Saving and investing after the Election
Hurrah! That’s it over for another five years! And, against the odds, the 2015 UK General Election has resulted in a majority government, meaning we don’t have to suffer days and days more of political machinations and interminable ‘election-extra’ news coverage.
Politics aside, the advantage of there being a majority government is that the uncertainty a hung parliament could have caused has not resulted. Markets famously hate uncertainty so it is no surprise that the FTSE 100 has increased since the election result. Sterling has also rallied. With certainty comes confidence from investors in a more stable climate.
Just how long-lived the certainty will be remains to be seen. The Conservative majority is a small one. Furthermore the Conservatives have promised a referendum in 2017, or possibly before, on the UK’s EU membership which could cause uncertainty from overseas investors, not to mention UK businesses who sell to Europe.
For savers and investors at home, for the time being, it looks like being business as usual in terms of saving and investing. For savers in bank and building society accounts, the outlook continues to be grim. Monday’s announcement by the Bank of England that, as expected, the interest base rate has been kept at its record low of just 0.5% means that rates on deposit accounts are set to remain depressingly low. Except, that is, for the popular NS&I pensioner bonds for the over 65s which pay 2.8 per cent for a one year bond and 4 per cent for a three year bond. However these bonds are due to be withdrawn from sale on Friday 8 May.
Low interest rates are good news for home buyers as mortgage rates remain low, although high demand for, but low supply of, housing could mean that house prices will rise.
The last coalition government bolstered ISAs in the 2014 Budget by simplifying them and increasing the amount that can be invested. Stocks and shares ISAs continue to be popular with investors who can put as much as £15,240 in this tax efficient vehicle.
Finally, there is likely to be continuity of sorts in respects of pensions. The last coalition government made ground-breaking changes to pensions. Known as pension freedom because it frees people from the previous requirement to buy an annuity with their pension, the freedoms have generally been welcomed. There will be some, however, who could see changes to their pensions under the new Conservative government. Some of these changes have already been trailed in the Conservative manifesto and apply only to those earning over £150,000 and who have pension pots over £1 million.
The recent pension freedom changes were led and championed by pensions minister, Steve Webb who was a casualty of last week’s election rout of Liberal Democrat MPs. Webb was held in high regard and his loss will be felt. The good news for consumers, though, is that Ros Altmann has been appointed pensions minister. While Steve Webb is a hard act to follow, Altman, as a well-known pensions expert and consumer champion, is well placed to continue Webb’s good work.
In particular, Altmann must ensure that pension freedom is not tainted by mis-selling.
However you see the election, with it now being out of the way, the landscape for savers and investors is perhaps a little clearer. Even if you can only afford to put a small amount by on a regular basis, knowing that you’re at least doing something to help finance your future is a good feeling!