Parties stay silent on personal finance

Mark Polson | Supplied

A s I write this my postal vote envelope has just dropped through the letterbox – it’s make your mind up time for me and tens of thousands of other Scots who plan a quick getaway at the end of the school summer term.

Before you decide which box to tick, we should spend a little time considering what impact the General Election may have on our pensions and investments.

One of the things people often cite as a reason to build wealth is to create financial independence. By that, most folk mean being able to live independently without having to work, and without having to rely on state support. But it can go further. At a certain level you are insulated from the state; you can buy your own safety net, your own healthcare, your own children’s education (even with VAT on top). Planning your finances is helpful even if you’re not super-affluent because it stops you being a tax-surfer. It means you don’t let the tax tail wag the dog.

If you’re of that mindset, you don’t really care so much what Keir and Rachel – assuming my turf accountant isn’t wide of the mark with their current 1/80 odds – do in terms of personal finance because you’re just getting on with it. The biggest determinants of your eventual wealth are money and time. The more you put in of the first and the more you have of the second, the better you’ll do.

With that in mind, let’s look at the main parties, bearing in mind it’s just about Westminster for now.

The Conservatives would love you to vote for their initial 2p cut in NI and ultimately abolishing the tax completely. The party also wants to abolish the main rate of self-employed NI by the end of the parliament. This raises questions about the sustainability of the state pension which is funded by NI, but understandably that’s not in the manifesto.

You can expect “fiscal drag” (where tax bands stay put as incomes increase, dragging more people into paying more tax) to continue biting, unless you’re retired and only receiving the basic state pension. The rest of your pension income will normally be taxed, but again that’s not in the manifesto.

The Labour Party would love you to vote for a fundamental review of pensions including getting workplace pensions to invest in more sustainable ways. That’s it – other than a promise not to resuscitate the pensions Lifetime Allowance.

The SNP would love you to vote for pretty much no change, but they’ve suggested a “wellbeing” pension. No real details yet.

Reform would love you to vote for abolishing IHT. The Greens would love you to vote for green things, which don’t have much to do with personal finance. The LibDems are similarly quiet.

What do we know after hundreds of pages promising moons, sticks and moons on sticks?

We know you don’t need to do anything at the moment. Manifestos are useful because they set out priorities. Assuming we have a Labour majority in Westminster, there are no manifesto commitments to reforming capital gains tax or IHT.

The main parties’ manifestos are silent on the basics of personal finance – no new tax schemes, no abolition of ISAs, no promises to get rid of tax-free cash or higher rate relief in pensions. We can expect a review of pensions more generally and some commentators think the IHT regime on pensions might get less generous.

But in the main your accrued pensions and investments will keep on doing what they do, and so should you. If you’re worried, speak to a financial planner and – as US rap heroes Public Enemy once so memorably remarked – don’t believe the hype.

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