The new government’s legislative agenda was set out in The King’s Speech on Wednesday. The government set out a package of Bills it intends to introduce to Parliament in the coming sessions and months.
In addition to widely expected Bills including those on employment rights, nationalising rail and bus services and a National Wealth Fund (introduced by the Chancellor last week), a new Pension Schemes Bill was announced and a recommitment to removing the VAT exemption for private school fees.
Pension Schemes Bill
Aiming to improve outcomes for people in retirement, it is expected that the Bill will support over 15 million people to save more in their private sector pension schemes, ensuring the average earner has over £11,000 more in their pension pot by the time they retire.
Measures in the Bill include:
- Addressing poor performing default funds as part of the value-for-money framework
- Consolidating multiple small pension pots
- Requiring all occupational pension schemes to offer retirement products ‘including default options to their members’ – this is designed to ensure members are invested for ‘longer, giving the potential for investments in productive assets – boosting economic growth.’
Steve Webb, former Pensions Minister, commented on the Bill, saying it “very much represents ‘business as usual’ when it comes to pensions policy. There appears to be nothing in the legislation that so far represents a distinctively ‘Labour party approach’ to pensions, and a Conservative minister could happily have brought forward this legislation.”
He continued, “It will take time before we see how the new government’s agenda differs from that of its predecessor, but this does mean that any distinctive policies will have to await legislation later in this Parliament and may take time to have effect.”
No immediate impact will be felt by pension savers, as the details are being scoped out and progressed through Parliament. What is clear is that the government are keen to prioritise people’s pensions pots to improve outcomes and drive UK investment. In its manifesto, a full review of the UK pension landscape was promised, so further details are awaited. We will keep you updated on developments and any potential implications.
School fees
The Speech confirmed the government’s manifesto pledge to press ahead with its plans to add 20% VAT on private school fees, with the King saying the measures “will enable the funding of six and a half thousand new teachers.”
Marking a significant change to how private education is financed in the UK, the Chancellor had previously confirmed that 2025 would be the earliest they would impose VAT, depending on how the plans and legislation progress. The change could come into effect in September 2025, so parents still have some time to review their financial plans and seek expert advice on how they might best navigate a fee increase. We will keep you up to date with developments, as the saying goes ‘the devil is in the detail,’ which will come in time. It is possible that some schools will be able to absorb a portion of the cost to support parents and retain as many pupils as possible, with parents then expected to fund the remainder.
We can help you understand your options with regards to raising the additional money required to keep your child on the educational path you have mapped out for them. By using specialist cashflow modelling technology and factoring in a range of scenarios including assumed growth, inflation and fee increases, we can help you understand how much you need to save and over what duration to meet your goals.
Budget announcement
Financial measures, including changes to taxation and allowances, weren’t covered in the Speech but will be addressed in the Budget later this year. Chancellor Rachel Reeves is expected to announce the date of the Budget before Parliament’s summer recess.
Any questions?
At S4 Financial, we have been advising clients on school fees planning and pensions for several decades. If you have any questions on any of the topics covered, please do give us a call or email hello@s4financial.co.uk to book a free, initial consultation with an expert adviser.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.
It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding of the Kings Speech 2024 and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only.
All details are believed to be correct at time of writing (18 July 2024)