IPE UK Briefing: UK election's impact on pensions industry

UK elections

The global stage is set with over 50 countries and over half of the planet’s population heading to the polls this year. Today is the UK’s turn as voters take to the polls.

With the potential for course-altering outcomes for years to come, the results of this election are expected to set in motion opportunities in some areas while suppressing growth in others.

It is widely anticipated that following 14 years of a Conservative government, Labour might take the reins. If elected, Labour has confirmed in its manifesto plans to increase investment from pension funds in UK markets.

It said it will adopt reforms to ensure that workplace pension schemes take advantage of consolidation and scale, to deliver better returns for UK savers, and for greater productive investment for the UK. And it will also undertake a review of the pensions landscape to consider what further steps are needed to improve pension outcomes and increase investment in UK markets.

Meanwhile, the Conservative Party has focused its manifesto on promising not to introduce any new taxes on pensions, as well as to continue progress with the several pension initiatives under its current lead, which include pension dashboards, the value for money framework, a solution to consolidate small pension pots, ‘pot for life’ proposals, and a review of the collective defined contribution (CDC).

Mansion House reforms

Under the current Conservative government, chancellor of the exchequer Jeremy Hunt’s Mansion House reforms aim to support growth across the UK economy by unlocking capital for high-growth companies and increasing returns for savers.

A number of consultations have been launched earlier this year, including the potential role of the Pension Protection Fund (PPF) as a public sector consolidator on which the government is still to publish a response to.

With a growing expectation that there could be a change in government following today’s election, industry experts are confident that the Mansion House reforms will stay in place, regardless of which party wins. It is “unlikely” that Labour will reverse the progress achieved by the Conservative government, such as the Mansion House Compact, if it comes into power, Mary Cahani, director of UK institutional at Invesco, tells IPE.

Funding code

The defined benefit (DB) funding code, which was expected to be laid in parliament in June and to come into force on 22 September, however, may be delayed. Pension schemes with valuations of 22 September will be mostly affected as they will have to start their valuations without having sight of the final parliamentary approved funding code.

SDR

With Sustainable Finance Disclosure Regulation (SFDR) in evolutionary limbo and the US facing an uncertain presidential election, the UK is in pole position to drive global product disclosure regulation into alignment with its Sustainability Disclosure Requirements (SDR) and take on ESG ratings disclosure to boot.

However, asset managers in the UK are expected to face several challenges implementing the Financial Conduct Authority’s (FCA) SDR and investment labels rules, according to a joint report by The UK Sustainable Investment and Finance Association (UKSIF) and PwC.

LGPS consolidation

With Local Government Pension Scheme (LGPS) assets expected to reach £950bn by 2035, investment pool Border to Coast Pensions Partnership notes that the LGPS needs to find a way to realise the benefits of scale and consider consolidation carefully.

Items to note:

• The IPE Conference & Awards 2024 will take place 2-3 December 2024 at the Cubex Centre and Žofín Palace in Prague. Sign up now!

Venilia Amorim

IPE.com editor