More workers, less pay
There has been a big rise in the number of agency workers in recent years, reports the Financial Times, and by 2020 there could be a million in the UK. Classed as ‘workers’ rather than employees, they do not get the protections employees receive by law, and on average get paid significantly less. The Resolution Foundation, which researched the numbers, says agency workers are the forgotten face of today’s workforce.
Take the money for your pension
FT columnist Merryn Somerset Webb invites readers to imagine they own an investment that has risen by 480% over the past seven years. Moreover, the rise is down to just one factor – the steady decline in interest rates over that period. Wouldn’t common sense tell you it was time to sell? she asks. The investment she refers to is the ‘transfer value’ of a defined benefit/final salary pension scheme. The example she cites is a reader who’s been offered a transfer value of £300,000 for a pension likely to be £7,000 a year at retirement in 20 years’ time. In 2009 the transfer value was just £63,000. Could you be worse off by taking the £300,000? Only if inflation shoots up to a very high level (the final salary pension is inflation-proofed), she argues, provided you invest it sensibly.
Modest gift for savers with new NSI Bond
Philip Hammond’s Autumn Statement contained few giveaways, but there was a modest gift for savers. Next Spring a new National Savings & Investments Bond will be launched that will pay 2.2% interest for three years. This is well ahead of the best 3-year rates currently available. The maximum investment will be just £3,000 per person – though Mr Hammond could do what previous Chancellors have done and hope to win a popular headline by raising the limit next year.
New measures mean some will pay IHT at 80%
The ‘residential nil rate band’ that will be introduced to inheritance tax law from April 2017 means a couple will be able to hand down an estate of up to £1 million with no tax after 2020, says the Telegraph. The ‘taper’ provisions mean that if your estate is over £2.2 million you do not get the new allowance, but if it is £2 million you do get it. That means there’s an effective tax rate of 80% on the £200,000 difference. Clearly there is scope for some tax planning in such cases.
New £1 to beat forgers
Next year, Britain will get a new pound. A new £1 coin, to be precise, because the Bank of England reckons no less than 3 in every 100 of the 1.5 billion in circulation today are forgeries. The 12-sided replacement coin will be a much bigger challenge for forgers, and indeed for coin machine vendors, who are hard at work reprogramming their machines ready for the change. It starts in March but the old coins will be valid until September. The Mail says a complete set of all 25 different designs of the old £1 coin – including a new one marked 2016 that won’t even enter circulation but can be bought from the Royal Mint for nearly £9 – could become very valuable.
And the big threat in 2017 is…
Inflation is the big threat next year, says the Independent, with the Bank of England forecasting it will hit 2.7 per cent. We have seen higher rates before, but the Indie points out that this time around, wages are growing much more slowly. Indeed, over the decade to 2020, Resolution Foundation predicts wage growth of just 1.6 per cent in real spending power, compared with 13 per cent for the Noughties and over 20 per cent for almost every decade since the 1920s. Moreover, it says lower earners will be worse off over the 2010-2010 period than in the previous decade.
Watch out for lenders’ tricks
Mortgage lenders usually write to borrowers with fixed rate loans near the end of the fixed term with an offer of a new rate. Watch out, says the Times, because such offers, which are taken up by about a quarter of those receiving them, may not be in your best interests. On average, a borrower with a £300,000 loan could save £750 a year by refusing their current lender’s offer and shopping around. Brokers say lenders can undertake a ‘tick-box’ exercise and offer a new loan quickly, whereas if you want to find the best rate you’ll have to go through a suitability check, which requires a face to face meeting.
Turn off the machines
Growing numbers of people are drawing up documents to make it clear that they would rather die than let excessive care home fees eat into their children’s inheritance, says the Times. The Commission on Funding of Care and Support says that one in ten 65-year-olds will pay more than £100,000 in care costs. Most data show that people do not have enough in savings in pension schemes or ISAs to pay for care so that many would need to sell their homes.
The worry is dementia
As the awareness and prevalence of dementia grows, the number of older people registering Lasting Powers of Attorney (LPAs) has doubled to half a million over the past two years. Many are doing so because they are fearful of losing all their assets to nursing home providers, says the Times. Unlike people with physical illnesses who go into care, dementia sufferers may live for many years in which they require full-time care beyond the capabilities of their families. While the LPA can state preferences for how you are treated, a solicitor says those who want to outline preferences about the withdrawal of treatment should set them out in an ‘advance decision document’ which is acceptable as guidance for Attorneys to act on.
Savings for the self employed
Since 2012, 7 million workers have been enrolled in pension schemes under the new ‘auto-enrolment’ system, but the self-employed are not saving into pensions – new figures show pension saving among those working for themselves had fallen from 31 per cent in 2005-06 to 14 per cent in 2014-15. Now, says the Financial Times, the government plans to find ways of encouraging the 5 million self-employed to save for their retirement. Experts said automatic enrolment could be adapted for the self-employed if they were to pay higher national insurance contributions, which could then be diverted to a workplace pension provider, with individuals given the opportunity to opt out of the process.
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