Winning over pensioners has been crucial in the lead-up to the general election. With the Labour Party now confirmed as the next government, many retirees are curious about what this means for them.

Here, we outline the key changes that could affect your retirement and what they mean for you.

State Pension Triple Lock to Continue
The Labour Party has pledged to maintain the state pension triple lock once it assumes office.

The triple lock ensures that the state pension increases annually by the highest of inflation, average earnings growth, or 2.5%. This commitment is expected to remain in effect until at least 2030. Currently, the full new state pension stands at £11,542 per year, though individual amounts can vary.

The future value of the state pension by 2030 will depend on inflation and average earnings growth over the next five years. Projections suggest it could exceed £13,000 annually by the end of the decade.

There were plans for a “triple lock plus” under the Conservatives, which would have linked increases in the state pension and retirees’ tax-free allowance (currently £12,570) to inflation, average earnings, or 2.5% annually. However, tax thresholds are frozen until 2028, potentially affecting pensioners’ tax liabilities if their incomes rise above these thresholds.

Labour opposes increasing tax-free allowances for pensioners while keeping tax thresholds frozen. Jonathan Ashworth, Labour’s shadow paymaster general, criticized the “triple lock plus” proposal as a political maneuver lacking economic credibility.

Questions over pension tax allowance

The Labour Party appears to have abandoned its intention to reinstate the pensions lifetime allowance, as it was not included in their manifesto.

In the previous year’s Budget, Chancellor Jeremy Hunt eliminated the pensions lifetime allowance, which placed a limit on the amount individuals could save in their pensions or the growth their pension funds could accumulate before tax charges applied. This change, effective from April last year, was welcomed by higher-income savers, including senior NHS doctors and other public servants, who were at risk of exceeding the cap set at £1.073 million.

Following the Budget, Rachel Reeves, then shadow Chancellor, initially stated that a Labour government would reverse this decision, but faced opposition from senior public sector figures.

Pension experts suggest that the lifetime allowance could still be reintroduced. Sir Steve Webb, former Liberal Democrat pensions minister and consultant at LCP, remarked that the absence of a commitment in Labour’s manifesto to reintroduce the lifetime allowance leaves open the possibility of future changes to pension tax relief.

Regarding pension policies, Sir Keir Starmer clarified in a recent radio interview that Labour does not intend to abolish the 25% tax-free lump sum that pension savers can withdraw. A Labour spokesperson later confirmed this position, describing any suggestion otherwise as a misunderstanding.

Labour has announced plans for a comprehensive review of the pensions landscape, which could lead to various reforms. This includes revisiting aspects of retirement savings like auto-enrolment, which saw proposals in 2017 to lower the age threshold for enrolment to 18 and remove the earnings limit for pension contributions. These proposals were legislated in 2023, and Labour has been encouraged to continue these reforms in government.

Additionally, there is potential for Labour to explore proposals such as enabling savers to consolidate pension contributions from multiple employers into a single pension pot, an idea previously suggested by Jeremy Hunt.

Overall, Labour’s approach to pensions includes a broad review that could result in significant changes to retirement savings policies.