In a historic victory, the Labour Party won a majority in the 4 July 2024 general election. After 14 years of Conservative government, you might be wondering what the change means for you and your financial plan.
Since Keir Starmer took office, a day has barely passed without headlines speculating about the changes Labour will enact. The news can affect your emotions and spur you to make decisions that don’t align with your financial plan.
For example, after reading that some investors are already acting to “protect their pension” from Labour, you might think you need to do the same. Or suggestions that Starmer could raise revenue by increasing the standard rate of Inheritance Tax may mean you start thinking about how to pass on wealth now.
Indeed, according to a poll from interactive investor, in the weeks before the general election, 15% of investors made changes to their portfolio, and a third considered doing so. Of those that did make changes, 30% said they were holding more money in cash, and a quarter said they reduced their exposure to UK investments.
While the markets may have experienced some volatility due to the uncertainty of the upcoming general election, this is often short-lived. History suggests that markets will recover as a new government sets out their agenda and some of the conjecture dies down.
For instance, Morningstar reported that the FTSE 100, an index of the 100 largest companies on the London Stock Exchange, increased slightly after the general election results.
It’s important to remember that investment returns cannot be guaranteed. However, if you’re making investment decisions based on political speculation, you could miss out. Some of those investors who tweaked their portfolio before the public headed to the polls might wish they hadn’t with the benefit of hindsight.
So, if you shouldn’t respond to speculation, how should you react to the new Labour government?
Sticking to your long-term financial plan often makes sense for most people
As difficult as it can be, doing nothing could actually yield better results than responding to the changing government.
Having confidence in your financial plan and sticking to it often makes sense for most people as decisions reactive to the latest news headline could lead to changes that aren’t right for you.
So, while there are still plenty of rumours about Labour’s plans over the next few years, try to tune out the noise. Instead, focus on your financial goals and how your financial plan was built to achieve them, including the steps you’ve taken to mitigate the effects of the unexpected.
It’s also worth noting that when the government announces changes that affect personal finances, they don’t usually come into effect immediately. For instance, changes to the tax treatment of different assets will often take effect when a new tax year starts on 6 April.
As a result, you don’t normally need to rush when responding. Instead, you can take some time to consider your position and how the changes may affect you.
We can help you assess the impact of government announcements on your financial plan
While reacting to speculation could be harmful to your financial plan, between now and the next general election, the Labour government could announce changes that do affect your personal finances.
As your financial planner, we’ll be on hand to help you assess what announcements mean for your finances and, if necessary, what steps you may take to reduce negative effects. Rather than making a knee-jerk reaction following announcements, we’ll help you review the changes in the context of your financial plan so you have the information you need to make decisions that are right for you.
We’ll help keep you informed about changes you might need to be aware of and when updates to your financial plan are appropriate as part of your regular reviews.
Contact us if you have any questions about your financial plan
If you’d like to review your financial plan or have any questions about how a Labour government could affect your wealth, please contact us. We could provide tailored advice that tunes out the speculation and focuses on the facts.
Please note:
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.