Personal Finance Impact of a Labour Government.

It’s highly likely to be election year this year and if the polls are accurate then Labour are in the driving seat to form its first government for 14 years with Sir Keri Starmer as prime minister, which could mean some significant changes for your investments and pensions.

The latest YouGov/Times voting intention poll placed |Labour on 44%, with the Conservatives  lagging behind by some distance with just 19% of those asked saying they would vote for them.

This is the same share of the poll they received following the aftermath of Liz Truss’ disastrous mini-budget two years ago.

Labour’s simplifying ISAs plan

Earlier this year Labour released a report Financing Growth: Labour’s plan for financial services, which outlined its plans for how your personal finances would be handled if it won power.

The savings landscape is to be reviewed, and a major part of the plan to reinvigorate the capital markets is to simplify ISAs to make it easier for people to feel the benefits of saving.

This is to be done through the increased utilisation of stocks and shares ISAs.

Although the report does not offer any more details of how this would happen.

It’s a direction that would welcomed by some major players in the financial services market such as AJ Bell, who have long advocated ISA simplification moving away from the multiple products of today’s system to a single ISA vehicle.

 

Pensions to be reviewed

Labour welcomed auto-enrolment for pensions that was introduced by the coalition government in 2012, and it will re-evaluate the whole pension model to review whether the current framework delivers sustainable retirement incomes.

A future Labour government would work with industry and consumer groups to ensure that savers are getting the best returns.

Also to identify and tackle the barriers to pension schemes investing more into UK productive assets, for example cultural and regulation-induced risk aversion.

All types of pensions will be assessed, including the employer-sponsored defined benefit schemes, where the amount is based on how many years you have been a member of your employer’s scheme, which is more typical in the public sector.

For Local Government Pensions Schemes, Labour will look to gauge the different models for asset pooling in pensions.

This includes in-house fund management at the pool level, with the aim to deliver higher returns for savers and to increase investment into more productive assets.

Also personally subsidised defined contribution schemes are to be reviewed, where Labour will hand The Pensions Regulator (TPR) new powers for consolidation if schemes fall short of offering sufficient value to its members.

The TPR will also be asked to provide guidance on fund and strategy suitability over your pension pots, and the minimum thresholds for scheme performance will be kept under review by a Labour government.

Labour also plan to bring in an opt -in scheme for your defined contribution pensions, where a proportion of its assets can be directed into UK growth assets that can be split to areas such as venture capital, small cap stocks and infrastructure investment.

A committee would be set up comprising of private investors who will draw up a list of venture and small cap funds that are supported by British Patent Capital, which is the largest domestic investor in British venture growth opportunities.

The next stage is that institutional investors will be asked to allocate a small proportion of their funds and your money to the opt-in  scheme.

 Consumer protection to be strengthened

Labour will empower payment service providers to delay any payments that they believe to be suspicious, this would support the work in this area which is already being carried out by the Financial Conduct Authority (FCA) and the Payment Systems Regulator.

The buy now pay later market (BNPL) is growing doe to the cost of living crises, and Labour aim to increase regulation over BNPL, something which providers have been calling out for.

The report said that Labour has laid out a plan for regulation to shield unprotected consumers, having spoken to influencers in the sector which it said has received broad support, but the details of the plan were not revealed.

The advice gap also needs to be closed and Labour said that it supports the ongoing work in this area of the FCA, such as addressing the advice gap through the Advice Guidance Boundary Review.

A Labour administration will closely monitor the progress in closing the gap, as its  report said that only 8% of UK adults have received expert financial advice.