Client categories: Saver/Investor, Employee
Should you defer your pension?
If you will soon become entitled to a state pension, then the big question is whether you should defer taking it, says FT columnist John Kay. Since you get a 10.4% increase in the pension for every year of deferral if you reached pension age before April 2016, you might think deferment is a no-brainer. But as economist Kay points out, to get an actual 10.4% return from deferment you would have to live for ever, and the actual rate of return you get will depend how long you live. Taking average life expectancy, he calculates that a woman who reached pension age before April 2016 should defer taking her pension until age 71-2. Sadly, the rate of increase for those retiring after that date is halved, and for a man with average life expectancy Kay reckons there is virtually nothing to be gained by deferral. But he also adds that if you are paying 40% income tax now but expect to be paying 20% later, that can also be a good reason for deferral.
Client categories: Saver/Investor
Why pirates wore gold
Why did pirates wear gold earrings? asked the Financial Times. So that if they died in foreign lands, they stood a better chance of getting a Christian burial – paid for by their jewellery. Gold attracts strange facts, but it is not so strange that a specialist shop has opened in London’s St James offering storage facilities for small quantities of gold bullion in heavily-guarded vaults. The proprietors see gold as a ‘safe haven’ or insurance-against-disaster type of asset rather than an investment.
Client categories: Parent
Is uni really worth it?
English students graduate with more debt than those of any other country including the US, says the Financial Times, citing recent research. With typical fees and living costs, UK graduates will have £44,500 of debt compared with a US average of £23,000.
Government figures show than more than one in three graduates has a low-skill low-paying job, leading the research sponsors The Sutton Trust to question whether going to university is worth it or whether a degree-level apprenticeship would be a better option for many.
Client categories: Retired
Care home closures rise
Care home insolvencies rose by a sixth in 2014-15, reports the Financial Times. And this year’s rise in the minimum wage to £9 per hour, plus recent cuts to the fees councils pay for those entitled to free care, mean the risk of an increase in closures among the UK’s 20,000 care homes is rising. Several of the larger operators are struggling under the burden of too much debt.
Client categories: Employee
Questions over lifestyle pension funds
Old-fashioned pension funds with over £100 billion in assets could deliver much less than retirees expect, according to research by Which?, says the Financial Times. These ‘lifestyle’ funds typically move assets from ‘risky’ investments such as shares to ‘safer’ assets like fixed interest as plan holders approach retirement. But under the new ‘pension freedom’ rules, many people will keep their funds invested and draw an income from them, in which case this type of ‘de-risking’ is likely to result in lower returns and lifetime income. Experts said that while lifestyle funds could still be suitable for younger people, those nearing retirement should review them.
Client categories: Saver/Investor
Regulators crack down on land bankers
A firm that lured thousands of investors into buying land on the basis that it would get planning permission lost its case in the Supreme Court, says the Financial Times. The regulator had argued that the company was effectively offering collective investments which the law required to be regulated, but the firm was unauthorised by regulators. Other land banking firms have closed but new schemes of the same kind tend to recur.
Client categories: Property owner, Parent
Barclay’s new 100% mortgage questioned
Barclays is offering 100% mortgages of up to 5.5 times income to property buyers whose parents put 10% of the purchase price into a Barclay’s account where it has to stay for three years. The rate is an attractive 2.99% for an initial three years with no fee. The only risk to parents’ cash is if borrowers fail to keep up their loan repayments. Experts question whether this a return to the bad old lending ways of the last property boom in 2005-07. The main risk, they warn, is of ending up with negative equity, a risk that rises the higher the proportion of the property value that is borrowed.
Client categories: Saver/Investor
Hard-hit savers turn to current accounts
With interest rates on instant access savings accounts and cash ISAs at rock bottom levels, savers are turning to current accounts to earn a bit of interest, says the Herald. Several banks offer current accounts that pay interest up to 5% on balances up to £2,500 provided a minimum is paid into the account each month.
Client categories: Property owner, Parent
Bank of Mum and Dad lends £5 billion
Research by insurers Legal & General says parents will advance over £5 billion to children this year to help them buy properties, says the BBC. One in four first-time buyer purchases will get help from the Bank of Mum and Dad and the average sum is £17,500. In 2016 over 300,000 purchases are likely to be helped in this way.
Client categories: Retired
Don’t buy rip-off cover
‘Don’t let Parky and Co lock you into their rip-off life cover’ urged the Mail, in a hard-hitting analysis of the Over-50 life insurance policies that are heavily marketed on daytime television with ads featuring celebrities like talk-show host Michael Parkinson. Vouchers and free gifts including plasma TVs are used as incentives, but the plans offer poor value, often paying out less then the premiums that have been paid in. The failure to pay just one monthly premium can mean the plan is cancelled and the policyholder gets nothing.
Client categories: Retired
£64,000 salary to buy average home in 2020
If recent trends in house prices continue, by 2020 buyers will need a salary of £64,000 and a deposit of £46,000 to buy an average home for £270,000 in 2020, says the Mail citing research by housing charity Shelter. In London, first time buyers will need a salary of £106,000 because a typical home will then cost £558,000.
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