With a second election on the cards, what will be the impact on your personal finances? In particular, how will investors, homeowners, pensioners and savers be affected?
Given the fact that 2016 turned out to be a year full of predictions that never came true, perhaps what we should do firstly is to keep calm and think sensibly. For example when the election was announced on 18 April, the pound hit a five month high, which was good news for holidaymakers. However, the FTSE 100 index went the other way, falling 2% in two hours and bringing some bad news for investors. But don’t panic just yet; it’s important to note that index has since recovered.
Implications for pension tax reliefs and allowances
At this stage, we have little idea of what the weeks leading up to the election might hold. The Government might try to abandon the five-year pledge not to raise income tax, VAT or national insurance that was set out by the Cameron government and which has been said to have “restrained” the Chancellor. If this happens, there could be possible implications for changes to pension tax reliefs and allowances. Labour’s leaked draft manifesto reveals increases in income tax for the highest earning 5%, proposals to scrap university tuition fees and the banning of so-called “zero hours” contracts.
Triple lock – staying or going?
Regardless of what is going to happen, what has become clear is that the state pension and tax relief are likely to be key areas for parties to focus on. With regards to the state pension, the costly triple lock which guarantees that pension income will rise by a minimum of either 2.5%, the rate of inflation or average earnings growth, whichever is largest, may or may not be scrapped. Before the last election, the Government pledged to keep it in place until 2020, but there is mounting pressure to do away with it. However Labour, if elected, wants to retain it and extend it until 2025, plus they have promised to protect pensioner perks such as free bus passes and the winter fuel allowance.
And according to experts, the Government may also want to increase the state pension age, meaning those in their twenties would need to work until a minimum of 70. Whilst Labour wants to specifically help women affected by the rising state pension age.
Whilst the housing market which has grown in recent years, may face a small wobble if buyers delay their purchases until after polling day, it seems that recent constraints on buy to let and stamp duty are likely to remain the same.
What next?
So with so much uncertainty, I guess we will need to watch this space to see what the next 3 weeks of campaigning brings and which way the population vote. In the meantime I would advocate for caution, restraint and professional advice if you are thinking of making any big changes to your finances.
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