Finance in the News

The trick to beating pension withdrawal tax
Thousands of people who have withdrawn cash from their pension funds since the rules changed in 2014 have paid too much tax, says the Telegraph. The reason is due to the HMRC system, which regards the first withdrawal from a pension fund as the first of twelve monthly instalments. The result is that they charge tax at 20 per cent or 40 per cent on withdrawals where the tax actually due will be much less. You can get the overpaid tax back by lodging a claim, though it takes time. But, says the Telegraph, there’s a way to avoid the whole problem: just make your first withdrawal from your pension fund a low sum like £100 or so. HMRC will adjust your tax code taking this into account, so future withdrawals won’t be overtaxed.

Millions miss out on ‘free money’ from pensions
Over 3 million people are missing out on as much as an annual £2 billion of ‘free money’ on offer from their employers through their pension schemes, says the Telegraph. Many employers offer £1-for-£1 matching for employees’ contributions (above a low threshold level) to the pension scheme, so if the employee puts in an extra £100 per month, the employer matches that with an equal contribution. This is effectively free money, and can add thousands to your retirement income, yet take-up of these offers is very low except when companies make them the default option – Nationwide found that when it did so, 80 per cent of its employees raised their contributions to get the pension boost.

More fathers quit work for family
More fathers are quitting work to look after children, says the Sunday Times. One major factor is the cost of childcare, around £11,500 for a full-time nursery place for a 2-year old, which means for many it is not worth working. Since April 2015, ‘shared parental leave’ means couples can share up to 39 weeks of paid parental leave, though only at a statutory rate of £140.98 per week unless their employer offers an enhancement, as many large firms do.

Millennials opt for co-living
A new housing trend from the US is catching on in the UK, says the Times: co-living. It means living in a big apartment block where you just have your own rented furnished room but also get access to a lot of shared facilities: kitchen, dining areas, gym, and activities like film and running clubs. A handful of developers are rolling out such schemes in cities across the UK. Some successful millennials who could afford to buy their own property prefer to ‘lease a luxury lifestyle’, says the Times.

It’s time to fix
Last week the Bank of England’s Monetary Policy Committee got closer to raising interest rates than at any time since the financial crisis ten years ago: the vote in favour of keeping rates unchanged was 5-3. The sharp rise in the rate of inflation is one major factor influencing policymakers. The result, says the Times, is that in regard to a rise in interest rates, it’s not a question of If? but When? It recommends readers to secure a fixed rate mortgage deal while ultra-low rates – still under 2 per cent for a 5-year fix – are still available.

Business back ‘soft BREXIT’
The Mail cites recent research showing UK businesses overwhelmingly (by 86 per cent) back a soft BREXIT as evidence mounts of recruitment problems. Job applications from the EU are down 43 per cent while applications for UK nurses’ jobs from the EU have tumbled by 96 per cent. Firms in the construction industry say plans to build UK infrastructure are at risk because of the potential loss of skilled workers.

Millennials beat dads at business
International research in 11 countries shows that entrepreneurs in their twenties are doing better in business than the 50+ generation, says the Financial Times. Average revenues and profits of their firms are significantly higher, and experts ascribe this partly to the fact that the younger generation on average spend two and a half hours per week more on strategy and people management than their elders.

Higher risk of identity fraud for business owners
The operators of the national fraud database have revealed that business owners are twice as likely as members of the public to be a targeted for identity fraud, says the Financial Times. The main reason is the availability of the names and addresses of directors in the Companies House database. A common fraud involves setting up multiple mobile phone contracts, since this is common practice for companies. Directors who publish a lot of personal information on social media aggravate the risk.

Sleepwalking into inheritance tax
Many people are sleepwalking into inheritance tax because they are not managing lifetime gifts effectively, says the Financial Times. Exemptions that can be used include the £3,000 per year allowance – which can be carried forward if unused the previous year – and £5,000 wedding gifts, and gifts to children in full-time education are also normally exempt. The main focus of parental gifts is cash towards a deposit for a home, and effective use of these allowances can ensure that much of such gifts can be made exempt from the tax.

Why stock markets won’t crash
There are five good reasons why stock markets are not going to crash any time soon, says the Telegraph. The global economic recovery is continuing, central banks remain supportive with monetary policy, company profits are growing at a faster rate than in previous years, there is lots of cash on the sidelines that could be invested, and there’s no sign of the ‘irrationality’ that saw technology stocks pushed to ‘bubble ‘ level in 2000.