Following the General Election on 4th July 2024, the result has shown that the Labor Party will become His Majesty’s next Government.
As Labor begins transitioning into power, Alpha has reviewed how their manifesto could impact life & pensions providers, alongside retail investment and advice firms.
Tax Changes for Individuals and Corporations
Labor have positioned themselves as the ‘Party of Wealth Creation’, a theme that permeates throughout a significant proportion of their proposed policies that appear to directly target the improvement of outcomes across the client lifecycle.
Labor have proposed a number of tax reforms, namely an increase to the capital gains tax rate on private equity profits, a change to the ‘non-dom’ rules and removing the charitable status for Private Schools.
Impact to Financial Advisers:
These tax changes are likely to impact both high net worth individuals as well as more traditional retail investors and can increase the demand required on Financial Advisers to re-evaluate financial plans sooner than the mandatory annual review. Ensuring that Financial planners are prepared for this demand, alongside reviewing that their propositions and resulting services, can support modeling these tax changes to provide good outcomes for their clients.
Impact to Life & Pensions Providers:
Similarly Life and Pension firms who invest into private equity will need to re-evaluate these tax implications on their portfolio and potentially develop new investment strategies that consider investing in alternative high-yield investments on behalf of their policyholders.
What will be welcome from life & pensions providers, alongside other corporations, is that corporation tax is to be capped at 25%, providing certainty on their tax profile over the coming 5 years.
Commitment to Sustainability
One of Labor’s ‘five missions for a better Britain’ is to make Britain a clean energy superpower, including the commitment to accelerate reaching Net Zero through a zero carbon electricity grid by 2030.
To achieve this, one of the first year policies will be to establish a national wealth fund to assess and begin to invest in ports, giga factories, clean steel and hydrogen. However, Labor has also announced they plan to extend the Energy Profits Levy for Energy firms to the end of the parliament, including increasing the rate by 3%.
Impact to Pensions and Investments:
The investment in green energy alongside the commitment to Net Zero may provide significant opportunities for firms looking to increase growth within their ESG geared portfolios and funds.
However, Advisers and Pension Funds will need to review their current asset allocation across Energy firms to fully understand the impact of an extended Energy Profits Levy.
Pension Reform
Labor has committed to conducting a dedicated pension review to ‘improve pension outcomes and increase investment in UK markets’. While we do not know the full scope of the review, we anticipate that there may be an overhaul of the pensions market, focusing on engagement, increased contributions and reducing the advice gap.
We anticipate that the current legislation for pensions (namely Pensions Dashboard) is likely to continue as a key enabler for engagement, and that mooted developments by the previous Conservative government (i.e. Pot for Life) may be accelerated under the review.
Impact to Pension Providers:
It is imperative that firms should continue to implement and monitor the Consumer Duty requirements while preparing for Pension Dashboard rollout in April 2025. Firms must also be nimble enough to make changes to their products, services and technologies once the outcome of the Pension Review has been completed.
Summary
Labor’s majority in the 2024 election (expected majority of 170), as well as achieving the backing of 121 business leaders, holds the potential to provide stability and certainty to markets, alongside improving investor confidence in the UK.
We anticipate that the Labor government may look to move quickly to begin enacting its manifesto, and more information about its exact plans over the incoming 12 months will be announced in the King’s Speech on the 17th July.
Alpha is ready and equipped to support our clients through this change of government and the initiatives that are expected soon and in the future.
