Weekly News Bulletin - 17/01/2022
Savings
Are you saving enough to live comfortably in later life - and retire when you want? Here's how much you should save NOW
The Mail on Sunday has teamed up with pensions and investment business Royal London to crunch the retirement numbers. We looked at how much someone would need to save every month to afford a minimum, moderate or comfortable retirement. The figures used for a minimum, moderate and comfortable retirement are taken from calculations by the Pensions and Lifetime Savings Association. The annual amounts are £10,900, £20,800 and £33,600 a year respectively for a single person. These figures assume a full state pension worth £9,339 a year. if you want a moderate lifestyle in retirement from the age of 65, you would need to save £355 every month from the age of 22. But, if you started saving at the age of 40, you would need to save almost double that amount – £690, to have the same retirement. To receive a comfortable income from the age of 55, you would have to save a massive £1,360 a month from the age of 22. But if you delayed retirement until age 70, you would need to save £555 per month. If you save £90 every month from the age of 22, you should have enough for a modest lifestyle in retirement from age 55. Bump that to £640 a month and you should be able to afford a moderate lifestyle. For a more luxurious one, you will need to save £1,360 a month. Mail on Sunday
Money saving tips: The 10 simple steps to ‘pump up’ your finances in 2022
Kevin Pratt, savings expert from Forbes Advisor, provided a guide exclusively to Express.co.uk on the 10 ways Britons can keep their finances on track in the coming year. Prioritise - Mr Pratt urged Britons to consider looking at what matters to them the most for their finances - for example, paying off debt or saving for a specific goal. Budgeting - A budget is a financial strategy for success. Decimate your direct debit and savage your standing orders. Get the best credit card deals. Tackle your debts. Secure your savings. 'Pump up' your pension. Make sure your tax affairs are up-to-date. Receive your rightful due - are you entitled to any benefits. Stock away a little in savings. Sunday Express
Could you save money when you put the dishwasher on or find a better way to budget and invest: The ingenious ways to save with a smartphone app
Simon Hodgkiss now saves money every time his door opens, he switches on his dishwasher or goes to bed late, he has linked his Monzo bank account to a smartphone app called If This Then That (IFTTT). The app, connects gadgets around the home, allows him to programme his bank to save money every time a real-world event happens. Each time he runs the dishwasher, 5p is taken from his account for his water bill and 10p for his gas and electricity bill. If he goes to bed at 10pm, 10p is taken, the amount increases by 10p each hour after this. Over the past 18 months, he's saved around £780 Primary school teacher Viki Allen, 46, saved £3,000 last year by taking part in a number of challenges. One involved saving 1p on January 1 and increasing the amount by 1p each day. She does this in reverse, too; a payment of £3.65 is taken on the first day of the year and the daily amount reduces by 1p. Combined, this adds up to £1,335.90 after 12 months. She also does a £1 weekly challenge, where £1 is saved in the first week, then £2, building up to £52 in the final week. Daily Mail
Pensions
Nearly a quarter of non-retired homeowners have no pension savings
Research by Legal & General Home Finance (LGHF) revealed. The study also found that a further 35 per cent of non-retired homeowners had less than £10,000 in their pension pots. LGHF’s research revealed that 22 per cent of people planning for later life expected to use the value of their home to fund their retirement. The firm noted that insufficient pension pots and high house prices were pushing more people to consider using their property wealth to fund their retirement. LGHF detailed how people were expecting to use their property for their retirements with 10 per cent planning to downsize, 9 per cent expecting to sell their property and 6 per cent planning to access equity via a lifetime mortgage. Pensions Age
‘Savings losing value by the day!’ - Britons urged to hold off on drawing their pension
When it comes to retirement, people are often more focused on ensuring they have enough to stop working when they wish, and do not think as much about how they will manage their money. Colin Dyer, Client Director at abrdn financial planning shared his top five tips. Create a plan - “Retirement is a marathon, not a sprint, so make sure you have an income plan that reflects that. “Celebrating and treating yourself in your early days of retirement is well deserved, it’s important that you think ahead and create a plan as to how you’re going to make sure your money lasts for the duration of your retirement.” Monitor your money - "Re-evaluate your retirement savings on a regular basis to ensure you have enough.” Grow your savings - “Money in your pension is usually still being actively invested and it is going to have a better chance of growing if it remains invested." Be tax efficient - “Be aware of how much you withdraw each year and how the amount impacts your tax bracket. A quarter of your pension pot is usually tax-free, and you'll pay income tax on the rest, so you could choose to take a lump sum, or take smaller regular amounts.” Don’t be afraid to ask for help - Speak to a financial adviser Daily Express
Pension warning: Britons urged to consider diverting savings to avoid 55% tax charges
Pension savers could be hit with 55% tax charges if they save too much for retirement. The Lifetime Allowance (LTA) is the maximum that can be saved into a pension over someone’s lifetime before tax charges apply. It currently sits at £1,073,100, where it will stay frozen until 2026. Many people may not even be aware of the limit, or might assume they will never reach it, but the Lifetime Allowance is something every saver needs to be aware of. This is because the penalties for exceeding the allowance can be stiff, and eat into people’s hard earned pension savings. PensionBee CEO, Romi Savova, commented on the implications of breaching the Lifetime Allowance and how Britons can avoid doing so. “Those that find themselves on or close to the threshold should consider whether it makes sense to divert some of their savings to another tax-effective savings vehicle, such as an ISA, to avoid penalties of up to 55 percent for breaching this limit and making withdrawals. Daily Express
Capital Gains Tax
Capital Gains Tax receipts to double in next few years - how to reduce your CGT bill
Capital Gains Tax (CGT) is set to double in the next five years with many households looking for ways to reduce their bill ahead of time. The total amount of money someone receives from the sale is not taxed, it is instead the gain from the sale which is subject to HMRC. An example on the gov.uk website states: “You bought a painting for £5,000 and sold it later for £25,000. This means you made a gain of £20,000 (£25,000 minus £5,000).” NFU Mutual shared how people can reduce the amount they pay. One way people save is by making gifts to their spouses or civil partners, which are made tax free of CGT. Shifting ownership of part of the asset someone is disposing of to a partner gives taxpayers two tax-free annual exemptions of £12,300, which means the first £24,600 of any gain will be tax-free. Furthermore, if someone’s partner will pay a lower rate of CGT, it could be worth giving them a larger share of the asset before the sale is made, NFU Mutual said. This will allow households to pay a smaller rate of tax. Daily Express
Property
London beats Cornwall to be most desired location for buyers
London was 2021’s most searched for destination by potential buyers, property site Rightmove has shared. The capital beat Cornwall, which had piqued buyers’ interests earlier in the year. However, a desire to escape to the countryside was clear in the difference in total number of searches between London and Cornwall. The difference was just three per cent, compared to a gap of 2 per cent in 2020, and 49 per cent in 2019. John Ennis, Foxtons managing director for central London & new homes, said it was “not surprising” that at the start of the year, during a “lengthy lockdown,” people were looking to escape to the coast and countryside. He added: “As restrictions fell away and the vaccine roll-out provided reassurance for international buyers, momentum returned to London with buyers and sellers exhibiting a strong appetite to transact.” City A.M.
House prices grow faster than any full year for 17 years, Halifax says
UK house prices rose at a faster rate in 2021 than in any calendar year since 2004, according to the Halifax. The mortgage lender said buyers sought more space during lockdown and took advantage of low-cost borrowing and stamp duty holidays. Prices increased by 9.8% during 2021, it said - the fastest for any calendar year since a 12.5% rise in 2004. The average UK property price hit a new record high of £276,091 in December, it added. In cash terms, that was a £24,000 rise in the cost of the typical home over the course of the year. However, growth is expected to slow this year due to higher mortgage rates and a squeeze on household incomes. BBC News