Five ways the general election could affect your finances -including mortgages, childcare and benefits

IN just six weeks’ time, the people of Britain will take to the polls to vote on a new government which could dramatically affect your personal wealth and household finances.

The snap General Election is taking place on July 4, prime minister Rishi Sunak announced yesterday.  

From the amount of tax you pay to the rules on products including mortgages and pensions, the government and its policies impacts all areas of our financial lives.

The Conservatives, Labour and other political parties will release detailed manifestos which, among other issues, will lay out exactly how they plan to change the economy and the wealth of the country.

But Rishi Sunak and Keir Starmer have already been vocal about some of their plans.

Here is what we know so far….

PENSIONS

The so-called triple lock on the state pension is a key issue for pensioners who rely on the benefit.

The guarantee means the state pension rises by the highest of average earnings growth, inflation or 2.5%.

Both the prime minister and Labour leader Keir Starmer have committed to the policy for the entirety of the next Parliament.

It is worth closely watching how parties react when speaking about the issue.  

Tom Selby, director of public policy at AJ Bell, said: “The next government will have some big pensions decisions to take.

“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.”

Labour has said it plans to reintroduce the lifetime allowance which is the limit on pension pots someone can build up over their lifetime and was scrapped in April this year.

Tom 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.”

Labour has also said it plans to simplify the ISA market – currently there are many different versions of the tax free savings account, including Lifetime ISAs, cash ISAs and investment ISAs.

TAX

The amount of tax we pay is set to be a big battleground issue in the run-up to voting day.

Taxes pay for services and benefits that we rely on including the NHS, Universal Credit and Child Benefit.

But it’s a fine balance between taxing people and funding these important areas of the country.

The chancellor Jeremy Hunt recently cut National Insurance and there are likely to be more key changes on the horizon.

Susannah Streeter, head of money and markets, Hargreaves Lansdown, says: “The chancellor has pledged to cut personal taxes further, with more tinkering to National Insurance looking likely, to try and stimulate growth. The latest public sector borrowing snapshot arguably offers the government even less wiggle room to bestow treats on voters.

“Kier Starmer has vowed to abide by tough spending rules to be seen as responsible with the country’s financial health.

“But at the same time, there is a plan to cut NHS waiting times and deliver 40,000 more appointments by paying staff overtime. It’s far from clear whether cracking down on tax avoidance and non-doms will provide the budget needed for this.”

BENEFITS

Universal Credit and other benefits are already set for some big changes this year – but there’s no doubt political parties could pledge to tinker with systems further.

A huge shake-up to PIP is currently being planned by the government and it could see cash payments replaced with vouchers.

It comes after the Prime Minister announced major changes to the welfare system, saying “people with less severe mental health conditions should be expected to engage with the world of work”.

He said that some people with mental health conditions may be offered talking therapies or respite care rather than cash transfers.

The changes proposed could come into force if the Conservative Party wins the general election, but they are not set in stone and could change.

Meanwhile, Labour has previously said that sickness benefit claimants who want to work will be allowed straight back on the dole if they cannot do the job.

It means someone on illness or disability welfare can take employment without the fear of losing their funding if they later quit.

Expect more details on benefits to emerge in party manifestos.

Sarah Coles, head of personal finance at savings provider Hargreaves Lansdown, said: “There have been no specific election pledges, but both the Conservatives and Labour have previously been keen to reform the benefits system.

“The clear water between them is fairly narrow – with both wanting to keep a lid on benefits payments and get more people into work, and both assessing that the current PIP system needs to be overhauled.”

HOUSING AND MORTGAGES

The housing market is a huge issue for people as there is little also more important than the roof over your head.

It is still incredibly hard for first-time buyers to get on to the ladder so politicians will no doubt want to appeal to these voters.

Stamp duty is another key issue that has been used to win favour in recent years. Many critics say it could be reformed further to help people downsize and free up housing.

Experts say a general election could significantly impact mortgage rates, often indirectly, through its influence on economic conditions, investor confidence, and monetary policy decisions.

Nicholas Mendes, mortgage technical manager at broker John Charcol, says: “The policies of the winning party also play a crucial role in shaping mortgage rates.

“If the new government implements measures aimed at stimulating the housing market, such as tax incentives for homebuyers or reforms to mortgage regulations, it can influence lenders’ products.

“Policies that promote economic growth and stability generally lead to lower mortgage rates, as lenders feel more secure in a robust economic environment.

“The Bank of England’s monetary policy is another critical factor influenced by election outcomes. The new government’s fiscal policy approach can affect the central bank’s interest rate decisions, which are a primary determinant of mortgage rates.”

In the mean time, house prices are set to remain stable and could jump regardless of which party wins at the poll, according to Tim Bannister, from property site Rightmove.

He says: “A look back at recent elections shows that house prices and activity usually hold steady in the lead up to the event, and we often then see a post-election bounce.

“An election in the summer, when the market is traditionally slower, could have less impact on housing market activity than if one had been called for the Autumn.

“So, as we head towards this election, the housing market is likely to stay active, with activity ramping up once the election is over and things become clearer.

“It could mean that we’re gearing up for a stronger than usual August, especially if we see interest rates finally start to fall.”

CHILDCARE

The cost of childcare is a huge issue for working parents.

The government is currently in the process of rolling out free childcare hours for parents of children under five.

But there could be more changes or plans announced ahead of the election.

Laura Suter, AJ Bell personal finance director, says: “There’s a case for reforming the entire system, which provides a hotchpotch of different subsidies for parents that frustrates families, leaves nursery finance departments scratching their heads, and creates an extra admin burden for the tax office.

“It’s possible a future government could go back to the drawing board with a complete re-think on the way parents are supported with childcare and the cost of starting a family.”