General Election 2015: Vote for the party that will boost your finances

Experts warn that the general election is unlikely to lead to stable markets. Simon Read talks to two investment managers who are advising caution
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The Independent Online

The general election will bring uncertainty for investors rather than ending it, as normally happens when an election is decided, according to Tom Stevenson, director of Fidelity Worldwide Investment. "After this election we may have just as much uncertainty as we have had in the run-up," he warns.

The possibility of a hung parliament brings questions, but that's not the only uncertainty that will alarm stock markets. "We don't know exactly what form a hung parliament might take," Mr Stevenson points out.

"The Conservatives and Labour are neck and neck at the moment, and the Lib Dems, who were the kingmakers in 2010, may actually not win so many seats this time. So we don't know which alliances there may be."

There's also a risk of there being another election soon. "Depending on May's result we might see the Conservatives or Labour ploughing on trying to run a minority government and, a bit like in 1974, we could end up with a second election within the year," he says.

Jason Hollands, managing director of Tilney Bestinvest, makes a similar point: "With combined backing for the two major parties at a low and significant support for insurgents (whether the Greens, Ukip or SNP in Scotland) thrown into the mix, the outcome of this election is self-evidently too close to call," he says.

"There is a high possibility of another hung parliament and even talk of a potential second election later this year, a situation that would have parallels with 1974, when, eerily, the oil price was also a major factor driving the news, as it is today."

Mr Stevenson says an election promise made by David Cameron could also lead to market-worrying uncertainty. "The Conservatives have committed themselves to an in/out referendum on our EU membership by 2017. So if the Conservatives win the election, that could lead to two years of uncertainty about our relationship with our biggest trading partner, which is not good news for the pound," he warns.

For all these reasons, he says investors need to be extra-careful about ensuring their hard-earned savings are not too focused just on the UK. "This is quite a good time to make sure your portfolio is pretty well diversified. The UK market is quite reasonably valued and has good income attractions, but the political uncertainty may mean that it lags for a while."

He points out that other markets are doing well. "Europe is doing well, Japan is looking good," is his opinion.

Mr Hollands points out that investors could benefit from overseas markets by investing in UK-listed stocks. "It is worth pointing out that in the main, the UK stock market is very international in nature, with some estimates suggesting that up to 80 per cent of revenues generated by UK plc is being earned overseas," he says.

"So if anything, knee-jerk selling of UK equities could represent a buying opportunity. It takes guts to invest when others are running for the exit – but it can also pay rewards," he advises.

To see the The Independent's full interviews with Tom Stevenson and Tom McPhail talking about the election and your finances, watch the videos above

The pension factor: more changes ahead?

Pensions have become one of the main political issues; the Coalition Government made sure that its major pension freedom reforms were pushed through before the election. Will pension reform be a major factor in the general election?

Yes, says Tom McPhail, head of pensions at Hargreaves Lansdown. "If we get a Conservative government we're unlikely to see any changes to the pension freedoms. But if we get a Labour government I think we'll start to see some adjustments." He predicts that the maximum tax-free lump sum people are allowed to draw may be changed, "and there could be some rolling back of the freedom to draw your pension pot out, such as the reintroduction a minimum income requirement."

Given the high likelihood of a hung parliament, what about the impact of the smaller parties? "They could all end up having an influence on government policy," Mr McPhail points out. But the biggest change could affect the state pension. "We've got a new state pension system coming in 2016 but the implementation is still pretty complicated. There are still uncertainties around increasing the state pension age in the future, so it would be surprising if we didn't see some further tinkering from the government.

"Whether we see any of the fringe benefits withdrawn, such as bus passes or winter fuel allowance, will depend on who wins. The Tories are very keen to maintain these free handouts to pensioners, as they see it as a good way of buying votes. Meanwhile, Labour has said it would look to means-test some of the benefits for higher-earners in retirement. What's the point of giving a free bus pass to a millionaire?"

But the greatest change after the election will be around the taxation of private pensions, he predicts. "We've seen so much change so quickly that it would be surprising if we didn't see the next government tinkering and adjusting further on that front."

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