What does the UK general election mean for your finances?

Britain's Prime Minister Rishi Sunak (L), with Britain's Chancellor of the Exchequer Jeremy Hunt (R) have drink and biscuits with employees during a visit to a builders warehouse in London on March 6, 2024. Britain's embattled Conservative government on Wednesday announced a fresh tax cut for millions of workers to woo voters before a general election expected this year. (Photo by Kirsty Wigglesworth / POOL / AFP) (Photo by KIRSTY WIGGLESWORTH/POOL/AFP via Getty Images)
Prime minister Rishi Sunak calls a general election for 4 July.

Prime minister Rishi Sunak’s suit has barely had time to dry after his rain-soaked announcement of a 4 July election and already we’re wondering what the election means for our finances. We’re looking for clues as to what might be in the manifestos and what changes may come with a victory for either party. There are a number of key areas to watch:

Both Labour and the Conservatives have committed to the triple lock, which ensures the state pension rises with inflation, wage inflation or 2.5% - whichever is higher. The unspoken risk is that we could also see plans for the state pension age to rise again emerge during the next parliament, to help either government pay for this guarantee.

The Lifetime Allowance is a trickier area. This puts a limit on the total amount you can have in your pension over your lifetime. It was axed by the Conservatives, but within a few moments of the announcement, Labour committed to bringing it back if elected. The party has since gone quiet about how and when it will do this. We must wait to see how this will impact people with larger pensions.

Read more: What pension research reveals about retirement planning

Frustratingly, the whole election process hits in the middle of the extension to automatic enrolment into workplace pensions – which will lower the minimum age for qualifying from 22 to 18 and drop the lower qualifying earnings band. It has been passed and is awaiting regulations and we don’t know whether the legislation will slip through in the ‘wash up’ in the coming days. If it doesn’t make it, we can only hope whoever is elected commits to finishing what has been started.

We’d been expecting a Bank of England rate cut in August or possibly September, with the outside chance of a change in June. Now the savings market has fully priced in a delay to September because the Bank will be keen for it not to be politicised.

This is positive news for savers, because banks are likely to pause their rate cuts for a month or two. For those on a variable rate, it means you could continue to earn rates at or above 5% for a while longer. For those who won’t need to spend this money for at least a few months, it opens a bigger window of opportunity to move to a fixed-rate deal, because the last handful of fixed rates at 5% are likely to hang around for longer. However, it doesn’t pay to get complacent. As the last few months have shown, things can change fast; it’s worth securing a great rate while they’re around.

Read more: When will interest rates fall and what should you do?

The timing of a rate cut will hit a lot of people with a mortgage. For anyone on a variable rate deal, a delay to rate cuts is disappointing. For those who moved to a tracker in the hope of a March cut, talk of having to wait until September will be a nasty blow. Likewise, anyone facing a remortgage is also in for a tough time, because fixed-rate deals are unlikely to fall any time soon.

We are yet to have any major announcements on tax, but this is always key for voters. Expect pledges or statements. According to Hargreaves Lansdown research tax cuts are a big draw for voters – particularly council tax and income tax. However, this needs to be balanced against the fact that public services are under pressure. The research showed that the second most popular tax change would be a tax rise to pay for the NHS. Both parties will be aware there’s not a massive amount of room to manoeuvre. Talk is likely to centre around the general direction of travel, rather than any immediate change.

This is going to be a key issue for both parties. Keep your eyes peeled for policy announcements. There may be building pledges, planning changes and incentives promised for first-time buyers. There’s also the hope that any new government will revisit the Lifetime ISA (LISA), including the limit on the value of property that can be bought through the scheme. This hasn’t budged since the LISA was launched, and without a link to house prices, it risks falling behind.

Read more: What is the Lifetime ISA? And how it could help you in your retirement

The run-up to a general election always tends to be an uncertain time, with investor confidence taking a knock and people putting off big decisions until they know where they stand. It means we could get some ups and downs in the coming weeks. What happens after the election will depend on the result. A decisive victory by one side or the other will tend to bring more settled markets than a close-run thing.

We will also have to watch for ISA announcements. Labour has spoken about the need for simplification in the past, while the Conservative government is consulting on the UK ISA. It will be interesting to see how this shakes out. We can only hope that any changes make the range even simpler and easier to use, rather than accidentally introducing needless complications.

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• Sarah Coles is a personal finance analyst at Hargreaves Lansdown and co-presents Switch Your Money On podcast.