General Insurance Article - What a Labour win would mean for your money

 Anne Fairweather, head of government affairs and public policy, Hargreaves Lansdown: “The Prime Minister will be appointed by the King in the late morning on 5 July. After travelling back to Number 10 he will be straight to work appointing his Cabinet. If Labour is elected, we don’t expect any movement on central positions, such as Chancellor. However, as the more junior ranks are filled over the weekend, there could be some interesting appointments to positions such as the City Minister and Pensions Minister.
 
 Parliament returns on Tuesday 9 July with new MPs getting sworn in. However, settling into a new job is never easy. With many new MPs expected to be appointed, the allocation of offices will take time. MPs will also need to appoint their own support staff, all while trying to work out the new IT system. We’ve all been there!
 
 A Mansion House speech from the Chancellor and the Governor of the Bank of England was planned for 11 July before the election was called, this could still take place but will only be confirmed once the new Chancellor is in office. We are expecting a King’s Speech setting out the legislative agenda of a new Government on 17 July. If elected, Rachel Reeves has said she wouldn’t hold a full Budget until the autumn, giving the Office of Budget Responsibility time to do their work. Liz Truss’ premiership has certainly dampened down the desire for surprises which could disturb the debt markets.”
 
 Susannah Streeter, head of money and markets, Hargreaves Lansdown: 

  

 Stock market reaction

 “In all likelihood, the impact of a Labour victory on financial markets would be minimal, especially if the current poll predictions materialise. Even a large Labour majority is unlikely to dramatically unsettle investors. It would enable the new government to get on with their agenda which has largely been digested by markets. Lower valuations, affected by Brexit, could turn more positive given recent pledges for closer trade ties between the UK and the EU and less of a focus on regulatory divergence. Meanwhile, a minority administration or coalition would be more unsettling as it would mean more uncertainty, and could hold back investment.
 
 Bond market impact
 Shadow Chancellor Rachel Reeves has emphasised an intention to be economically responsible and focus on stimulating long-term growth. The priority will be keeping the waters calm in the aftermath of the election. However, she suggested that borrowing rules could distinguish between day-to-day spending and investment, to propel long term growth, potentially loosening the purse further ahead. So far, this doesn’t seem to have perturbed the debt markets, with bond investors appearing to be more sensitive to interest rate speculation than the investment plans of an incoming government.”
 
 Sarah Coles, head of personal finance, Hargreaves Lansdown:
 
 Tax promises
 “Labour made expensive commitments during the campaign, keeping the state pension triple lock, and ruling out rises in income tax, National Insurance or VAT. However, money will be tight, so there’s a chance of cuts in services or tax rises later. Capital gains tax could be in the frame. It helps them deliver on the promise not to raise taxes for ‘working people’, but it’s a tough balancing act, because it doesn’t sit well with its aim to help people create wealth. If Labour raised CGT, and equalised it with income tax, it would cost a higher rate taxpayer with a stocks and shares gain of £30,000, £5,400.
 
 There was a pledge to increase taxes for specific groups – including non-doms and parents paying school fees if the cost of VAT is passed on. There was also silence on frozen income tax thresholds, hiking taxes for millions. Since the thresholds were frozen, 4.4 million more people have been forced to pay tax including 2.1 million dragged into paying basic rate tax and 1.88 million into higher rate tax. This has a knock-on impact on savings, and investments. Savers lose chunks of their personal savings allowance as they cross frozen thresholds – and pay tax at a higher rate. They also pay higher rates on dividends and capital gains.
 
 Fortunately, nothing will happen overnight. The Budget isn’t expected until the autumn, and any changes are likely to be gradual, so it’s not too late to make the best possible use of any tax-efficient savings and investments, including ISAs and pension contributions. Don’t rush into any decisions, or be driven by tax fears, but if you were planning contributions this tax year, it’s worth considering making them before any changes kick in.
 
 More support with your finances
 The election gestured towards support for those who need care, although few details were forthcoming. There were clearer pledges for parents – including breakfast clubs in primary schools, the right to parental leave from day one of starting work, and protections against discrimination against pregnant women. When added to the roll out of free childcare to all children over nine months, this could make a significant difference to families. Meanwhile, for those wrestling with everyday costs, there were promises of everything from improving the minimum wage to cutting utility standing charges.”
 
 What a Labour win would mean for pensions and pensioners
 
 Helen Morrissey, head of retirement analysis, Hargreaves Lansdown: “In the event of a Labour victory, the triple lock would be here to stay, giving retirees certainty on how their state pension will be uprated in the next Parliament. However, with the cost continuing to rise, Labour will walk a tricky tightrope between keeping the triple lock and not overburdening the working population.
 
 Labour’s promised pension review needs to transform workplace pensions to better serve savers, from consolidation to thinking about small pots and how people can build a lifetime pension, rather than switch provider with every new job. This has the potential to help people engage with their pension, address the issue of lost pension pots and drive competition in the industry. Labour has said it will also turn its attention to the tricky task of how to stimulate growth by encouraging UK pension funds to invest more in the UK. It was a challenge the Conservatives sought to meet with its Mansion House compact – it remains to be seen how a potential Labour government might approach it.
 
 The review should have the state pension as a core part of it. The state pension forms the foundation of our retirement income and people need certainty as to what they will get and when. We have to move away from the rapid series of hikes in the state pension age, towards a system that offers more stability.
 
 The other key part of the review will be pensions taxes, including pensions tax relief. This is ripe for tinkering whenever a government needs money, which has created a complex, messy system that can make it hard to plan long term. Labour’s decision to step back from plans to reintroduce the lifetime allowance has been welcomed and this needs to be built on to deliver a system that incentivises people to save with confidence that they won’t get tripped up by complex rules. In the meantime, people should continue to make full use of the allowances available to them to build up their SIPPs.”
 
 Susannah Streeter:
 
 Investment sectors affected
 
 Energy
 “Labour plans to establish Great British Energy, a publicly owned clean power firm, funded by increasing the windfall tax on oil and gas company profits from the North Sea. It also wants to draw new licensing rounds to a close, limiting future revenue streams for companies operating on the UK’s continental shelf. The oil majors benefit from diversity, so will face limited impact, but smaller players may need to rethink their strategy. Investors will want to see producers focus on profits from existing operations, while ploughing capital into future facing technologies. Electrification will be a growing trend - benefiting electric vehicle manufacturers, infrastructure providers that can support network demand, utilities and energy services companies.
 
 Water
 Under a Labour administration water companies could face higher fines if they fail to clean up waterways and mend leaks, and executives could lose their bonuses. Already the cost of repairs and upgrades weighs heavily on firms, and mandatory investments in service levels will keep demands on cash resources high. Investors should keep an eye out for regulator Ofwat’s five-year price review after the election. This will not only set out price controls but also service level and investment requirements.
 
 Housebuilding
 Labour’s pledge to build 1.5 million new homes by shaking up the planning system would benefit housebuilders facing slow approvals of new sites - although it remains to be seen how quickly this can be done. High mortgage costs have heaped pain on housebuilders, so with rates likely to have peaked, there are signs of a recovery. However, that’s broadly reflected in valuations, so investors could be sensitive to disappointments.
 
 The outcome of the general election may see some industries more affected than others. As ever to ensure you’re not overly exposed to any particular risk, it’s important to maintain a diversified portfolio.”