You would assume that investors are cracking open the champagne and sitting back basking in the knowledge that Britain is on the up, with pickings being at their best in years. The Footsie recently achieved a record high topping the peak in the dotcom boom of 1999.
However, the reality is different. A dark shadow looms over investor confidence and a wave of fear has swept over experienced market watchers.
Uncertainty brought about by the upcoming general election has scuppered the buzz surrounding the financial markets. There is no doubt that investors are becomingly increasingly worried about potential coalition negotiations. Polls are showing that neither of the UK’s main parties is likely to win an overall majority. A minority government could lead to a second election within months, causing a negative outlook for stock markets.
Research from leading retail stockbroker, The Share Centre, has revealed that the majority of investors think the government does not do enough to support them and have little faith in any party. The researchers polled almost 1,000 experienced investors to understand their views on the investment policies of political parties ahead of May’s election.
Investors are cynical about whether any government will support them, with three quarters believing no political party is sympathetic towards their needs. In light of this, more than half of investors say they would be swayed to vote for a particular party if they were to focus more on investors’ needs – a clear call to action for politicians.
The 870,000 active personal investors in the UK make up a major interest group to which politicians seeking election should be paying close attention. The research indicates there may be electoral benefit to be gained from paying greater attention to the needs of this group, which is critical to the economic success of the UK.
Investors had very clear views on what changes they would like to see in political manifestos to get them to vote for a particular party.
One of the biggest issues found in the research was centred on the difficulty of the tax system, with two thirds of respondents saying they would like to see this simplified. A further three fifths (61 per cent) would like to see a reduction in tax on pension income and 58 per cent would like to see inheritance tax reduced.
Investors were alarmed when Labour recently announced plans to increase taxes on pensions to allow for university fees to be reduced. The move could cause hostility towards the party and have a significant impact on voting.
The next few months will be an opportunity for all political parties to outline clearly how their manifestos will support the investor
Richard Stone, chief executive of The Share Centre, says: “The next few months will be an opportunity for all political parties to outline clearly how their manifestos will support the investor.
“In the current era of ‘austerity’, political parties should be clearly signalling their support for individuals who are prudent and diligent in saving and investing for their future; noting, of course, that their investment provides vital capital for UK businesses, which is the driving force of continued economic recovery.”
The Share Centre found a major theme running through the changes investors would like to see, in addition to an overarching desire for taxation to be more easily understood, is the security of knowing diligence in saving and investing will not be penalised. Investors are calling for income generated from those investments to be taxed more leniently and wealth allowed to be passed to the next generation without it being raided
The retail stockbroker found more than half could change their vote if a party did more to support their needs as investors, which could potentially have a substantial impact on votes.
Mr Stone adds: “Investors remain baffled by an overly complex tax system, with the majority wanting to see it simplified. It is clear it’s becoming too difficult for people to navigate and this lack of understanding leaves them feeling disadvantaged.
“There is also a major concern that investing for their and their family’s future will be penalised by taxation on income or inheritance, reducing the incentive to invest. Investors want to be better supported by the political parties, who should sit up and pay attention to these findings ahead of the general election.”
The survey also found that investors wanted to see cuts to stamp duty on shares, lower capital gains tax and a reduction in inheritance tax.
There is no doubt that investors are becomingly increasingly worried about the uncertainty created by potential coalition negotiations. With close to a million personal investors in the UK, parties should be paying closer attention to their needs and working harder to secure their votes.
ABOUT THE SHARE CENTRE
The Share Centre was established in 1990 to provide value-for-money share services for private investors. Its range of services includes buying and selling shares by internet, telephone and post, and a comprehensive share administration and safe custody service. Tax-efficient investment “wrappers”, including ISAs, CTFs and SIPPs, are also available. The Share Centre’s advice team provides comment on market sectors, individual shares and funds on www.share.com. Access is available to customers and registered users of the site. Registration is free. To understand how our advice team arrive at their views, please read our Investment Research Policy. The Share Centre blog is also available at http://blog.share.com. In addition, account customers can receive individual telephone advice on UK-listed shares.
Risk warnings
Investing in general, and the products and services mentioned above, may not be suitable for all. If in doubt, individuals should seek independent financial advice. The value of investments and the income from them can go down as well as up, and investors may not get back their original investment. Past performance is not a reliable indicator of future performance. The bases and levels of taxation relating to ISAs, CTFs and SIPPs are subject to change, and the value of these tax allowances may depend upon the circumstances of the individual.
The Share Centre Limited is a member of the London Stock Exchange, and is authorised and regulated by the Financial Conduct Authority under reference 146768.
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