UK parties reveal their plans for your wealth

It's the most unpredictable election in years, but will you be better or worse off at the end of it? Which of the eye-catching campaign pledges will survive the inevitable post-result haggling? And will all the uncertainty affect the markets?

Across the main parties there are some common threads. All have promised more crackdowns on tax evasion and avoidance, for instance. All have promised to build many more houses, and to substantially preserve the benefits that are so popular among older voters. At the same time, they have limited their room for manoeuvre by largely ruling out rises in the taxes that do the heavy lifting: income tax, national insurance and VAT.

The smaller parties have been more adventurous, most obviously the Greens, who have advocated a wealth tax and a financial transactions tax.

We've summarised the main points of each, and below we take a more detailed look at policy in three key areas: pensions, property and taxation.

Pensions: until the pips squeak

Pensions tax relief is becoming an increasingly popular way of raising money for other purposes.

"Pensions cannot be left alone because their allied tax reliefs represent the juiciest, lowest hanging fruit in Whitehall," says Michael Johnson, a fellow at the Centre for Policy Studies and an authority on pensions.

"But any change is likely to produce more losers than winners, so the challenge is how to mask the political damage, or at least concentrate it on as few people as possible."

Hence the focus on high earners. "Changing pension tax relief arrangements is a much more opaque way to raise money than sticking a penny on the income tax rate," says John Ralfe, a pensions consultant.

Labour plans to fund a reduction in tuition fees from £9,000 to £6,000 by restricting tax relief on pension contributions to 20 per cent for those earning above £150,000. The Conservatives have pledged to taper the annual allowance for those earning above £150,000 - meaning that those earning above £210,000 will be restricted to £10,000 a year of pension contributions that can attract tax relief.

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Pension providers fear the changes will further add to the recent upheaval in the industry, and over the long term could deter people from saving into a pension at all.

"Pension tax relief is being used like an election piggy bank," says Adrian Walker, retirement planning manager at Old Mutual Wealth.

"While only affecting a relatively small number of high-income individuals, both sets of proposals have the potential to be complex, damaging and counter-productive," says Carl Emmerson at the Institute of Fiscal Studies.

There are also big question marks over the effectiveness of such measures. "I always question how much money these sorts of policies will actually raise as people's behaviour will change," says Mr Ralfe, who points out that if the LTA drops to £1m, large numbers of higher earners will probably stop contributing to pensions anyway.

"It seems clear that relief of up to 45 per cent is in the last chance saloon," says Jason Hollands at TilneyBestinvest. "Those investors potentially impacted should consider acting sooner rather than later in bringing forward planned contributions."

The Liberal Democrats take a broader approach; they have pledged to review pension tax relief arrangements with a view to standardising tax relief at a single rate above 20 per cent. This would be progressive but unpopular among higher-rate taxpayers - of whom there are almost five million - who would get relief at a lower rate than they do now.

On the state pension, all parties are committed to the "triple lock", which guarantees that pensions rise each year by the greater of earnings, inflation or 2.5 per cent.

The Scottish National Party, potential kingmaker in the election, wants a guarantee that there will be no further rises in the state pension age in Scotland - on the grounds that life expectancy there is lower - and a single-tier pension of at least £160 per week.

Housing and property

Housing is a central issue for all of the main parties and there is broad agreement on the nub of the problem: growing demand and short supply. Annual housebuilding numbers have fallen from 251,820 in 1979/80 to 140,880 in 2013/14 - a 44 per cent drop - according to figures from the Office for National Statistics. All of the parties have pledged to build more homes. But there is disagreement over the best way of tackling the problem.

The Conservatives would extend Margaret Thatcher's flagship Right to Buy policy with a manifesto promise to give 1.3m housing association tenants the option to buy their homes at a market discount. Replacement homes would be funded by forcing local authorities to sell off their most valuable properties, the party said.

But the policy was lambasted by housing associations, which questioned the fairness of using the sale of state assets to fund discounts on housing for private individuals.

"Selling these assets would remove our capacity to replace them," says Stephen Howlett, chief executive of Peabody, one of London's largest housing associations. "Giving housing associations the market value of the sale from selling off high-value council-owned properties would not help us to replace low-cost homes on a like-for-like basis because the land is either not there or would come at an inflated price. So much-needed housing supply would inevitably contract."

The policy would also do nothing for the growing numbers of private sector tenants, a group actively courted by Labour. It wants to make three-year tenancies the legal norm. Landlords would only be able to terminate during that time with "good reason", such as antisocial behaviour or the need to sell up.

Labour also wants to cap rent increases, based on a limit such as average market rents. Rents would initially be set "based on market value" and rent reviews could take place no more than once a year. It also wants to clamp down on letting agents' fees.

Such policies could have a significant effect on the buy-to-let sector. David Whittaker, managing director of Mortgages for Business, a buy-to-let broker, says the rent cap policy would be self-defeating as landlords would either increase rents at the outset or sell the property if the cap made renting unviable. "Labour is trying to manipulate the supply side and all they're doing is reducing supply in those postcodes."

The Liberal Democrats also have an offering for tenants and first time buyers - extra money for a rental deposit (Help to Rent) or expansion of a shared ownership scheme, known as "rent to own".

The latter proposal foresees 30,000 homes for young people who are currently priced out of the housing market. These occupiers would be able to accumulate a share in a home through rent-like monthly payments without having to save separately for a deposit. Rent-to-owners would become full owners after 30 years of payments, but could cash in their share earlier should they wish.

However, shared ownership schemes, which have been a feature of the housing sector for many years, have been criticised for the high fees required to buy extra tranches of the property.

Jeremy Blackburn, head of UK policy at the Royal Institution of Chartered Surveyors, says the Lib Dem measures were likely to be destined for the shelf, subject to May's result. "The 'Right to Rent' and 'Help to Rent' are new, and could make some difference to young people and families", he says. "But what we really need for the private rented sector are policies that encourage institutional investment and drive up standards."

Tax

A significant change to the inheritance tax regime is one of the centrepieces of the Conservatives' manifesto. Having presided over a static threshold at which so-called "death duties" become payable since 2010, the party has pledged to allow family homes worth up to £1m to be passed on free of tax.

Currently, individuals have a £325,000 allowance which can be transferred to their surviving spouse, meaning that estates worth up to £650,000 are effectively exempt from IHT.

The Conservatives have proposed an additional transferable allowance of £175,000 per person for main residences, taking the total per couple to £1m. This would be tapered for estates worth more than £2m, with no relief for those valued at more than £2.35m.

The Institute for Fiscal Studies says the policy would reduce the share of estates liable for IHT from 8 per cent to just over 6 per cent by 2020.

George Bull, senior tax partner at Baker Tilly, says that the policy would appeal beyond the minority who stand to benefit. "We're seeing a paradox that while property is the easiest thing to tax, most people's wealth is tied up in bricks and mortar. The idea that the Exchequer will gain a stake in [their family home] is several bridges too far for many."

Ukip has gone further, pledging to scrap IHT altogether, but the Green Party wants to replace it with an "accessions" tax, where tax on bequests is payable according to the recipient's wealth. Legacies to those with wealth of less than £200,000 would be tax-free.

The Greens are also committed to raising the additional rate of income tax paid by those earning £150,000 or more a year to 60 per cent. Combined with a pledge for national insurance to be payable at 12 per cent on all income, the highest earners would face a marginal rate of 72 per cent - the highest in decades.

The Labour plan to return the additional rate to 50 per cent - where it stood between 2010 and 2013 - is less radical. It is also supported by the SNP.

Heather Self, a partner at Pinsent Masons, says that while the policy would be likely to prompt flexible income to be accelerated, predicting people's behaviour is difficult. "If you're sending out a signal that people are not welcome, it's often the impression that [a policy] leaves, not the amount of tax it raises."

The Conservatives and Liberal Democrats have not proposed reforms to income tax rates, but have focused on the thresholds at which they become payable.

The Conservatives plan to raise the threshold at which 40 per cent tax becomes payable to £50,000 by 2020. But the focus of the coalition partners has been on increasing the personal allowance - they would raise it to £12,500 a year by 2020, a target surpassed by Ukip's target of £13,000.

Matthew Whittaker, chief economist at the Resolution Foundation think-tank, says that while the allowance is sold as benefiting lower earners, it is higher earning dual income households that gain most from further increases. "The five million lowest paid are already out of income tax."

Ukip's pledge to introduce an intermediary 30 per cent rate on income between £43,500 and £55,000, like Labour's plan to reintroduce a "starting" rate of 10 per cent on an unspecified band, has been criticised for complicating the tax system for limited benefit.

Among Labour's highest-profile pledges is the abolition of the non-domicile regime, which allows wealthy foreign residents to enjoy tax privileges.

While shadow chancellor Ed Balls has said that getting rid of the system - which allows "non-doms" to exempt their offshore earnings from UK tax - could raise £1bn, it has been presented more as an issue of equality.

Some wealth managers and accountants have voiced concerns that the proposals could prompt the most wealthy and footloose among the UK's 110,700 non-doms to leave the country, potentially damaging the economy.

Others are more sanguine, pointing out that three in five non-doms already pay UK tax on their global income and that other non-tax reasons attract them to living in the UK.

<>Taken together with Labour's proposed mansion tax on properties worth more than £2m, which would disproportionately affect homes in central London, it is widely viewed that the party is targeting wealthy foreigners.

"The cumulative impact [of Labour's proposals] begins to make the UK look unattractive," says Dermot Callinan, UK head of private client advisory at KPMG.

"Our concern is that Labour would quickly announce an end to non-dom rules and make it apply for disposals from day one," he said. "That could catch a lot of people out."

The Liberal Democrats have diluted their own mansion tax plans, pledging an annual charge that would start at only £2,000 for homes valued between £2m and £2.5m, but they are also seeking reform to non-dom rules.

Rather than abolishing the status, they would end the ability for non-dom status to be inherited, and increase the charges that long-term residents pay to exempt their overseas income from UK tax.

It might not be a view beloved of headline writers, but elections have precious little long-term effects on the stock market, gilts or sterling, writes Jonathan Eley.

On the face of it, Conservative administrations have produced better annualised returns since 1970, according to Hargreaves Lansdown: 16 per cent, against 9 per cent under Labour administrations.

But the broker says that most of this apparent outperformance is probably down to external factors.

Kevin Gardiner, investment strategist at Rothschild, says the closeness of the contest reflects the fact that the major parties basically agree on many of the big issues.

"The mixed, moderately taxed economy with liberal labour markets, open exchanges and an operationally independent Bank of England, has cross-party support," he wrote in a note to the wealth manager's clients.

A poll carried out for FTMoney by Interactive Investor (see chart) suggests investors do not see an urgent need to alter their portfolios.

Jeremy Lawson, chief economist at Standard Life, said that while individual elections might occasionally produce a large move in sterling or shares relative to other markets, on average the impact is not statistically significant.

"After 12 months, the effect has usually washed out," he says, adding that economic growth, the pace of monetary tightening and corporate earnings are likely to be more important for the markets this year than the outcome of the election.

Much has been made of the pound's recent weakness against the dollar, but that is largely a function of dollar strength. Against a basket of currencies, sterling has held its own.

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