Election manifesto promises: how they will hit your cash

The parties have revealed their plans for our personal finances. Simon Read finds out how their proposals have gone down
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The Independent Online

Savings

Labour revealed plans to introduce portable bank account and cash ISA tracking numbers to help dissatisfied consumers to switch. The Tories plan green ISAs which offer a tax-free boost for savers who invest in environmentally responsible companies. The Liberal Democrats want to crack down on charges and have pledged legislation to ensure that banks can only impose charges "proportionate to their costs" on unauthorised overdrafts, bounced cheques and failed direct debits.

"The Lib Dems know that bank-bashing will be popular with voters, but the reality is that we have seen several high-profile challenges by the Office of Fair Trading on various 'unfair' charges and the industry has already come a long way in resolving many of these issues," points out Kevin Mountford, head of banking at moneysupermarket.com. "There's a trade-off here because most customers run their accounts in such a way that they never pay these charges. Perhaps the Lib Dems want to see all of us paying monthly fees to run our current accounts?"

The Rev John Strain, from the campaigning group Save Our Savers, welcomed Labour's proposed changes. "It is a positive step. The policy goes some way to enabling investors to move their accounts more easily and get the best deal possible," he says. "But it will not stop the practice of ISA providers cheating savers by not offering the equivalent of their leading non-ISA savings rate topped up by the tax breaks offered by the Government."

Pensions

The Labour Party manifesto contains a pledge that between now and 2020 the state pension age for women will rise to 65; and between 2024 and 2046, it will rise to 68 for both men and women. Labour will also restore the pensions link to earnings by 2012. The Tories plan to review the state pension age, to consider whether the increase in the pension age from 65 to 66 should be brought forward from 2026. This change, however, will not be introduced before 2016 for men and 2020 for women. The party also plans to restore the value of dividend tax credits to pension funds. They will also end the obligation to buy an annuity at 75. The Liberal Democrats would immediately restore the link between pensions and earnings and scrap the compulsory retirement age. They would also scrap the age 75 compulsory annuity rule.

"Some of the election promises simply do not stack up," says Charlotte Black, of the pension advisers Brewin Dolphin. "We want to see the right policy measures introduced to restore individuals' faith in saving for retirement, and we want the next government stick to the policy throughout the next parliament – to create more certainty and confidence for savers and investors and support the re-emergence of a savings culture."

"I'd like to know how the Tories intend to reinvigorate occupational pensions," says Malcolm Cuthbert, partner at Killik & Co. "The truth is that final salary company schemes have been under attack by government action for some time – well before Labour came to power in 1997. By making a final salary pension a guaranteed right with indexation and equalisation they have made it unaffordable for most employers. Are they talking about unravelling some of these regulations? If so, this is to be welcomed. That alongside allowing them to be based on career average earnings as opposed to final salaries would also help.

"But more important than this is convincing the man in the street that they will be better off saving into a pension than not. This would mean creating certainty that means testing will not destroy any pension savings they've made," says Cuthbert.

Northern Rock

Labour says it will secure greater competition in the banking sector by breaking up the banks in which the Government has a controlling stake. It plans a mutual solution for the disposal of Northern Rock, a proposal backed by the Liberal Democrats, who say they would seek to turn Northern Rock into a building society. Meanwhile the Tories would offer everybody in the country a chance to buy a stake in the state-owned banks.

But turning Northern Rock back into a mutual building society doesn't make sense, says Gavin Oldham, chief executive of The Share Centre. "The problem with the original demutualisation process was not in the flotation of their shares, but with inadequate regulation and too much institutional focus. The current travails of UK building societies demonstrate how difficult it is for mutual organisations to raise capital, an essential part of the new banking regime. Also, the UK government would find it very hard to repay the billions of pounds provided by the UK taxpayers under the Labour Party's plans.

"I believe the best way forward would be to float the shares of Northern Rock Mark II back on to the stock market, with at least half the shares going to personal investors," says Oldham. "That way, anyone who wants to subscribe for a stake in their future can do so confident in the knowledge that they can exit when they want to. The bank will be able to raise fresh money, the taxpayer will be repaid, and the regulators can ensure that the bank sticks to its retail bank knitting."

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