Who’s buying bonds?
Why are investors piling into funds investing in bonds? asked the Telegraph, noting that in the three months to end-October UK investors bought almost £5 billions’ worth of them. Experts agreed it was puzzling, since rising interest rates are generally negative for bond prices. But some said long-term demographic trends, especially ageing, meant that investors might be switching from shares to bonds to protect their capital.
Childcare rollout delayed
The extension of the scheme providing tax-free childcare vouchers worth £2,000 per child to 7-12 year-olds has been deferred, says the Financial Times. Registration problems with the Childcare Service website for children aged under 6 had been widely reported, so the rollout has been deferred from December 2017 to March 2018. Registration for younger children will continue.
Six out of ten adults in the UK have not made a will, says the Mail. Many believe family or friends will decide how their assets are divided, but they are wrong: that will be determined by the ‘intestacy rules’ for anyone who dies without a will in place. Spouses usually automatically inherit property and joint bank accounts, but people who are cohabiting do not have the rights of legal spouses and this is a major source of problems.
Till death do us part
Nationwide has launched a mortgage which can run until you die, says the Times. Otherwise, the only reason it may need to be repaid is the property owner entering a residential care home and the property being sold to pay the fees. About 1.9 million people with interest-only mortgages taken out in the 1990s could use this lifetime loan if they do not have the capital to pay off their current mortgage when its term ends. A few other lenders have similar offers.
How much do I need to save?
Many of the broad brush answers to the question ‘How much do I need to save for retirement?’ are simply unaffordable, says the Financial Times. It cites the International Longevity Centre, which says workers should save 18 per cent of their incomes, which is clearly impossible for many people. Indeed, the FT featured several young doctors who had opted out of contributing to the excellent NHS pension scheme because they were struggling with debts and the cost of living. Actuarial calculations commissioned by the FT show that even when mandatory minimum pension contributions rise to 8 per cent of earnings in 2019, most workers will still fall far short of the two-thirds of pre-retirement income that is usually taken as a yardstick of required retirement income.
Holiday scams on the rise
Ever more sophisticated scams are parting British holidaymakers from their money, says the Times. Most are for self-catering accommodation and often use cleverly designed websites where stolen images and information about holiday villas link to fraudster bank accounts. Experts advised checking availability – fraudsters often advertise wide availability even in peak seasons when other properties are fully booked – and watching out for unrealistically low prices. They also advise paying by credit card so that you can reclaim from the card company, which is much easier than trying to reclaim money if you have made a bank transfer.
Fraud unit gathers over £5 billion
A new unit of HMRC, the Fraud Investigation Service, gathered £5.2 billion in revenues in its first full year, reports the Financial Times. Over £1 billion came from criminal investigations that involved prison sentences with a total term of 800 years. The unit has a target of substantially increasing the number of fraud prosecutions each year. Much of the additional tax came from ‘sin taxes’ on alcohol and tobacco where smuggling continues to increase.
Older workers prefer to spend
A survey of older workers suggests they prefer to spend than save, says the Mail. While for many people, earnings peak in their early 50s, only 12 per cent use the extra income to save more towards retirement in their company pension scheme. On the other hand, one in five said they spent more and 25 per cent said they would partially fund their retirement by moving to a smaller home. Perhaps not coincidentally, a quarter of those questioned said they still weren’t taking retirement saving seriously.
How to make your retirement income last
The Telegraph offered a simple piece of advice on how to make your retirement savings last. It passed on this advice from an American commentator, who suggests putting the equivalent of three years’ spending into a cash account separate from your long-term retirement portfolio. It’s very rare that a ‘bear market’ lasts longer than this, so you can avoid withdrawing cash at a time when prices are down, and so avoid the ‘risk of ruin’.
Spend your pension last
Spend everything else first and the cash you have in your pension fund last, says the Mail. That, it says, is the advice the experts are handing out as a result of the 2015 pension rule changes. The key reasons are that once you’ve taken your tax-free cash, any other withdrawals from your pension fund are subject to income tax; any capital left in your pension fund on your death passes to your heirs outside your estate and thus avoids inheritance tax; and withdrawals of cash from ISAs bear no income tax. However, structuring the right withdrawal plan from pensions and other investments requires expert assistance thanks to the UK’s complex tax rules.
As tax year end approaches, there is still time to make use of your available reliefs and allowances.
This tax year end planning checklist covers the main planning opportunities available to UK resident individuals and will hopefully help to inspire action to reduce tax for the 2023/24 tax year and to plan ahead for 2024/25.
As tax rate band thresholds are changing, understanding the impact on high rate taxpayers and the economy is crucial.
It was recently revealed in the media that the amount we need to enjoy a ‘moderate’ retirement has increased by £8,000 per annum, a 38% increase, in just one year.