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Liberal Democrat manifesto – pensions and personal tax

Tom McPhail takes a look at what the Liberal Democrat manifesto promises mean for your finances.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

While the next government looks set to be dominated by either the Conservative or Labour parties, recent history has shown that they might need support from one of the UK’s smaller political groups to secure the keys to number 10.

With the Liberal Democrats currently polling in third place, what does the party’s manifesto hold for your finances?

Any manifesto should be considered as a whole, and simply because a particular policy is good or bad for a particular industry, or group of shareholders, does not make it good or bad policy, that judgement is one for voters to weigh up for themselves.

Taxes

The Liberal Democrat manifesto is notably light on direct tax and spend policies, with the focus being much more on the big picture social and environmental agendas.

They have reiterated their commitment from previous campaigns to increase all income tax rates by 1%, with the expectation this would raise £7 billion to be spent directly on the NHS and on social care. The inclusion of the basic rate, rather than just targeting higher rate taxes, is a tacit acknowledgement that if the Government wants to raise chunky sums of revenue, you need to focus on taxes that a lot of people actually pay.

The manifesto also pledges to scrap the Capital Gains Tax allowance and merge it with the income tax allowance. That’s an effort to harmonise the two and shift the emphasis of personal taxation towards accumulated wealth and away from income. In another boon for lower earners the manifesto promises to review the Living Wage and to introduce an increase to the minimum wage by 20% for workers on zero hours contracts.

Looking at property taxes, there are clear efforts to increase housing supply for younger voters. Councils would be given the power to increase council tax on second homes by up to 500%, while the ‘bedroom tax’ would be scrapped and people encouraged to downsize.

Pensions

On pensions, the Liberal Democrats will keep the state pension triple lock for the term of the next parliament, meaning the state pension will rise in line with the highest of inflation, earnings growth or 2.5%.

They’ve also said they’d pay compensation to those women born in the 1950s, who have seen their state pension age raised (sometimes referred to as WASPI campaigners). However, the manifesto doesn’t specify the exact terms on which compensation would be paid, saying it would be for the parliamentary ombudsman to decide. This could mean a total cost ranging from hundreds of millions of pounds, up to many billions.

Consistent with their environmental focus, the Liberals would require all pension funds to be managed in line with the Paris Agreement on climate change.

The party are also looking to strengthen the pension rights of those working in the gig economy.

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General election 2019

HL is not expressing a view on the merits or otherwise of any of the policies or any of the political parties, and nothing in this note should be taken to be an endorsement or recommendation of any particular party, candidate or policy.

Article image credit: REUTERS / HANNAH MCKAY - stock.adobe.com

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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