In his recent budget, Chancellor George Osborne unveiled a new ISA to help first time buyers, to be launched later this year.
Under the scheme, couples wishing to buy their first home will receive up to £6,000 which they can use as a deposit. They will have to save themselves in the new help to buy ISA and receive a boost to their funds from the government when they decide to buy. The boost or bonus they receive will be 25 per cent of what they have saved, up to £3,000 per individual. Thus, for every £1,000 saved, the government will add £250. The maximum amount that can be placed in the ISA is £12,000 and the bonuses are paid per Isa, rather than per property. In this way, a couple with two help to buy Isas can receive as much as £6,000. The ISAs will also pay interest.
Anyone over the age of 16 who has never owned a house before is eligible to save under the scheme. Savers must use the money from their ISAs for a home for themselves; they cannot use them for a buy to let property, even if they have not owned a property before. The value of properties that can be bought is capped at £250,000 outside London and at £450,000 in the capital.
Individuals can save up to £200 a month and so will need to save for five years if they wish to receive the maximum amount available from the government. Savers can open their account with a lump sum of £1,000, in which case it will take them four and a half years to save the maximum of £12,000.
Critics of the scheme warn that it will increase demand for homes but will not increase supply and that the £2 billion cost to the taxpayer should, instead, be spent on providing affordable housing.
Chancellor George Osborne has revealed the new design pound coin which will be introduced into circulation in 2017.
The new coin has twelve sides and is reminiscent of the threepenny bit, which also had 12 sides and was in use until 1971, when it was withdrawn from circulation following decimalisation.
The coin features the four symbols of the United Kingdom: the thistle, the rose, the leek and the shamrock. All four are seen emerging from a coronet on the new coin. It was designed by school boy, David Pearce, a teenager from the West Midlands, the winner of a competition run by the Royal Mint to find a suitable image for the coin.
George Osborne first announced his plans to introduce a new £1 coin in his 2014 budget because the current pound coin is relatively simple to counterfeit. It is estimated that as many as one in thirty pound coins is a forgery.
The coin will be made using cutting edge anti forgery technology to make it the most secure coin in the world, according to the Royal Mint. The three features that will help achieve this are: it utilises two different colours of metal, has twelve sides and incorporates a technology developed by the Royal Mint to foil counterfeiters, which has been adapted from bank notes and is being used for the first time in coins.
David Pearce, 15, said that he had spent a lot of time researching what symbols could represent all of the UK and could not believe that he had won.
George Osborne said that the new coin would have 12 sides in honour of the Queen because the threepenny bit was the first coin on which she appeared at the beginning of her reign. The new coin will be followed by a £5 note featuring Winston Churchill and a £10 note on which Jane Austen is depicted.
Many bank customers are unaware of the seven day service for switching bank accounts, says the Financial Conduct Authority, (FCA).
The FCA said that the service which enables customers to move their money to a different bank is not being sufficiently publicised and so is having a disappointing impact. It has called on banks to do more to raise awareness of the service through advertising campaigns.
The Current Account Switch Service was first introduced in September 2013 and enables customers to move their accounts from one bank to another in seven days rather than in the 18 to 30 days the process would previously take.
Since its introduction, 1.64 million people have moved their bank accounts. The peak came in November 2013 when 105,802 people switched. The figures for February 2015 were lower, at 91,615.
Christopher Woolard, the FCAs director of strategy and competition, said that banks should work harder to make the public aware of the tools that exist to make moving banks a relatively quick and simple process.
The FCA also said that customers would find the process less daunting if they could keep the same bank account numbers. Portable bank accounts are, in theory, feasible but there is no indication yet when they might become a reality.
The Current Account Switch Service works very well for those customers who use it, reported the FCA. The service is run by the Payments Council, which says that it has plans to make more improvements to it. It will be running advertising campaigns in order to raise the public*s awareness of the scheme and to increase their confidence in using it.
Five banks currently offer incentives of £150 to consumers who wish to move their bank accounts.
Property prices are continuing to fall in London, according to data released by the Royal Institute of Chartered Surveyors (RICS).
The data covered the period from December 2014 to February of this year, with more surveyors saying that prices had fallen rather than increased. The situation is reversed in the rest of the UK, however, where property values are continuing to rise, according to the RICS figures.
Prices have risen most steeply in Scotland and Northern Ireland but also accelerated in the south west and south east of England, where the lack of housing drove up values.
The fall in prices in the London area was the sixth consecutive drop recorded by the RICS.
Simon Rubinsohn, chief economist at the Institute, said that buyers believe that properties will become more and more out of reach. Respondents to a recent survey said that they think values will increase by as much as 30 per cent over the next five years.
Other surveys, by Halifax and Nationwide, have reported a fall in property prices across the whole of the UK in February of this year, compared with figures for the previous month.
Analysts are predicting that the value of property will rise more slowly in 2015 than they did last year. The general consensus among them is that the rate of growth will be between 3.5 and 4 per cent, roughly half that of last year, although the exact figure varies from lender to lender. Nationwide says that values rose by 7.2 per cent and Halifax report an increase of 8.5 per cent. The figures mask huge regional differences. According to Nationwide, London house values increased by 17.8 per cent in 2014 but by a mere 1.4 per cent in Wales.
Prime Minister David Cameron has pledged to retain universal benefits for all pensioners, regardless of their income, if his party wins the next general election to be held in May.
During the last election campaign of 2010, Cameron vowed that bus passes, winter fuel allowances and free television licences would continue to be issued to all pensioners. In a recent speech, he repeated that pledge, saying that there was ‘no question’ of means testing being introduced and that the commitment he made in 2010 will stand for as long as he is prime minister.
The Liberal Democrats and the Labour party have both announced that they will limit some of the benefits very well off pensioners can claim, should they win enough seats to form the next government. Universal benefits for pensioners also include free prescriptions and eye tests.
Pensioner benefits cost the taxpayer around £3 billion every year. Norman Smith, assistant political editor with the BBC, said that Cameron’s promise follows the recent announcement made by Chancellor George Osborne, that pensioner bonds were to be extended. Smith suggested that the Conservatives are targeting the older voter deliberately because they are more likely than younger people to vote in the general election.
Labour MP, Rachel Reeves, Shadow Work and Pensions Secretary, said that far from championing the pensioner, Cameron has let them down by failing to do anything about high fuel costs and ‘rip off’ pension charges during this parliament. The Labour party, she said, will stop winter fuel payments for the wealthiest five per cent of pensioners and reverse the tax cut for millionaires, recently brought in by the coalition government.
The pound is at its highest value against the euro for seven years, reaching € 1.40 for the first time since the end of 2007.
This means that Britons who holiday in Europe this summer will see their money go 15 per cent further than it did last year.
The rise follows recent news that the European Central Bank has started its programme of buying government bonds, as well as fears that Greece will leave the Eurozone.
Last summer, £1 was equal to € 1.2, which meant that for every £, UK holiday makers received € 1.18. £600 bought € 707. This year, holiday makers will receive € 822 for the same amount.
Jeremy Cook, head of currency strategy and chief economist at World First, foreign exchange traders, said that the euro is being ‘hammered’ because of the European Central Bank’s bond buying scheme, concerns regarding Greece’s future within the Eurozone and negative bank deposit interest rates.
European creditors have called on Greece to agree to a list of reforms before they are prepared to release loans. However, Dutch finance minister, Jeroen Dijsselbloem, has said that there has been very little progress made and that Greece is wasting time by refusing to seriously consider engaging in a programme of reforms.
The president of the European Central Bank, Mario Draghi, said that the bank intends to continue buying government bonds at least until the second half of next year, 2016.
The European Central Bank has a remit of keeping inflation at or below 2 per cent but it is currently close to deflation or negative inflation. Mr Draghi was optimistic, however, saying that spending by consumers was expected to improve during 2015, as the bond buying programme took effect. He also said that he expected demand for European exports to rise as the weak euro made prices more competitive.
Average household incomes have returned to the level they were at before the economic crisis of 2007 – 2008, according to recent figures from the Institute of Fiscal Studies, (IFS).
However, incomes for adults of working age have not yet returned to their pre-economic crisis peak once inflation has been taken into account. Adults over the age of 60 do have higher incomes, says the IFS report, largely because pensioners have not been subject to cuts in their benefits.
The IFS report concludes that living standards have been slower to improve than after any other recession, due to the weak growth of incomes. Benefit cuts and tax increases, as well as the government’s continued efforts to reduce the deficit, have also impacted negatively on average incomes.
IFS director, Paul Johnson, has said that he finds it ‘astonishing’ that average incomes are still no higher than they were before the economic crisis of 2007 – 2008 and that for households consisting only of working age adults, they are a little lower.
The reason for incomes of the over 60s rising more than those of working age adults is that state pensions have been ‘triple locked.’ This means that they rise in line with earning, inflation, or 2.5 per cent, whichever is the highest. Consequently, pensions have risen steadily.
The IFS says in its report that average incomes have not yet recovered to their earlier levels because of the UK’s poor productivity performances, with workers failing to increase output. Consequently, meaningful wage rises have not been affordable.
A senior economist with IFS, Robert Joyce, said that government policies which increase productivity and so boost wages will be of greater benefit to households than tax cuts and rises in benefits.
Chancellor George Osborne welcomed the IFS findings, saying that they pointed to a ‘milestone’ on the road to economic recovery.
Interest rates in the UK have remained as low as 0.5 per cent for six years. The Bank of England first cut the rate to its current level in March 2009, in a bid to boost the economy during the credit crunch.
Recent economic growth has led to speculation that the Bank has plans to raise the cost of borrowing money in the near future. However, inflation is very low, at 0.3 per cent, and so the Bank’s policy makers are unlikely to increase the interest rate for some time yet.
Inflation is likely to remain low and may even turn negative in the late spring, chiefly because the cost of oil has almost halved since last summer.
Bank of England governor, Mark Carney, has spoken of reducing interest rates still further if prices fail to rise over the coming months. He predicts that they will start to increase by the end of this year.
The problem with falling prices is that consumers often put off buying expensive goods in the hope that prices will fall further. Seventy per cent of the British economy is dependent on consumer activity and so a slowdown in sales inevitably has a dramatic effect on economic growth.
Senior economic advisor, Martin Beck of the EY Item Club, believes that the next interest rate rise will not come until early 2016, when inflation should be above 1 per cent and likely to reach the Bank’s target of 2 per cent.
Chief economist at the British Chambers of Commerce, David Kern, called on the Bank to state its intentions clearly, adding that many British exporters are already suffering because the pound is so strong against the euro and that higher interest rates would only worsen the situation. Should the Bank make it clear that it has no plans to raise interest rates until 2016, confidence would increase, he said.
Millions of people will be able to gain access to their pension funds from the start of the next tax year, on April 6. The minister in charge of the move, Steve Webb, has said that many pensioners might leave themselves without enough money for their old age, but that this is a ‘calculated risk.’
‘Pension freedom day’ as it is becoming known, will allow people over the age of 55 to do whatever they want with their pension, rather than having to buy an annuity.
In an interview with The Observer newspaper, Steve Webb said that he realises it is a risk to allow people the freedom to do what they want with their own money. Full control might be safer but that has led to compulsory annuities and many very dissatisfied pensioners.
The average length of retirement is 25 years but, as figures from the insurance company Zurich show, fifty per cent of people believe that they will need their retirement fund for only 20 years or even less.
However, Steve Webb believes that although many people may choose to spend all of their pension pot ten or even twenty years before they die, this is not necessarily the wrong thing to do. Perhaps they will enjoy spending their pension pot and then live on the state pension and, perhaps, some other savings. That may even be the best outcome, he said.
Mr Webb also downplayed fears that the pension industry will not be ready for pension freedom day on April 6. A number of insurance companies have already said that they are not willing or ready to allow savers full access to their money next month. Some companies, for example, will not be allowing savers to withdraw their funds gradually, so forcing them to take their pot out in one go and pay a huge tax bill or buy an annuity.
The number of adults saving money in a workplace pension scheme is higher than it has been in seventeen years, reversing the trend of decreasing participation which began in the 1990s.
The reason for the huge boost in numbers saving through a company pension is that a large number of young people in their twenties have now joined their workplace scheme.
In 2013, fifty per cent of all employees saved for their retirement. By 2014, this figure had grown to 59 per cent, figures from the Office for National Statistics have revealed. Although all age groups have contributed to the increase, the biggest leap in numbers was among young people in their twenties. Fifty three per cent of 22 to 29 year olds are now saving into their company pensions, compared to 36 per cent in 2013.
The increase is chiefly due to the government’s automatic enrolment programme which was introduced at the end of 2012. Employers are now compelled to enrol all their employees over the age of 21, who are earning more than £8,000 per annum, into workplace pension schemes.
According to Nigel Stanley, TUC’s head of campaigns, auto-enrolment has been a big success. Like the minimum wage, auto-enrolment was unpopular with employers when it was first introduced but has now been accepted. However, he added that the rules concerning levels of contribution were not sufficient to give people a ‘decent’ income at retirement.
Auto-enrolment will be fully implemented by 2018 when the minimum contribution will be 8 per cent of employee earnings, three per cent of which will be contributed by the employer. At present, employees are only paying one per cent of their salary and employers pay only a further one per cent.
There is also an increase in those who do not qualify for auto-enrolment, such as part time workers and 16 to 21 year olds choosing to save for retirement.
Representative 17.46% APRC (Variable)
For a typical loan of £23,120 over 120 months with a variable interest rate of 17.46% per annum, your monthly repayments would be £442.07. This includes a Product Fee of £2,312.00 (10% of the loan amount) and a Lending Fee* of £763.00, bringing the total repayable amount to £53,047.80. Annual Interest Rates range between 8.6% to 27.87% (variable). Maximum 50.00% APRC. *Lending Fee varies by country: England & Wales £763, Scotland £1,051, Northern Ireland: £1,736.
Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
