Rachael Griffin, tax and financial planning expert at Quilter:
"In many respects social care policy dictated the outcome of the last election. Unfavourable, or more importantly, unclear policies around social care have the capacity to bring a party to its knees. The Conservatives, conscious of this, have released their position today and have taken a soft approach of more funding in the short term and a non-committal long-term approach. Simply saying they will work across the parties.
"Labour on the other hand have clutched the opportunity to promise what the public want to hear – they will fund free personal care. However, the manifesto lacks detail on what exactly is included. Importantly it does not clarify whether “hotel costs”, such as food and board in a care home are included. However, they have gone so far to say they will institute a care cap of £100,000 for catastrophic costs and lifetime cap on personal costs. The sustainability of such a cap is a big question mark over these care policies as we have to remember it is today’s workers that will be funding it and as costs rise with an ever aging population, will it still be in place by the time they need to benefit?
"Whatever the answer, there will need to be an awareness campaign on what their policy means for people and more than likely some kind of private provision will still be needed. And while Labour want to distinguish themselves from their rivals, a cross-party approach to an issue like social care is crucial. Otherwise, there will be a constant question mark leaving people in limbo on how to plan for their future"
Personal tax policy
"With substantial costly promises Labour need to raise money somewhere. One source is inheritance tax reliefs and they’ve said they will scrap the residence nil rate band. This overly complex allowance is a nice target. However, while convoluted, the rationale behind it was that people wanted to pass their homes onto the next generations. Scrapping the allowance and not replacing it with anything else will stem the flow of wealth between the generations. Something people will want to think twice about as the younger generations are set to be worse off than those before them.
"Similar to the Liberal Democrats, Labour have also proposed to scrap the Marriage Allowance. With the possibility of a coalition government, this policy recommendation could end up being enacted. The Conservatives have flagged that this would in fact mean an income tax rise for a number of people who earn less than £80,000."
“Labour’s plans around taxing dividends could end up impacting a greater number of people than just the corporate executives it wants to target with its policies. There are around five million self-employed workers in the UK and a number of these will pay themselves through dividends taken from the companies they run to provide their services, and as such this will have a significant impact on the way they run their businesses.
“The proposal aims to bring the taxation of dividends in line with Labour’s plans for income tax. Given its wish to increase income tax rates on higher earners, this could end up being a significant hit to those that provide services to the economy. However, these are people who already do not receive access to employment rights such as employer contributions on pensions or entitlement to holiday pay. As such, should we be in a position where Labour achieve a parliamentary majority, many of these workers will need to assess their employment situation and work out what status will be most beneficial to them.
“Furthermore, given the tax free allowance on dividends has been slashed in recent years as it is, financial advice will be crucial for those looking to navigate what is already a complicated area of personal finance.”
Jon Greer, head of retirement policy at Quilter:
“The Labour party’s manifesto pledges on pensions are out of the step with the demographic changes we are witnessing in this country. The party has promised to scrap future increases to the state pension age and ensure previously accrued pension rights are not impacted by future changes, all the while making it flexible for those with physically arduous jobs.
“The point around accrued state pension rights is an incredible shift in the whole pensions system and one that any government should not be taking lightly. The state pension is very different from private pensions where entitlement is a property right, whereas state pensions entitlement is based on the rules approved by Parliament on the day the person claims. This would be such a significant change that it could shackle the government from making any future changes to the state pension at a time when it is becoming increasingly unaffordable.
“Given the rises in life expectancy, the cost of the state pension is only going to go one way, increasing the burden on the deceasing number of working age people. Coupled with the promise to work with the Waspi women to find a solution to their issues, the provisions that will need to be set aside to fund pensioners will be significant and challenge the policy objective for responding to increased life expectancy. But it remains to be seen how Labour will account for the costs associated with these policies whilst delivering an affordable state pension system.
“Furthermore, previous government reports have found limited appetite for a variable state pension age and benefits and it will be tricky to implement and administer a system that is both fair, flexible and affordable. To ensure intergenerational equality Labour will also need to look at how they make their ‘triple lock’ promise fair for all. In the immediate term the impact of keeping the triple lock may not be material if earning increases exceed 2.5% and inflation, but over the longer term its continuation is material.
“Oddly, Labour has included in its costings document, but not its manifesto, that it will restore pension credit for mixed aged couples. This will be a boost for couples of different ages, which in the 21st century is not uncommon.
“Where the Labour manifesto has provided some good news is confirmation a comprehensive pensions dashboard that includes information on costs and charges will be in place. However, this is far outweighed by huge spending promises to help pensioners without, it appears, any oversight into how this will be funded over the long-term.
“It is difficult to square how many of these policy announcements are affordable without ultimately shifting away from the principle of equitable funding across generations.”
Note: Inheritance tax reversal appears on page 38 of the costings document.