
“As such, it is vital that the incoming government work rapidly to ensure economic stability. Further, pension policy must be airtight.
“Leading the party’s plans for pension policy is a comprehensive pensions review – a much-needed initiative that should be a top priority. With millions not saving adequately for retirement, the review must result in reforms that improve access to financial education, boost pension engagement, and simplify savers’ experience of the sector. Indeed, closing the engagement gap must be top of the agenda for the new government.
“One way the new government can simplify the pension system is by supporting the timely rollout of the Pensions Dashboards, which have faced significant delays under Westminster’s predecessors. Additionally, the government must enforce greater scrutiny and accountability for providers imposing excessive transfer delays.
“Above all, what we need is for the new government to actually deliver on its promises to transform pensions. Appointing a dedicated pensions minister with a clear action plan will be a crucial first step toward providing Britons with the knowledge and tools they need to achieve financial security in retirement. After a long period of instability and disillusionment, now is the time for definitive action. Your move, Labour.”
Andy Briggs, Phoenix Group CEO, said: “Our fundamental aim is to get the best possible outcomes for our 12 million customers and it is hoped that a period of political stability will help deliver this. Phoenix Group has been calling for a review of pension saving adequacy and we believe this should cover both the private and state pension system to ensure it is fit for purpose. It is imperative that a plan for increasing auto-enrolment minimum contributions should be part of this. Inaction risks people being lulled into a false sense of security that saving at the statutory minimum will be enough.
“It is also vital we give UK pension savers greater access to a wider pool of investment opportunities and this must go alongside better support and financial guidance for people taking one of the most important financial decisions of their lives. We will continue our programme of engagement with the Labour Party to ensure pension reform is one of their priorities. It is essential we address the pensions savings gap now to ensure the best outcomes for our customers.
Sharing his reaction, Michael Born, Research Analyst at Morningstar, focused on the impacts of today’s election result on housebuilders, gilts, equities and renewables saying:
“Labour set out plans to build 1.5m homes over 5 years in its manifesto, and a key part of achieving this will be by making the approval process more straightforward. This should benefit housebuilders, but particularly the larger players who are well-placed to benefit nationally such as Taylor Wimpey, Persimmon, Vistry, and Barratt.”
“Rachel Reeves and Keir Starmer have hammered home their message of fiscal responsibility, cutting spending as well as likely raising taxes. After several years of aggressive borrowing and spending, culminating in 2022’s mini Budget, seeing more fiscal prudence and discipline should be bullish for GILTs over the medium to long term. However, while UK inflation has come down, it is still high and there are a lot of structural issues – such as the huge deficit – which means we are unlikely to see huge rallies in the GILTs market immediately.”
“A Labour win has been priced in for some time. We would not expect to see any dramatic swings in asset prices on the back of the election results.”
“Labour’s commitment to decarbonisation of the power network is much more aggressive than that of the previous government, so energy majors with a focus on decarbonisation such as SSE are well-poised to benefit from the win over the longer term. Labour’s proposed business rates reform should also benefit bricks and mortar retailers like Sainsbury’s as well as hospitality stocks like Whitbread and JD Wetherspoon. Meanwhile, inflation has been coming down, and we are seeing real wage growth, so life for the UK consumer should improve which should also benefit these stocks.”
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “Congratulations to Sir Keir Starmer on becoming Prime Minister. We wish him and his government every success.
“Growth was one of the main issues highlighted during the General Election campaign. The Labour manifesto emphasised the party’s plan to kickstart economic growth, invest in the UK’s infrastructure and drive wider wealth creation.
“The investment company structure, which has delivered for investors for over 150 years, is well placed to help Labour achieve their growth objectives. Our investor base is diverse – from institutions to individuals saving for their retirement – and we invest in a broad range of asset classes, from UK stocks and shares to infrastructure and private equity, bridging the gap between private assets and public markets.
“Everyone recognises that more needs to be done to reinvigorate the UK’s public markets, raise levels of savings and investment and increase investor engagement. We have made constructive proposals on all these issues and look forward to working with the new government to progress them.”
Tim Middleton, Director of Policy and External Affairs, the PMI said: “The PMI would like to offer its congratulations to Sir Keir Starmer on his victory last night. There are many reforms required to the UK pensions system. Some, such as the new Defined Benefit Funding Code and changes to auto-enrolment, remain from the agenda of the previous Government. Others stem from the Labour Party manifesto: the new Government has committed itself to a review of the UK pension system, and we would greatly appreciate clarity as to what this review will address. In particular, we look forward to the appointment of a new Pensions Minister, who we greatly look forward to meeting in order to discuss the next chapter for pensions provision in the UK.”
Matthew Beesley, CEO, Jupiter Asset Management, said:
“The UK market has very healthy underlying fundamentals and is trading at near all-time high levels. Yet frustratingly at the same time, the valuations of UK stocks are also at record low levels because of the political uncertainty of the last few years. There is every reason to hope that the new government will usher in a period of political stability, prioritise the Edinburgh reforms and hold themselves accountable to a clear industrial growth strategy that will cement the UK’s recovery and turn it back into a key focus for international investors.”
Sarah Jane Boon, a Partner in the Family team at Charles Russell Speechlys says: “Labour’s pledge to add VAT to private school fees within their first year in government could make private schooling unaffordable for some families and bring about concerns about how easily (and when) a good state alternative could be found.
“Parents of children at independent schools will be used to regularly assessing the affordability of school fees against their finances – school fees have increased ahead of inflation for the past 25 years – but families could now be hit with significantly increased fees as soon as the next academic year.
“This possibility may be especially worrying for separated or divorced parents, who are committed to a court-imposed obligation to discharge school fees until their children reach the end of their secondary education. If Labour do form the next government, there may be increasing numbers of parents who seek to vary their court obligations on the grounds of affordability.
“Separated couples often struggle with funding two households on divorce. The decision as to where children are educated falls to both parents to be agreed under their parental responsibility, so disagreements over such issues can lead to litigation – with the court making the ultimate decision.”
David Saunders, Senior Partner at law firm, Sackers, specialist in pensions and retirement savings, commented: “With Labour now confirmed as the new Government in office, all eyes are on what its priority destinations will be during the initial stages of its journey. Labour’s manifesto suggested that the pensions road ahead may well contain some familiar milestones, with proposals to ensure that workplace pension schemes can take advantage of consolidation and scale, to deliver better returns for UK savers and greater productive investment for UK PLC. Whilst there were no obvious indications of major pensions tax changes on the horizon, having ridden into office on a manifesto of change, once the new Government starts cranking through the gears it will be interesting to see where the promised review of the pensions landscape ultimately takes us.”
