Labour’s war on pensioners punishes people for doing the right thing

The government wants to mandate how pension funds should invest – a clear breech of fiduciary duty that puts people’s life savings at risk, says Helen Whately and Mark Garnier

Labour is waging a war on savers. This should be a big story, but it’s been drowned out in the cacophony of the Budget unravelling.

Everyone knows Keir Starmer and Rachel Reeves are hiking up taxes to pay for more welfare. My phone is buzzing with outrage at the prospect of a family of five on benefits getting the same income as someone earning £90,000.

It should also be buzzing with outrage at the tax rises on savers and pensioners. Millions of people who are working hard and doing the right thing are set to be punished – and made poorer – by the government’s choices.

Capping salary sacrifice schemes is one of those choices. For years it’s helped people put more aside for retirement. Even so, most people are not saving enough to afford their standard of living in later life. But the Chancellor is about to make it even harder. 

The attack on salary sacrifice is not a minor tweak; it is a deliberate throttling of a mechanism that encouraged long-term saving. And this measure alone is forecast to generate nearly £5bn of extra tax revenue in 2029-30. Money that would otherwise have gone into people’s pensions.

At a time when pension adequacy is already a serious issue, why on earth would the government choose to disincentivise saving?

The Budget isn’t the only front in the government’s assault on savings and pensions. Today Parliament is debating the Pension Schemes Bill. Nestled alongside the sensible reforms introduced by Conservatives is a new power no government should wield: the power to mandate how pension funds invest. 

Ministers insist this is merely a “backstop”. Yet that raises the obvious question, why take the power at all? A threat made “just in case” is still a threat, and pension trustees know it. 

Any Minister always needs to consider the worst thing someone else might do in their position. Reform UK, for instance, have said they want to use pension funds to pay for the nationalisation of water.

Forcing funds to invest where ministers prefer is unlikely to deliver better returns for pensioners

Fundamentally, mandation undermines the fiduciary duty to act in savers’ best interests. Forcing funds to invest where ministers prefer is unlikely to deliver better returns for pensioners.

Trustees are not there to fulfil manifesto promises or chase political pet projects. They are custodians of people’s life savings. Whether it is tying investments to the Paris Agreement or funnelling pension money into failing utilities, political aims must never trump members’ returns. These are not government funds, they are the hard-earned savings of the British public.

Mandation also opens up a legal minefield. Trustees are legally accountable for outcomes. If a mandated investment fails, who takes responsibility? Is it the trustees compelled to follow political instruction, or the government that issued it? 

Alarm

Industry bodies are united in their alarm. The ABI warns mandation is unnecessary; the Pensions Management Institute calls it a “dangerous precedent”; Aviva notes the power “goes far beyond” what is justified. When an entire sector speaks with one voice, the government should listen.

Instead, Labour has dismissed these concerns. At the Pensions UK annual conference earlier this year, the pensions minister told people – and I quote – to “chillax”. 

Rather than reaching for the mandation lever, the government should be doing a proper diagnosis of why pension funds aren’t investing more in UK assets. Is regulation getting in the way? Have we over-corrected since the Maxwell scandal? Ministers cannot fix what they do not understand, yet they refuse to even commission the analysis industry is calling for.

On this, as on welfare, the government is making the wrong choices. Conservatives believe in encouraging people to work and save. We know we didn’t always get this right in government, but unlike Rachel Reeves, we will own up to our mistakes.

Pensioners deserve dignity, not political experimentation – and savers deserve a government that backs them instead of seeing their savings as another piggy bank the Chancellor can raid.

Helen Whately is shadow work and pensions secretary

Mark Garnier is shadow economic secretary to the treasury