What General Election could mean for your wealth – from stocks to tax and EFTs | Personal Finance | Finance
One thing’s for sure: general elections can have a big impact on our finances. It’s been just one week since this year’s election date was announced and both Labour and Conservative parties have already started talking money!
Sunak recently pledged to cut out taxes for pensioners and there are rumours that Labour might raise the capital gains tax rate to match income tax.
Historically, UK general elections have had a big impact on Britain’s economy. Not only through party political decisions but also through volatility in the stock market and investor behaviour. It turns out that the general election could have a pretty big effect on your money – both good and bad.
Let’s take a look at how the upcoming UK election could affect your wealth and what you can do about it!
The election and the FTSE100
The FTSE100 (or ‘footsie’) is an index that tracks the performance of the top 100 stocks listed on the London Stock Exchange. The index is considered to be a good indicator of the British economy.
Hold on tight
It is normal for British stocks and shares to see volatility around the general election as investors try to predict the outcome. This means that prices could rise and fall significantly, which increases the risk of investing.
It is difficult to say whether this volatility will lead to upward or downward price movement. It all depends on investor sentiment!
If people panic and start selling their stocks, we could see the performance of the FTSE100 take a hit. On the other hand, if investors see the FTSE100 as a good buying opportunity, the index could rise.
Buy British
Recently, there have been efforts made to encourage more people to ‘invest British’. A report from HSBC called British stocks a ‘golden buying opportunity’ and Chancellor Jeremy Hunt has made plans to launch a British ISA. It’s not certain if Labour will continue this plan if they get in, but it would make sense for them to carry on promoting British investments in order to boost the economy and support the City.
Despite these efforts, it is normal for people to feel sceptical in the run-up to an election. After all, it is difficult to know which party will win, making it difficult to predict outcomes for the stock market.
Check out the FTSE250
Research by Citi has shown that the FTSE250 typically outperforms the FTSE100 during a general election. So, it might be worth adding stocks from the FTSE250 to your portfolio if you haven’t already!
Pensions and tax
Decisions around pensions and savings could significantly impact the value of your pot. So far, parties have made promises, and rumours have started to spread, about potential decisions that could be made.
Mr Sunak has recently pledged to cut tax for pensioners. This would be great news for over-75’s however, I am left wondering how the Tory government would make up for this tax break?
The Tories have also committed to their ‘Triple Lock’ which could see the state pension rise by 8.5% in 2024. This would mean that pensions stay in line with wage inflation.
The Triple Lock could benefit future generations who are more likely to opt out of pension schemes and could be more reliant on the state pension. However, this rise also adds to the country’s huge and growing debt burden as tax-take is not rising enough to cover the extra costs.
On the other side of the table, Labour has also ruled out increased income tax or NI which could be good news for working Britons!
The value of the pound
Political uncertainty can be bad for the pound. Therefore, we might see some weakness during the run-up to the election, especially if the gap between the two parties gets smaller.
Now might be a good time to invest in ‘safe havens’ such as Gold. We have a great free guide on how to invest in gold – whether it’s physical gold or digital versions – that you can download here.
If the winner of the election does win by a large majority, it will imply stability which would be good for the pound.
How to protect your wealth during the general election
At the moment, it’s difficult to say for certain which party could win. But, as always in times of uncertainty, it’s a good idea to protect your wealth by investing in safe-haven assets such as gold and silver.
Gold is your friend
Gold, in particular, can help your savings keep their value during times when the pound might experience weakness.
As for pensions, we might see an end to the Triple Lock. This means that growing your own pension pot could be more important than ever.
If you don’t already, I would recommend looking into different high-yield investment options that you could use to build yourself a comfortable retirement fund. ETFs are a cheap and easy way to get into investing and provide returns that often beat the stock market.
Exchange-Traded Funds
In fact, as ETFs (Exchange-Traded Funds) are so popular now – given that they are cheap, transparent and easy to invest in – I recommend that you come to my FREE webinar all about how to invest in ETFs which is happening on Monday June 10 th at 12.30pm.
It’s just an hour and I will have a panel of experts there who will be able to answer your questions as well as give you industry secrets that only the institutional investors usually know. Sign up for free here and come and say hi!
During political events, the best thing to do is to avoid making panic decisions. There is likely to be some volatility no matter who wins. The key is to keep your finances spread across a range of different investments and savings pots. This will lower the risk of suffering a big hit.
Jasmine Birtles is an investment specialist and runs the consumer and investing site MoneyMagpie.com.
