Finance in The News

Huge rise in probate fees

The fee for obtaining probate in England and Wales on an estate of over £2 million will rise by 9500 per cent from May 2017, says the Sunday Times. Instead of a flat fee of £215, the fee will be £20,000 in what experts describe as another tax on death. But there will be no charge on estates worth up to £50,000 and a flat fee of £1,000 will apply to estates between £300,000 and £500,000. Probate has to be obtained before the executors of a will can distribute any of the assets to beneficiaries. The Courts currently oversee probate on over 500,000 estates each year.

Stocks & Shares ISAs

British savers hold £275 billion in Cash ISAs, and over 80 per cent of the new ISA accounts opened in 2016 were for cash. Yet with interest rates so low, savers are getting negligible returns on their money and in many cases are losing money after taking inflation into account. Many experts say savers should put at least part of their annual ISA allowance (£15,240 this year and £20,000 from April 6 2017) into a stocks and shares ISA. This is especially relevant to women, says the Times, since whereas 17 per cent of men have a stocks and shares ISA, only 10 per cent of women have one. If you pay basic rate income tax, you can now have interest from deposits of up to £1,000 each year and pay no tax on it – so most people do not need to shelter their deposit savings from the taxman.

Time for a 10-year fix?

With the uncertainties of Brexit and Trump, and economic growth and inflation suggesting interest rate rises are ahead, it’s time to consider switching to a 10-year fixed-rate mortgage, says the Telegraph. It says that three years ago, there were only eight 10-year fixed-rate mortgage offers in the market but today there are 124, with lenders competing fiercely, especially for those seeking to borrow under 60 per cent of their property’s value. For them, 10-year fixes at 2.6 per cent to 2.7 per cent are readily available and offer security, albeit with large redemption penalties if you want to exit early.

Thousands stumble towards pension tax traps

A year after a reduction in the lifetime pension allowance to £1 million, hundreds of thousands of people are stumbling towards hefty tax bills because they will exceed this limit without knowing it, says the Telegraph. The rules are mind-numbingly complex, but if the value of your pension fund tops £1 million you can pay tax on any excess at up to 55 per cent. The workers most at risk are in their 40s and 50s and are members of defined contribution (final salary) pension schemes, where increases in pension entitlements are valued at 20 times the increase in annual pension. There are steps you can take to avoid or mitigate the problem, but you will certainly need advice.

Last chance at 6.7 per cent for life

A government scheme offering investors attractive returns for life is about to close, says the Telegraph. The scheme, which will close in April, allows those who retired before April 2016 to buy additional income to top up their state pension. The return you get depends on your age; for example at age 70 the annual return is 6.7 per cent. The returns are far higher than those obtainable in the open market on annuities that offer a similar deal, which includes guaranteed inflation-proofing of the income and a surviving spouse’s pension. Take-up of the offer has been low because people find it hard to work out how likely they are to benefit from it – since that will depend on how long you actually live.

Bigger loans to get easier

It should become easier to obtain a large mortgage loan, says the Mail. The Bank of England has tweaked its mortgage affordability rules to allow a higher proportion of lenders’ new mortgage loans to exceed the normal limit of 4.5 times income. Lenders have been unable to meet the demand for such loans and may now have about 10 per cent more capacity, say experts.

Learn to invest with Lisa

The only companies offering the new Lifetime ISA (or Lisa) at launch in April will be investment fund-based, says the Financial Times. The scheme, offering a government top-up of up to £1,000 a year (25 per cent of the amount saved annually) to those aged 18-39 when they start the plan, is designed to be used for a first-time house purchase and will replace the Help-to-Buy Isa next year. Investment funds are fine for long-term saving, but if the plan is to use Lisa for house purchase within the next few years, you should wait for deposit-based schemes to launch in coming months.

Home ownership at 30-year low

The percentage of people in England owning their own home has hit a 30-year low, says the Financial Times. In 2015-16 owners were 62.9 per cent of the population, the lowest since 1985. Over the same period the number renting has grown to account for almost 20 per cent, with 250,000 households joining the rental sector last year. Over the past ten years, the number of homes owned outright with no mortgage has risen by 1.3 million while the number owned with a mortgage has fallen by 1.7 million. The biggest drop in home ownership has been among those aged 35-44.