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How the general election will impact your money

How the general election will impact your money
Your Money
Written By:
Your Money
Posted:
23/05/2024
Updated:
24/05/2024

Rishi Sunak surprised most households in the UK with his shock general election announcement in the rain yesterday.

It’s official, the date voters head to the ballet box will be 4 July, and speculation will mount as to who will end up in 10 Downing Street and by how big a majority.

But how will the upcoming election impact your finances over the next six weeks and beyond?

Sarah Coles, head of personal finance at Hargreaves Lansdown, which won Best Lifetime Investment ISA at the YourMoney.com Awards 2024, says that “with money so tight for so many millions of people… all eyes will be on the impact on our finances.”

“There are 10 key things to watch”, Coles added.

Those 10 factors have been explored by Hargreaves Lansdown’s experts Helen Morrissey, Mark Hicks, Susannah Streeter and Sarah Coles.

10 things to watch out for

1. The state pension

The future of the state pension – most notably the triple lock – is a major issue. There’s support for it from both Labour and the Conservatives, but it’s a divisive policy, with younger generations shouldering the ever-burgeoning cost. Recent research from Hargreaves Lansdown showed just 16% of the 18-34 age group would be more likely to vote for a party pledging to keep the triple lock. This compares to 54% of the over-55s.

Regardless of who has the keys to 10 Downing Street, people need certainty as to what they will receive from the state pension, and when, and we need a long-term plan.

2. Auto-enrolment

Auto-enrolment into workplace pensions has been a great success so far, but it needs to go further. The AE Extension Bill has the capacity to do this, as it enables people to be auto-enrolled from the age of 18, as well as allowing pension contributions from the first pound of earnings.

The bill received royal assent last year, but all has gone quiet since, with the pensions minister admitting it might not be implemented for some time.

3. Lifetime Allowance – and broader pension taxation

The outcome of the general election will bring some much-needed clarity on the Lifetime Allowance. The Conservatives scrapped it, but Labour has said it wants it reinstated. As yet, we don’t know how they would do this. Such confusion brings unnecessary complexity to people’s long-term planning, and we look forward to its resolution.

4. Annuities

The annuity market has been riding high in recent years off the back of interest rate rises. The most recent data from Hargreaves Lansdown’s annuity search engine shows a 65-year-old with a £100,000 pension could get an income of more than £7,100 per year from a single life level annuity.

The expectation is that, as interest rates start to decline, then so will annuity incomes. However, given that a general election makes the prospect of a rate cut less likely this summer, then we could see annuity rates stay higher for a bit longer.

5. Savings

The savings market moved quickly in response to the election announcement. The Bank of England is going to want to skip changing the base rate around the time of an election, to avoid the risk it becomes politicised. As a result, the savings market has now fully priced in a delay to September. Before the announcement, August was still a reasonable possibility, and June was an outside chance. All that has changed.

Savers could stand to benefit, because it could mean a pause in rate cuts, so easy-access savers would continue to earn rates at or above 5% for a while longer.

6. Investments

As the markets are relatively politically agnostic, whoever wins, any uncertainty will settle down. As always, it’s worth taking a long-term view. A decisive victory by one side or the other will tend to bring more settled markets than a close-run thing.

7. ISAs

ISAs are increasingly important to the UK investor at a time of rising taxes. Labour has spoken about the need for simplification in the past, while the Conservative Government is currently consulting on the British ISA.

It will be interesting to see how this shakes out, and we can only hope that any changes end up making the range even simpler and easier to use, rather than accidentally introducing needless complications.

8. Taxes

Jeremy Hunt has already pledged that the Conservatives will move gradually towards lower taxation, and you can expect Labour to have tax firmly on the agenda too. Right now, neither party has a vast amount of cash to play with, so we might end up with vague promises about general approaches rather than any very specific tax cut pledges at this stage.

We have seen taxes on investments increased over the past couple of years, so there’s the hope that whoever wins the election will revisit that decision and whether it’s the right thing to encourage investment within the UK.

9. Property

Incentives for first-time buyers may well be part of the picture, and there’s the hope that any new Government will revisit the Lifetime ISA (LISA), including the limit on the value of property that can be bought through the scheme. This hasn’t changed since the LISA launched, and without a link to house prices, it risks falling behind.

10. Mortgages

With the much-rumoured base rate cut now unlikely to be made in the summer, it’s bad news for anyone on a variable rate deal. Plenty of people remortgaged to these more than six months ago, in the hope that a rate cut was around the corner, so yet another delay will be a real blow. For those on a fixed rate mortgage, who need to remortgage in the near future, the picture is equally bleak, because fixed rate deals are unlikely to be falling any time soon.