Triple lock and pension policy, mortgages, tax and ISAs could all be affected by the upcoming General Election.
Yesterday, the Prime Minister confirmed the date of the next General Election which may have left many people wondering what this could mean for their finances.
The Prime Minister cited economic growth and inflation coming down as he announced a summer election.
Sunak also pointed to tax cuts for workers and increases to the state pension as key achievements.
All political parties could announce their own plans for personal finances should they be elected.
This could include changes to pensions rules, mortgages, savings as well as auto-enrolment rules.
There may be changes in auto enrollment rules
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Pensions
Both the Conservative and Labour party have been adamant on committing to the Triple Lock policy for the entirety of the next Parliament.
The triple-lock guarantees the state pension rises by the highest of average earnings growth, inflation or 2.5 per cent. The full new state pension is currently worth £221.20 per week, or just over £11,500 per year.
Tom Selby, director of public policy at AJ Bell said: “While neither party is likely to talk about it in their manifesto, it is possible planned state pension age increases will also come into focus for the next administration.
“The current state pension age is 66, with plans in place to raise this to 67 by 2028 and 68 by 2046. However, there have been calls from various quarters to accelerate that timetable in order to save the Treasury money.”
Another policy that could see change is the lifetime allowance. This has been scrapped by the Conservatives this year but Labour has previously stated it will reintroduce it.
Selby added: “This would be a retrograde step, adding unwelcome complexity to an already complex system. It would also run directly counter to wider efforts to boost investing, as any lifetime allowance tax charge would punish those who enjoy strong investment growth.
“We’d urge all parties to focus on keeping pensions as simple as possible and avoid turning pension tax into a political football. By their very nature pensions are a tool for long-term planning and the public need to be confident that Governments won’t move the goalposts every five minutes.”
There will also be an update for the £27billion of lost pensions just languishing in accounts and pensions dashboards. Proposed pensions dashboards should help make it easier for people to find lost pensions.
The reforms, due to be introduced in 2026, will allow people to see all of their retirement pots in one place, online. Until then, there are tools out there that can help you locate their old pensions.
Auto-enrollment
The pensions industry has also been patiently waiting for reform to be made to auto-enrollment.
A report into the reforms published in 2017 recommended lowering the minimum age for auto-enrolment from 22 to 18 and getting rid of the lower qualifying earnings band, although these recommendations have yet to be enacted.
Selby said: “Given a future Government is likely going to need to increase minimum contributions beyond even this level, implementing the 2017 recommendations is likely to be an early job for the next administration.”
ISAs
Selby insisted both parties focus on simplification and increasing the ISA allowance as this would be much more likely to boost UK Plc over the long term. To simplify the system would mean having one ISA’ product incorporating the best features of the existing six ISAs.
“No sensible person designing a savings system from scratch would propose the plethora of different ISAs we have on offer today,” Selby added.
He continued: “The proposed UK ISA is a deeply flawed gimmick that will not achieve its stated aim of reviving UK capital markets.
What’s more, it will add complexity to the ISA landscape, something AJ Bell research shows puts people off using the product. Regardless of who triumphs in the general election, the UK ISA should be confined to the policy dustbin, with focus instead trained on simplification and increasing the ISA allowance. This would be much more likely to boost UK Plc over the long-term.
“Labour has already said it will look to simplify the ISA landscape to make it as easy as possible for people to invest if it is elected to power.”
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Tax
This is another key issue that both parties could have conflicting issues over. For some, taxes need to rise in order to fund already-stretched public services. For others, ever-increasing tax bills are evidence that public spending is out of control and taxes need to be cut to incentivise growth.
Laura Suter, AJ Bell personal finance director said: “The Conservatives will surely point to recent cuts to National Insurance as evidence of their commitment to reducing the tax burden, while Labour will argue that frozen tax thresholds mean we’re paying more tax via stealth methods.
“In truth, there is very little wiggle room in either direction. Taxpayers will struggle to stomach further tax increases, while tax cuts will eat into the future Chancellor’s budgets, which is crucial to any spending commitments either party plan on.”
Mortgages
According to Nathan Emerson, CEO of Propertymark, housing “must be a key theme that all political parties are placing front and centre of their general election campaigns” since it is the “cornerstone for every single community across the UK” and “the foundation to a strong economy”.
Emmerson said: “There must be a sustainable mix of housing solutions for both buyers and renters, as well as a commitment to ensuring the UK leads regarding innovation, quality, and environmental sustainability.
“In addition, any new government must ensure there is comprehensive support in place for first-time buyers to prevent the prospect of home ownership being out of reach, but equally ensure the housing market remains balanced for all. It is also important there is a full-scale commitment to ensure wider infrastructure is also planned for, as we witness an ever-growing population.”
Stuart Forsdike, founding partner of PCS Legal, raised the prospect of a cut in stamp duty and conveyancing reform coming to the forefront of the political agenda.
He said: “However, the issues facing the housing market go beyond just stamp duty. The entire moving process is currently so fragmented and stressful that it acts as a significant deterrent to potential movers. The complexity and inefficiency of the conveyancing process alone contributes to this stress and requires reform.
“A complete overhaul to make the moving process more fluid and straightforward should be a priority on the agenda of all political parties.
“High costs and cumbersome procedures are major barriers to mobility in the housing market. Addressing these issues by simplifying and making the process more transparent could lead to increased activity and satisfaction among homeowners and buyers alike, ultimately benefiting the wider economy.”
