Depending on the outcome of this year’s general election, there could be some changes to legislation that affects both pensions and investments over the next few years.
It is natural to feel apprehensive about what might be around the corner, especially when it could affect your wealth and your retirement plans. By being informed about what each party has pledged, you can vote with confidence on election day and understand how your wealth might be affected if there is a change of government.
How will the key pledges from the major parties impact pensions and investments ahead of the election? How can your financial planner help you to protect your wealth?
Pensions and investments – The Conservative Party
The Conservative party has pledged to mitigate tax liability for pensioners while maintaining the State Pension triple lock. They have maintained a commitment to the triple lock on the State Pension, which ensures it will rise in value each year in line with the highest of:
• Inflation, as measured by the Consumer Prices Index
• Average wage growth
• 2.5%.
On top of this, they have proposed the “triple lock plus”. This would ensure that a pensioner’s Personal Allowance would also rise by the largest of these three factors. This would help to avoid State Pension rises being offset by increased tax liability.
They have also pledged no new taxes on pensions. As such, the party would maintain the 25% tax-free lump sum you can take from your pot when you retire. They will likely also continue to offer tax relief on pension contributions at your marginal rate.
In his Spring Budget, chancellor Jeremy Hunt proposed a new UK ISA, designed to increase investment in UK companies. The Conservatives would offer investors an additional £5,000 ISA allowance provided this is invested in UK companies using the new ISA. In effect, this could allow you to invest up to £25,000 in ISAs in the 2024/25 tax year.
Pensions and investments – The Labour Party
The Labour Party is also committed to the triple lock and wants to ensure pension schemes offer good value for consumers. They have pledged to maintain the triple lock on the State Pension, meaning that it will continue to rise in line with the cost of living. It has also set out a plan for financial services that is separate from its manifesto.
The party has pledged to review the pensions and retirement savings landscape with the aim of making it easier to consolidate schemes. It has also proposed a British “Tibi” scheme that would enable defined contribution pension funds to invest more in British growth assets.
The party plans to grant the Pensions Regulator greater powers to intervene if pension schemes do not offer good value for money for consumers.
The manifesto suggests that a Labour government would not raise personal tax rates – including Income Tax, VAT, and National Insurance – but it has not been forthcoming about plans for Capital Gains Tax (CGT). So, there is a possibility that this could increase under a Labour government, which may affect investors.
Pensions and investments – The Liberal Democrats
The Liberal Democrats have made several pledges related to pensions and investments in their manifesto.
It has echoed the Conservative and Labour Parties in their commitment to upholding the triple lock on the State Pension. Additionally, it has pledged to introduce measures to tackle the gender pension gap, ensuring working-age carers have the ability to save towards their retirement.
It has also stated that it would require pension funds and managers to demonstrate that they are working in alignment with the requirements of the Paris Agreement. This is the commitment that nations from around the world agreed to in 2015, which was designed to prevent global temperatures from increasing by more than 2°c above pre-industrial levels in an effort to slow down global heating.
The Liberal Democrats have pledged to increase CGT, which may affect investors who don’t hold investments in a tax-efficient wrapper like an ISA.
According to Investors Chronicle, the CGT rates would be based on profits only, rather than the combination of income and profits, as it currently is. The party has proposed a rate of 20% for gains up to £50,000, 40% for gains between £50,000 and £100,000, and 45% for gains over £100,000.
A general election can create uncertainty, but taking advice is a sensible way to protect your wealth. It is impossible to know for certain what the outcome of the election will be, which creates a high level of uncertainty for the country particularly regarding pensions and investments.No matter what happens on 4 July, there is a chance that the next government will review various financial systems. They may subsequently make changes to the way your savings, investments, and pensions are taxed.
If you are concerned about how this could affect your wealth, it is sensible to consult your financial planner for advice as soon as possible. They can help you to identify the most appropriate steps to take to achieve your long-term financial goals both now and in the future.
Need help with pensions and investments? Get in touch
If you are concerned about how the general election could affect your wealth or your retirement plans, we can help. To arrange an initial meeting with no obligation, please contact us at hello@rpgcc.co.uk or call 020 7870 9050 to speak to us. Or you can visit our web chat in the bottom right corner; we respond personally during office hours, and you can leave a message out of hours. The RPGCC team is always just a click or call away.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change. The Financial Conduct Authority does not regulate tax planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
