- Don’t panic.
- Take a long-term view.
- Consider this year’s ISA plans.
- Don’t forget existing investments.
- Plan this year’s pension contributions.
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“The manifestos delivered some pretty hefty tomes, packed with pledges, promises, bunting, babies and hard hats. But now the dust has settled on the announcements, attention turns to what it means for you, and what you need to do to prepare your finances for the next government. The manifestos have put some meat on the bones of political policies proposed by all the parties in the run up to the general election. So it’s worth chewing over five sensible steps.
- Don’t panic
It’s easy to see speculation around each policy and fear the worst, but we shouldn’t allow it to drive behaviour that we wouldn’t otherwise consider, especially when it could end up being detrimental to your finances. Anything from making knee-jerk investment decisions to piling money you can’t spare into long-term savings and investments, could end up doing more harm than good. The tax tail should never wag the investment dog, and we shouldn’t let it chase the policy squirrel either.
- Take a long-term view
The good news is that the markets have been quick to shrug off slight manifesto jitters and are back in the green. We’re not expecting any massive movements to be inspired by UK politics in the immediate future, especially if the result of the election is clear cut. Even if there are short-term movements immediately after the election, as long as you have a diverse portfolio and a long-term view, there’s no need to make any sudden changes.
- Consider this year’s ISA plans
Having said all that, although the parties say the manifestos are fully costed, unless there’s robust economic growth, the second half of the coming Parliament could result in some very tough choices on spending, or revisiting some tax pledges. It means that if you haven’t used your ISA allowance, and you plan to do so at some stage, it may make sense to crack on while you know exactly where you stand.
For some people a cash ISA will be a sensible plan because they’re worried about tax on their savings. This has the added advantage that you can strike at a time when cash ISA rates are particularly competitive. For others, a stocks and shares ISA provides certainty that your investments are sheltered from any tax changes a future government may bring in. In many cases, a combination of the two will be the best solution.
- Don’t forget existing investments
When you’re considering your ISA options this year, don’t forget existing investments outside tax wrappers. You can use share exchange, or Bed and ISA, to move up to £20,000 into a tax-efficient environment, which will help protect your existing investments whatever happens after the election.”
Helen Morrissey, head of retirement analysis, Hargreaves Lansdown:
- Plan this year’s pension contributions
“One major announcement came before the manifestos: the Labour u-turn on the lifetime allowance. This will be music to the ears of anyone who was looking to make contributions to a large pension. For more than a year, savers were in pensions limbo, not knowing if they should continue to pile money into pensions or press pause. The announcement means that regardless of a Conservative or Labour victory they can make full use of their allowances.
Within the manifestos themselves, the Conservatives have gone one step further, pledging not to make changes to pension tax relief or tax-free cash. Labour have made no such pledge and there are concerns that tax relief changes could be on the cards given Rachel Reeves’ previous support for a flat rate. It’s worth noting that support was given a long time ago, and Labour has said it doesn’t need to raise taxes for anything in the manifesto. However, right now you have clarity of what your allowances are, and of the tax relief on offer, so it may make sense to take advantage of that this side of the election.”
