Weekly News Bulletin - 06/12/2021

Savings

Rainy-day saving tops list of most worthwhile financial actions

Marcus by Goldman Sachs surveyed more than 8,000 adults as part of its 2021 worth and value report and found that 65% favoured building up their emergency savings account over any other financial activity. Furthermore, 41% of respondents said they transferred a set amount of money into a savings account as soon as they got paid. Investing has risen in popularity since last year’s survey, with 23% of adults revealing they planned to start investing, outside of their pension savings, or invest more in the next 12 months compared to 15% in 2020. YourMoney.com

Pensions

Report highlights potential benefit of switching to an annuity later in retirement

A report by LCP titled ‘Is there a “right time” to buy an annuity’ has found that although someone aged 60 who chooses drawdown would initially be 10% "happier" overall than someone who immediately uses all of their pension pot to buy an annuity, annuities become more attractive later in retirement. LCP’s model compared the happiness a retiree would get at each point in retirement from staying in drawdown compared with switching some or all of their savings into an annuity. LCP’s model found that a hybrid approach can generate the "best outcomes" at all ages, with the crossover point where the balance of the pot is annuitised being approximately 71. International Advisor | Pensions Age

Pension savers miss out on £108,000 in compensation

The Financial Services Compensation Scheme (FSCS) has said that savers missed out on £104m in compensation last year after their financial advice firms collapsed, with the average uncompensated loss standing at £108,000. Last year there were 961 claims that were above the £85,000 FSCS limit if an adviser that provided the wrong advice subsequently fails, up from 836 the year before. The limit was increased from £50,000 in April 2019. The surge in claims, with more people being paid the maximum, has pushed up the cost of the FSCS to an estimated £833m next year, up from £700m this year. It is funded by a levy on the financial services industry. The Times

Capital Gains Tax

'Huge relief' as Capital Gains Tax hike shelved - but 'very welcome tweak' announced

Capital Gains Tax was recently reviewed alongside Inheritance Tax by the Office of Tax Simplification (OTS). The review is set to put important changes into motion, however, a Capital Gains Tax rate hike is not on the cards. Sarah Coles, Hargreaves Lansdown said "There would have been huge unintended consequences of the proposed CGT changes, people would have been artificially trapped holding assets they didn’t want – because the tax benefits of hanging onto them until they died would have been too good to lose." The tax is charged on the profit a person makes when they sell something which has increased in value. A welcomed key change is an alteration when it comes to the approach to divorce. For divorcing couples, this is a "very welcome tweak to the rules" according to Ms Coles who said "At the moment, if your divorce crosses into a new tax year, then any assets that you pass between you as a result of the divorce could be subject to CGT. "This tweak will mean this is no longer the case, so couples won’t be forced to time proceedings quite so ruthlessly, rush decisions through, or pay the price for delay." Daily Express | Financial Times

Property

First-time buyer mortgage rates drop to 2019 prices

Mortgage deals for first-time buyers are now cheaper than before the pandemic. Younger buyers with small deposits were largely locked out of the market last year as lenders pushed up prices for riskier borrowers. But lenders are now competing for their business to hit their annual targets. The average two-year fixed-rate mortgage with a 5% deposit is now 3.13%, according to Moneyfacts, down from November last year, when it was 4.74%, and lower than the 3.27% it was in the same month in 2019. It is also the case for longer deals. A five-year fix for first-time buyers with a 5% deposit charges 3.41% on average, lower than the 4.21% in 2019. The Daily Telegraph

Buy-to-let rules overhauled to attract pensioners

Mortgage lenders have eased rules which had prevented many retirees from investing in buy-to-let properties. Accord Mortgages, part of Yorkshire Building Society, has dropped its minimum income requirement for buy-to-let customers. Previously, applicants had to earn a minimum of £25,000 to qualify for a loan. Chris Sykes, of mortgage broker Private Finance, said: “It is a welcome change for many. Those who treat buy-to-lets as their pension wouldn’t qualify for finance through Accord previously but would now.” The Daily Telegraph

Red hot property market makes Brits the richest they have ever been

A booming property market triggered by a tax holiday and Brits demanding larger homes has made the UK the richest it has ever been. Household wealth in Britain swelled 8.4 per cent over the last year to £11.2 trillion, the highest it has ever been since the Office for National Statistics (ONS) started tracking the figures in 1995. The UK property market has been on a tear over the last 18 months, supported by a stamp duty holiday, record low mortgage rates and a dash for space. A 7.3 per cent uplift in house prices lifted household wealth to its highest level ever, the ONS said.Despite the stamp duty relief being watered down to the first £250,000 of a purchase earlier this year, demand has stayed red hot, boosting house prices to record levels. According to building society Nationwide, house prices rose 10 per cent over the last year in November, despite the relief ending at the end of September. City A.M.

Economy

Demand for credit surges

Data from the Bank of England shows that October saw a surge in credit card borrowing. Consumers borrowed a net additional £706m last month, with new credit card borrowing accounting for £637m of this. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, commented: “Households set aside into savings accounts in October the smallest sum since the pandemic began, though the emergence of the Omicron variant likely will ensure that they remain cautious over the coming months." Sky News