The Election - and our CFO

Last week, I asked you to share your views on the upcoming election and how you thought this could impact your finances. Over the coming weeks we’ll be analysing the manifestos and bringing you the latest news with tips, insights and things to consider.

But first, here’s a summary of the mood out there from the perspective of the saver and investor. I’d say it’s a concerned acceptance of perceived inevitable change rather than a joyous and hopeful embrace of change. Here’s a summary of what you are thinking and planning:

1. Maximizing use of tax-advantaged accounts: a significant number of you said you’d try to bump up your ISA allowances and pension contributions, shielding as much as possible from potential tax increases. “I will just get the most money possible into my pension while higher rate tax relief is still in place.”

2. Widespread concern over potential tax changes: mostly capital gains tax (CGT), pension tax relief, inheritance tax and a potential reintroduction of the pension lifetime allowance (LTA). This is a real concern for richer pension savers or those with large public sector pensions. Some will stop contributions for now in response – “Pension is the key issue for me. Likely change in LTA means it will not make sense to continue contributing”. And a few mentioned potentially gifting money to lucky children ("Hi Mum and Dad, how are you?") or paying into a spouse’s pension. “Depends on what happens with ISAs... if more 'unearned' income will be taxed, I shall give some to the children to reduce my income.”

Another reader was “worried about whether to at least take the tax-free portion of our SIPPs whilst we can, even though it will take a few years to drip feed it into ISAs and we may incur tax on interest earned in the meantime”.

And finally, one of my favourite responses: “I’m expecting the reintroduction of Lifetime Allowance, but there’s very little that can be done to mitigate that (other than passing away in the next 6 weeks which I certainly hope won't happen)”.

3. Diversifying Investments Globally: this was interesting. Lots of you mentioned plans to diversify your investments more globally, reducing exposure to perceived UK-specific risks. And a few mentioned you’d move more to passive investments, which I read as a response to high global uncertainty and high equity markets making it difficult to attempt to pick any potential outperformers.

4. Sector-Specific Concerns: there is concern about investments in utility companies (water and energy) and many are planning to sell up any exposure to these sectors given fears of nationalization or regulatory changes. “I would sell shares in utility (energy and water) companies” was a common refrain. On the flip side, a minority of respondents thought that Labour would “correct the starving of public expenditure”, which would mean opportunities in infrastructure.

5. Plans to sell rental properties: finally, a number of respondents mentioned they were now actively considering selling their buy-to-let properties, citing concerns about potential changes in regulations which could impact profitability and increase management burdens. “Evict my tenants and look to exit my buy-to-lets as all the parties like making headlines to win votes rather than deal with real problems. Section 24, rising mortgage rates and slow eviction notices from the courts make the whole sector less attractive.”

In summary, while the majority say they will maintain the status quo and wait for more information, the underlying mood music is gloomy, largely as a result of anticipated changes to tax and pensions, with a secondary concern about the UK stock market and rental properties.

30% of you think that your personal finances will get worse over the next 6 months, and just 9% think they will get better, although of course this comes at a time of a US election, global instability and question marks around interest rates too. Pensions are the main concern as the shadow of the Lifetime Allowance hangs over some of those approaching retirement.

We had a mixed bag from those embracing the potential change – “I’m going to disinvest some money to have a party at getting rid of the most corrupt and incompetent government I have ever known. Let's face it, it would be incredibly difficult for even the Raving Monster Loony party to have done worse than Johnson, Truss and Sunak.” And those who were worried about the financial future under a Labour Government – “Sell a percentage of everything before Labour gets in trouble. Buy again if the Conservatives are able to unite their party.”

Next week we will follow up on some of these concerns with a pensions focus in the blog. As a general rule, on balance I don’t think we should act on ‘what ifs, and maybes’, so I’m not twiddling or fiddling now. But whichever party wins, we know that the cupboards are bare and so the tax take has to rise. Stealth taxes are a given and so the major question for middle and higher earners – in my opinion – is around pensions.

In the interim, if you want to see whether you’re on track for your retirement, our simple pensions calculator will ask you what sort of a retirement you fancy – and when. Work out what you’ve got today. And see if you’re on track – and if not, what you might consider doing to improve things.

Every small business needs a CFO

Some of you who have been getting my blog since the early days may remember me writing about our CFO (Chief Feline Officer), Mog. She was the first to join me in the Boring Money C-suite and has been observing my calls and blog writing for the last 8 years. Mog had cancer and developed a massive tumour on her stomach which got too much to fight. She was put to sleep on Wednesday. Thankfully at home, on the patio, in the sun. She was a formidable, feisty, no-BS puss, rescued from the mean streets of North London, when she choose me in the Archway rescue centre. "You’ll do", she thought, as she jumped onto my shoulder, and loudly told me she was coming home with me.

Mog looked out for me in the early days, and I recommend any small business has a Chief Feline Officer on their website. Scammers find and impersonate the person in any firm they think is responsible for transferring money – which in our case was Mog. Scams are a lot easier to spot when your cat is sending you impassioned emails about the urgent need to send funds.

Her blanket remains defiantly on the island in the kitchen and the packet of Dreamies is on the side. The house is horribly still without her.

Holly

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