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MM leader: Is Labour about to blow apart the Budget?

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All eyes this week are on the referendum on whether Scotland should go or stay as part of the union. As Money Marketing went to press, there was no way of knowing whether the Yes campaign or the Better Together campaign will emerge triumphant.

But away from the Scotland vote, there are rumblings that providers’ contingency plans go beyond that of the impact of an independent Scotland. Insurers are planning for the unthinkable – a U-turn on the Government’s flagship pension reforms.

The reason this is on the table, according to Money Marketing sources, is if Labour gets into power the radical pension freedoms set out in the Budget could end up looking very different.

The latest YouGov poll on voting intentions for The Sun newspaper puts Labour in the lead at 35 per cent, with the Conservatives on 31 per cent.

So far, 2014 has been a hell of a year for insurers, and not in a good way. In the wake of the charge cap and the FCA’s closed book review, the last thing they will want is a reversal of the Budget reforms they have undoubtedly spent the last six months preparing for.

But it seems after the battering they have had this year, providers are braced for inevitable change.

Chancellor George Osborne is widely acknowledged to have made a play for the so-called “grey vote” with his new pension freedoms. He opted for the drama of pronouncements from the despatch box, with industry consultation only following several months later. The after-the-event nature of having to cope with the biggest overhaul to pensions since the 1920s could mean the plans are ripe for tinkering.

Osborne is hoping voters will be lured by the newfound access to their pension pot. But as more and more savers wake up to the fact that they could be stung when their marginal rate of tax is applied, this could be the opportunity that Labour is looking for to clinch at least a redesign of the Budget changes.

As much as Osborne has shown his hand ahead of the general election, clearly, Labour would be shooting itself in the foot to attack the reforms straightaway. But as the freedoms are at odds with Labour’s political philosophy, if Labour wins power next May it may only be a matter of time before it starts chipping away at the reforms.

One thing is clear, whatever the outcome of the election, there has never been a better time to be an adviser.

Natalie Holt is editor of Money Marketing – follow her on Twitter here

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