The UK is just days away from a General Election in which polls suggest the Labour Party will return to power after 14 years. There has been no shortage of speculation about how the result will impact your finances, and financial markets more generally.

We outline below why investors might be well served to avoid the temptation to make significant changes to a long-term investment plan based upon these sorts of predictions. That said, reviewing financial plans well before any Autumn statement is a sensible idea.

Pensions and allowances

One of the areas of focus over the past year has been on the pension legislation that took effect from 6 April 2024 in relation to the lifetime allowance. Although the current Chancellor announced the removal of the lifetime allowance in the Spring Budget 2023, this was not a straightforward change to implement, and some of the less understood implications of this are still being felt. The shadow Chancellor had previously said that Labour would reverse the changes in keeping with the spirit of only improving the position for NHS workers.

Interestingly, the Labour manifesto has been silent on this topic, and there is perhaps a growing awareness that this is not an area of legislation that is easy to amend on a frequent basis. The shadow Chancellor has also recently stated that she does not wish to make sweeping changes with pension or fiscal policy generally, so perhaps the concern on this area is no longer warranted.

However, one area of pension planning that will be quite easy for either a Labour or Conservative government to change is in relation to the pension annual allowance. This was increased from £40,000 to £60,000 in the 2023 Spring Budget, and the tapering of the allowance, i.e. the point at which the allowance reduces based on one’s income, was also significantly increased. This is something that could easily be changed, and we have seen this occur regularly in the past. As both parties have been at pains to stress that they will not increase income tax, National Insurance (NI), or VAT, reducing pension allowances would be an easier, and arguably more palatable, change for voters in order to help raise tax revenues.

As such, although we do not expect even a Labour government to make any immediate changes, if you are considering optimising your pension allowances, it would certainly be sensible to review this before potential changes in the Autumn. With a need to increase tax revenues without increasing Income Tax, National Insurance, and VAT, there are of course other areas of planning that could be affected, such as changes to Capital Gains Tax (CGT) allowances, and dividend tax rates. Although we would not suggest taking any knee-jerk reaction in response to the election, one may wish to consider reviewing plans well before the Autumn.