General Election 2019: What will the Liberal Democrats’ policies do for your personal finances?

We run through some key finance-related policies in the Lib Dem party's newly published manifesto.

The Liberal Democrat party has understandably attempted to keep Brexit the focus of this election.

Even so, any party seriously vying for power has to outline some of the more day-to-day policies likely to affect voters’ personal finances. Below, we run through some key finance-related policies in the party’s newly published manifesto.

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The triple lock

The party’s manifesto pledges to keep the current triple lock policy for the state pension. This means that the amount paid for the basic state pension will rise in line with wage increases, inflation or by 2.5%, depending on which figure is highest.

Adopting this policy is a bid to shore up the so-called “grey vote,” says Tom Selby, a senior analyst at AJ Bell. However, he continues: “Despite making political sense, this policy remains something of an oddity in the retirement landscape.

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“Rather than increasing the real value of the state pension at random points in time – namely when inflation and earnings are low – it would be far more sensible to decide a ‘fair’ value for the state pension and then set a path to reach that point. This amount could then be pegged to earnings and/or inflation so the value of the payment is protected.”

Gig economy rights

The Lib Dems have also proposed a shake up to pensions for those working in the so-called “gig economy.” This, says Jon Greer, head of retirement policy at Quilter, is “one area of policy that does seem to be well-thought [out]”.

The proposed policy would see the establishment of a new “dependent contractor” employment status. This new status should offer workers access to new rights such as minimum earnings levels, sick pay and holiday entitlement. According to Greer, it could also “help introduce swathes of people into the world of pension saving.”

Steven Cameron, pensions director at Aegon, however, is more sceptical. He says that the proposal “misses the trick of coming up with an entitlement to be auto-enrolled into a workplace pension.”

Compensation for Waspi

The party also said it would ensure that women born in the 1950s who have lost out financially in the recent move towards the equalisation of the state pension age will be “properly compensated”.

According to the Lib Dems, the government had previously failed to “properly notify [these women] of changes to the state pension age.” The proper compensation will be addressed according to the recommendations of the parliamentary ombudsman.

Commenting on the proposal Helen Morrissey, pension specialist at Royal London, notes: “Given how little real progress we have seen on this issue up until this point, we have to ask whether we will see concrete proposals on this or whether it will continue to be kicked into the long grass.”

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Indeed, this is already a watered-down version of the Lib Dems’ previous position, which was to award every 1950s-born woman affected by the hike compensation totalling £15,000.

Selby notes: “Although this promise may give hope to those women affected, caution is recommended at this stage, partly because we don’t know what the ombudsman will say, and more obviously because the Lib Dems are unlikely to be elected with a majority at the election.”

The party also said it would work to end inequality in pensions law for those in same-sex relationships.

Raise capital gains

Capital gains tax (CGT) will also likely see an increase under the Lib Dems, with the manifesto committing to ending the current separate CGT-free allowance and taxing capital gains and income through a single allowance.

According to Laura Suter, personal finance analyst at AJ Bell: “This will be a hit to higher earners, who will see the tax on their investment gains increased from 20% to 40% or even 45%.”

Social Care

One of the Lib Dem’s flagship policies is to raise £7 billion a year to be spent exclusively on the NHS and social care in England and Wales, paid for through a 1p rise on all tax bands. More specifically, they have proposed a cap on the cost of social care for individuals.

Cameron welcomes this policy, saying: “The Lib Dems offer a very helpful promise to cap how much an individual has to pay, putting pressure on other political parties to follow suit. However, he continues: “It remains to be seen if 1p extra in income tax will come close to bridging the funding gap even as a short-term measure."

Rachael Griffin, tax and financial planning expert at Quilter is less optimistic: “A care cap has been bandied about by politicians for years. The issue is how to make a simple cap that is sustainable, and with the manifesto light on detail it’s difficult to see if the Lib Dems have actually found a solution to that.”

Force funds to become more green

The party also says it will regulate financial services to encourage more “green investments”. This would include forcing pension funds to show their portfolios are “consistent with the Paris Agreement.”

Regulators would also be given new powers “to act if banks and other investors are not managing climate risks properly.