Majority of those that will be saving less blame the increased cost of consumer staples and rising energy prices
Young adults aged 34 and under are four times more likely to be saving more in 2024, compared to over 55s
One in five (19%) adults in the UK say they’ll be saving less money in 2024, new independent research* carried out on behalf of Handelsbanken Wealth & Asset Management shows.
For those planning to save less next year, almost two thirds (64%) said this was down to increased energy prices while the same proportion (63%) blamed the increased costs of consumer staples, such as food and other household goods. Over half (57%) agreed that high inflation was a factor too, according to the study.
This is further supported by recent data from the Office for National Statistics (ONS)**, which found that around 4 in 10 (41%) of energy bill payers are struggling to afford payments, and revealed that just under half (48%) of adults in Great Britain are using less fuel, such as gas or electricity, in their homes because of the rising cost of living.
While 30% of British adults say their intentions are to save more next year, many are doing so to prepare for tough times in the future. More than a quarter (28%) believe they’ll need a savings ‘safety net’ due to the rising cost of living, for instance – with more women planning for this than men (32% vs. 24%). This is unsurprising, with ONS data revealing that around three in 10 (30%) were already having to dip into existing savings to meet rising costs.
The Handelsbanken data shows it is younger people who are most likely to be saving next year, with those aged 18-34 four times more likely (57%) to in 2024, compared with those over 55, at just 14%. Of those that are planning to save more, around one in five said this is because they’ll be starting a job which pays more.
PK Patel, Head of Wealth Management at Handelsbanken Wealth & Asset Management said: “With many feeling the strain after months of increased prices and increased outgoings, it’s no surprise that people are less than optimistic when it comes to augmenting their savings or maintaining their existing pots.
“But while dipping into your nest egg or saving less than usual is sometimes unavoidable, it can have lasting consequences on your long-term financial planning goals.
“It is therefore more important than ever to seek financial advice to ensure you’re putting the best plan for yourself in place, and keeping an eye on key upcoming personal finance dates, such as the ISA deadline on the 5th April.
“This is the final date you must pay into your ISA to take advantage of that financial year’s tax benefits, for instance, and a significant event in the savings calendar.”
Brits have on average £24,500 in savings account, after putting away £260 every month
UK savers say that their average interest rate is 3.3%, 1.95% below the Bank of England’s rate
Despite this, only 23% of savers have switched accounts in the last year to capitalise on better interest rates
7 out of 10 brits (71%) feel that banks profits are too high
Smart money app Plum is calling out banks for profiteering from high interest rates and not passing interest back onto savers.
Despite recent hikes in the Bank of England’s base interest rate, which currently stands at 5.25%, many UK banks have been slow to adjust their savings account rates accordingly. This has left consumers feeling short changed and struggling to make the most of their money.
New research from Plum shows that the average UK saver is putting away £260 in savings each month, with a total of £24,500 in their savings accounts. In addition, the research found that the average Brit is getting 3.3% interest on their savings account, 1.95% under the base rate. This means that on average, customers are losing out on £478 in interest per year1, equating to a hefty £17 billion across UK savers2.
Despite savers being able to gain higher interest rates by switching, the majority of savers (77%) hadn’t done this. They cited similar rates between banks (28%) and liking their current banks (30%) as the biggest barriers, even though 71% of people felt that banks profits were too high.
The biggest motivator for saving was for an emergency fund (49%), with holidays coming in second (44%). Saving up to buy a house or for home improvements was the biggest motivator for people under 45 (47%) and for the 55-64 age bracket, saving for retirement was their biggest priority (51%).
In July this year, the FCA set out a 14-point action plan to ensure banks and building societies are passing on interest rate rises to savers appropriately, with those that fail to justify their pricing decisions by the end of 2023 set to face robust action from the FCA.
Victor Trokoudes, Founder and CEO of Plum, said: “While banks have been quick to increase interest rates on loans and mortgages, they have been sluggish in boosting interest rates on savings accounts.
“We are in the midst of a cost-of-living-crisis and consumers are continuing to face financial pressures. So it’s really disappointing to see that many banks are not passing more of this money back onto customers, effectively devaluing their hard earned savings.
“While the FCA has pledged to take action against this behaviour by the end of 2023, it’s by no means a silver bullet. Borrowers are paying more while savers see minimal benefits, highlighting that the business models of the major banks are inherently misaligned with the interests of their customers.
“The Bank of England has raised rates 14 times since December 2021, and they are expected to remain high. That’s why it’s so important that the public know that they don’t need to stand for this and allow banks to take their deposits for granted. We’ll be offering a new service that better reflects these base rate changes so their money can work harder.”
Plum, which has already helped people to set aside £2bn, is launching a new product that allows people to earn higher returns that are more closely aligned to the Bank of England base rate
How the new interest rates affect house prices and rent across the UK
Housing market: hurry if you’re selling, halt if you’re buying, stay if you’ve borrowed, finance experts advise
Landlords will likely increase rent prices or sell to cope with increased mortgage repayments
Inflation and interest rates will keep rising, but house prices are already slowing down
TODAY, the Bank of England will decide what the new base interest rates might be, currently at 1.75%. Top market analysts expect this to further rise to 2.25%.
The Office for National Statistics announced on August 17th that UK inflation rose to 10.1%, from 9.4% two months earlier. The Bank of England expects it to further increase, peaking at 13.3% in October. The accompanying higher interest rates and bleak two-year economic outlook generally means bad news for homebuyers, landlords and renters across the UK.
Top market analysts at CMC Markets expect interest rates to further rise to 2.25% this month. This directly impacts mortgages on variable rates – around 1 in 5 households in the UK – and another 3.1 million whose fixed-rate periods expire in 2022-2023, according to UK Finance estimates.
Borrowers whose repayments are directly linked to the base rate, as set by the Bank of England, will now face mortgage repayments at rates between 3% and 4%, up from 1.75% and 2.75% only five months earlier. This will inevitably spill into rent prices.
CMC Markets analysed the latest data for June 2022 from HM Land Registry, published on August 17th, and concluded that the likely tendency for house prices is in a temporary slowdown, which is good news for those waiting a little longer to buy a home.
Michael Hewson, Chief Market Analyst at CMC Markets comments: “Houses sold in June 2022 only increased in price by 1% compared to May, whereas, last year, this constituted a much more generous 5.7% surge.
“This is only the first month this year for prices to slow down at such a fast rate, so some caution before jumping to conclusions is advised. Remember, house prices may be slowing down, but they are not decreasing. Importantly, since this is transactions data processed at the time, it does not take into account the big leap in interest rates that the Bank of England announced later that month, let alone the even bigger hike in August.
“Therefore, despite the soaring inflation and rising consumer prices across the board, UK house prices appear to be trailing behind because demand for homes has generally come to a screeching halt. Most buyers are weathering the storm for a few more months at least, while some are also working out how the cost of living crisis will pan out in the medium term so that the new mortgage is not squeezing their pockets beyond their comfort zone.
“For those still keen to get on the property ladder, there are plenty of fixed-rate banking products that can insulate them from the current spiralling interest rates on mortgages. They should, however, prepare for the possibility of being faced with higher-than-expected repayments once the fixed rate period expires, as the new variable rates are at the lender’s discretion. Fixed rates are not a cure-all either, as they may now be set to a higher level to start with.
“The buy-to-let market is equally volatile. Landlords will either pass the increased mortgage repayments onto tenants by increasing their rent or simply sell fast to lock in a better price. Right now though, those already on the property ladder are generally better off staying put rather than moving or re-mortgaging. They would not get a good deal on their old house in this market and may likely end up losing more money overall.”
What did the Bank of England do earlier in August?
The Bank of England explained that the rise in interest rates was necessary due to external pressures which are expected to persist. This means that British firms and residents will continue to feel this weight reflected on rising domestic prices, wages outpaced by soaring inflation, and even higher mortgage repayments, despite the Bank’s attempt to widen the borrowing pool through less restrictive mortgage rules.
Although historic, the Bank’s decision was not a surprise for trading analysts at CMC Markets, a London-headquartered financial services company, who believe the Bank was expected to raise interest rates higher than 1.25% during the June meeting, as a means to keep import inflation in check.
This is on the backdrop of a 10% year-to-date depreciation of the British pound sterling against the US dollar and an indication from the Federal Reserve, the US central bank, of a further interest rate increase by 0.5% or 0.75% in September.
Michael Hewson comments: “The UK currently fares worse than both the EU and the US. This is due to its closer dependence on energy shocks than the States and less government intervention to soften the blow compared to its European counterparts.”
What’s next and when will things calm down?
Other than adjusting the interest rates to the accurate level to keep abreast of import inflation, the economic projections for the UK paint a bleak outlook for the next two years.
The UK is projected to enter a recession in the final quarter of this year, the Bank of England announced. The country’s economy will contract by 1.25% in 2023 and 0.25% in 2024, however, inflation is becoming a much bigger long-term threat, with unrealistic chances of falling back to the desired 2% much before 2024.
The current political race for the Conservative Party leadership and the consequent fiscal policies promoted by the new British government is a major factor to take into account for any inflation, GDP, and unemployment projections and investment decisions.
As it stands with the current measures, inflation is expected to peak at 13.3% in October – a sharper increase than the Bank anticipated in June, originally estimated at 11%. It will continue to rise throughout 2023 only to decline in 2024.
Meanwhile, forecasts for the Consumer Price Index (CPI) are less optimistic now, expected to decrease only to 9.5% in the third quarter of 2023, although the Bank anticipates a sharp fall in prices immediately thereafter.
Selling prices are set to increase to reflect rising costs while real household post-tax income is expected to plunge in 2022 and 2023. The Bank predicted that core prices will peak at 6.5% this year, meaning that, in the following six months, food and energy will constitute more than half of the headline CPI.
The next meeting for the Monetary Policy Committee, where the Bank of England will decide what the new base interest rates might be, is today – September 22nd.
As the impact of the cost of living crisis hits home for millions of people, Which? shares tips to help consumers shave money off their tax bills.
There are lots of ways to reduce your tax bill legally, whether you’re an employee or self-employed, a landlord, investor or pensioner. Simple checks can boost your take-home earnings with minimal effort. There are also tax reliefs and government schemes that can help.
Check your tax code Consumers who pay tax via Pay As You Earn (PAYE) should check if they’re on the correct tax code, to be sure they’re not paying more tax than necessary. Those on the incorrect code might be entitled to pay less tax in the coming months, or receive a rebate from HMRC for previous overpayments. Someone might find themselves on the wrong tax code, or an emergency tax code if they’ve started a new job and their new employer doesn’t have a P45, if they’ve recently had a change in salary, or if they’ve started or stopped taxable state benefits. For example, basic-rate taxpayers given an emergency tax code that excludes their personal allowance could pay an extra £2,514 in the 2022-23 tax year.
Consumers should check their tax code each year, or after changing jobs, to make sure it’s correct for their situation. Find out the most common ones in Which?’s guide to understanding your tax code.
Check if you qualify for any benefits Workers on a low income with less than £16,000 collectively in any savings and investments may be able to qualify for Universal Credit, which is due to replace other legacy benefits like tax credits by 2024. Payments will vary depending on people’s circumstances. Those with children, for instance, could receive up to 85 per cent of their childcare costs, up to £646 a month for one child, or £1,108 for two children.
Every year more than £15bn goes unclaimed from the Treasury from households eligible for benefits, meaning more than seven million UK households could be missing out on benefits and other help like council tax discounts. Which? suggests checking what might be available to claim by entering details about you and anyone else in your household into the entitled to calculator.
Pay into a pension scheme Employees can contribute to their employer’s pension scheme from their gross pay, before any tax is charged. The government then tops up the pension contribution with tax relief, providing a free bonus for saving for retirement. The effect of tax relief is that a contribution of £100 that would have been taxed at 20 per cent, and therefore worth £80 net, is paid into your pension fund without any deduction – so it’s worth the full £100.
Be sure to meet the tax return deadline to avoid a £100 fine Around 12 million people need to submit a self-assessment tax return each year. Missing the claim deadline is a costly and easily avoided mistake. Those making an online submission have until 31 January 2023 to send in their 2021-2022 return, but for paper submissions the deadline is earlier, 31 October 2022. Missing the deadline incurs an automatic penalty of £100, even for those who don’t owe any tax. Use the Which? tax calculator to tot up your return and submit it directly to HMRC.
Reclaim overpaid taxes Non-taxpayers and those whose income has unexpectedly fallen during the year might have been taxed more than they should have done, as HMRC assumes your personal allowance is equally used each month. To reclaim, fill out form R40 from HMRC, or call them.
Claim tax-free childcare Under the tax-free childcare scheme, parents can claim back 25 per cent of their childcare costs up to £500 every three months. There are certain eligibility criteria, including having a child under 11 and earning less than £100,000. To get started, parents need to set up an online account, which can be used to manage payments to their childcare provider. For every £8 you deposit, the government will pay in £2, up to the value of £500 every three months, or £1,000 if a child is disabled.
Maximise your personal savings allowance In 2022-23, savers can earn £1,000 of interest on savings tax-free if they’re a basic-rate taxpayer. Higher-rate taxpayers have a tax-free allowance of £500. This means they only pay tax on savings income that exceeds this threshold. This will no longer be deducted automatically by the savings provider. If tax is due, you’ll need to pay it via self-assessment or have it deducted via PAYE. Keep in mind that you won’t have a savings allowance as an additional rate (45%) taxpayer.
Use the starter rate for savings If your income from a job or pension is below £12,570 in 2022-23, but you earn income through interest on savings, you may also qualify for the starter savings allowance. Any interest you earn up to £5,000 is tax-free. This will be in addition to your personal savings allowance, meaning you could earn as much as £18,570 before paying tax.
Benefit from lesser-known allowances Consumers can keep hold of a bigger chunk of their earnings by claiming all the tax allowances they might be entitled to. Marriage tax allowance and the Rent-a-Room scheme can save significant sums, yet relatively few people are aware of them. For example, those renting out a room in their home can take advantage of the Rent-a-Room scheme, which means they can earn up to £7,500 tax-free. Marriage allowance benefits couples where one partner earns less than the personal allowance, and the other is a basic-rate taxpayer. Married couples or those in a civil partnership can transfer a 10 per cent personal allowance from the lower-earning partner to the higher earner. In 2022-23, £1,260 can be transferred, potentially saving you up to £250.
Get a reduction on your council tax if you’re a low earner Those on low incomes may be eligible for a council tax reduction of up to 100%. Each local authority has different criteria for who is eligible to claim council tax reduction and the size of the reduction depends on income, savings and whether the claimant lives alone
Those who don’t qualify for a discount themselves, but share a property with a second adult who does (and is not their spouse or civil partner), might be able to claim a second adult rebate.
Reena Sewraz, Which? Money Expert said: “Many people are feeling financial pressure at the moment as soaring energy and food prices, as well as tax hikes, have put a huge strain on household budgets. However, there are steps you can take to save money on tax.
“It is always worth doing a quick check to make sure you’re on the right tax code – if this is incorrect you could be eligible for reduced tax or a refund from HMRC. You can also easily check if you’re eligible to claim additional allowances and benefits from the government, such as marriage tax allowance, universal credit, or a discount on your council tax.
Giving up a pack of cigarettes a day could save you up to £4,197 a year – the price of a family holiday abroad.
Cutting out that weekly pack of cigarettes could save you £598 a year, or £2,990 over five years.
Quitting for good could save you up to £41,975 over ten years – equivalent to a 20% deposit on a new home.
You could be saving up to £4,197 a year by giving up a pack of cigarettes a day according to new research, with savings of £598 a year for less frequent smokers.
Vaping experts over at IndeJuice calculated how much money you could be saving based on the average UK cost for a pack of 20 cigarettes over various timespans. They broke down how much you would save throughout your lifetime if you kicked the habit for good, as well as comparing what you could be spending the money on instead.
The research reveals that if you are smoking one pack of cigarettes per day at the average UK cost of £11.50 per pack, you would save £349.79 per month or £4,197 over the course of a year by quitting – the cost of a family holiday abroad for four people, the cost of running your car for ten years or paying for 11 years’ worth of gym memberships.
Someone who regularly smokes a full pack of cigarettes a day can expect to see staggering savings in the long run – banking up to £41,975 over ten years from quitting smoking. This is the equivalent of a 20% deposit on a £200,000 property, the price of a Porsche Cayman or nearly a kilogram of 24 carat gold.
For people who are only smoking a couple of cigarettes a day, the cost can still quickly add up. If you are smoking just one pack of cigarettes a week at the same average cost, you could still make savings of £598 a year, or £2,990 in your pocket over the next five years.
The money saved by quitting for one year, could cover the cost of a three-course meal for you and your significant other 11 times a year, the cost of nine weekly food shops or seven annual Netflix subscriptions.
A spokesperson from IndeJuice added: “Many smokers are already aware of the harm imposed on their body by regularly smoking, but it is easy to overlook the financial savings that could be made by choosing to quit for good.
“When looking at Google Trends data over the past five years, there has been a significant increase in people searching the term ‘quit smoking’ year on year, with the exception of 2021 where there was a 2.3% decrease in searches from the previous year.
“As we emerge out of the pandemic, it is important that we continue to reflect on the health benefits of quitting for good, and the long-term savings offer an additional incentive to do so.”
Paul Wilson, Personal Finance Expert for Little-Loans.com, shares five ways you can take back control of your finances this year
Even if you haven’t made any resolutions, the new year is still a good time to take a look at areas of your life you might want to improve upon.
Your finances can be a great place to start, because freeing up some money could give you the opportunity to do other things, like building up a savings pot or emergency fund, making home improvements or booking a holiday.
Here are five tips to tidy up your finances in 2022:
Budgeting
If you want to get a grip on your spending, the best place to start is with a budget. This could be a simple spreadsheet with your incomings and outgoings, or you could use a budgeting app to help. Apps like Snoop, Money Dashboard, Emma and Monzo can help you keep track of what you spend and show you where you may be wasting money. Most of them let you link all of your accounts and will categorise your spending so you can see where you could make cutbacks. There’s plenty of apps to choose from so research the market and find the best one for your circumstances.
Subscriptions & memberships
Perhaps one of the biggest money wasters is unused subscriptions or memberships. Write a complete list of every subscription you have and how much it costs. Then decide if it’s worth keeping. If you’re paying for a Netflix plan that lets you watch on four devices but you only ever use the TV in the lounge, then downgrade.
Similarly, if you’re signed up to several streaming sites, ditch at least one. With music streaming, check if you could save by having a family plan rather than individual accounts. Do you really need Amazon prime, or could you wait a couple of extra days to get free standard delivery anyway? Be thorough and honest. If you’ve only been to the gym a handful of times in three months then is it worth paying for?
Direct debits & bills
Do a complete audit of all your direct debits and standing orders. Are you getting the best deals or could you be paying less? Set reminders for when all of your utilities or insurance products are due for renewal and make sure you shop around as soon as the time comes.
Your TV package could be reduced if you decide to cancel some of the channels you barely watch, and some mobile phone providers will reduce bills when your contract reaches a certain length of time. Use an evening to analyse all of your direct debits, set renewal reminders and call any companies to ask if they can help you reduce your bills.
Consider consolidating
If you have several credit cards, loans or car finance deals, you might be able to consolidate them into one easier payment. Work out what you owe and see if it would be cheaper to get one loan to cover it all. When paying off credit cards make sure you are still taking advantage of any introductory offers. If you are paying interest then look to see if you can switch to a card with a 0% balance transfer rate. There is no one size fits all when it comes to paying off debt, but check what you owe and whether there is a way to reduce it right away.
Start saving
Saving doesn’t have to be complicated. Open a straightforward savings account and start putting a small amount of money away every month. Do it as soon as you get paid so it’s less noticeable.
It could be the cost of a takeaway each month, so if you save £30, by the end of the year you’ll have £360 to put towards Christmas or to carry over and keep adding to.
Start with an amount that you won’t miss to ease you into it. Even £10 could help you get into the habit and give you something to work towards.
Cash Out
Having actual money in your hand can make you more mindful of what you spend. Many people adopt an envelope or jar method, where they attribute money each month to things like ‘food’, ‘eating out’ etc.
Seeing the cash you have left can be an incentive to stay on budget. Being mindful of your money is one of the first steps to seizing control of it and getting on top of your spending in 2022.
Finance can be a difficult topic to tackle with young children, but teaching them to have a healthy relationship with money from a young age is important to lots of parents around the globe.
With this in mind, financial experts from money.co.uk have compiled a list of their top 10 tips for teaching your children about money.
1. Start with the basics of money and finance
How you introduce money to your children will partly depend on their age. A good place to start is getting children comfortable handling cash and coins. Explain to them how money is used to buy things and that it must be earned before it can be spent.
2. Speak openly about small financial decisions
Start getting your child involved with minor financial decisions, such as which brands and items to buy when shopping. This way your child is able to understand the decisions you make while also feeling in control of certain financial choices.
Older children could also help with budgeting while shopping if you ask them to keep a running total of the items you buy. Not only will this help their maths skills, but it can also help them to understand how small items can still add up in price and not everything is affordable on a budget.
3. Try simple games and toys with younger children
Creating easy monetary games such as counting pennies can help your child understand the value of different denominations of money. Try using a pile of 1p coins and asking your child to match the number of coins to the price of a higher value coin, such as 10p or 50p.
4. Set a good example with your own finances
There’s no two ways about it, children learn money habits from their parents. Showing them small activities such as checking the receipt after your shop or putting money into savings can start developing positive habits from a young age.
Encourage your child to ask questions without repercussion in this setting. While you might not necessarily have all the answers, opening up a dialogue is a healthy way for your child to learn more about finance.
5. Use pocket money as an incentive for small tasks
Using pocket money as an incentive to do chores around the house not only helps you, but it also helps your child learn more about the value of money and what it takes to earn it. Creating a simple plan with a set amount of money for different tasks, along with caps per week or month, is a great way to help your child start understanding where money comes from.
6. Use pocket money to teach children how to save
Alongside teaching children the relationship between work and money, household chores and pocket money is also a great opportunity to show children how to save. If your child has shown interest in a more expensive purchase, you could set them up with an old-fashioned piggy bank where they can ‘deposit’ their earnings or chart for them to fill out so they can track how much money they have.
7. Reward them by learning about interest
Paying small amounts of interest on the money your child has saved is a helpful way to encourage them to keep saving. Older children will be delighted to learn that the interest they earned last week can be used to earn more interest if they save until next week.
8. Use trips to the shop to learn about saving vs. spending
Another practical way to teach a child about the benefits of saving is by visiting shops. Allow them full control of their own money on the understanding that if they don’t have enough they won’t be able to borrow any more. The more they feel in control of their own finances, the more they will be able to make sensible decisions when it comes to spending or saving.
9. Use digital tools with older children
There are a whole range of online tools for teaching older children about online banking and using cards for payments. One of the leading products on the market is GoHenry, which is suitable for those aged six and up, costs £2.99 a month and allows parents to set strict spending limits, monitor what their kids are buying and where they are spending their money.
10. Teach older children about selling old toys for extra money
If you don’t want to give your child pocket money, teaching them about ways to earn money for themselves is a helpful alternative.
When they’re old enough, you could ask your child to go through their old toys, books and clothes and set aside which ones they’d like to sell.
You can then sell these on their behalf through online auction sites such as eBay or Facebook Marketplace. Not only is this a great way for your child to feel independent in earning their own money, it presents an opportunity to also discuss how to use the internet safely.
Salman Haqqi, personal finance expert from money.co.uk, speaks about why teaching children how to handle money from a young age is so beneficial.
“Creating an environment in which you are able to speak more openly with your children about your financial decisions is vital to engaging them from a young age on the value of money. Showing them how to make choices when shopping will set up good habits and understanding of managing money.
“It’s important to make sure your lessons are age-appropriate and that you continue to involve and teach your children about money as they grow. A healthy relationship with finances starts at a young age, and children learn most of their habits from their parents.”
‘two in three of the global population, including one in three in the UK, are financially illiterate‘
The Financial Times has launched a new charity endorsed by the former prime minister Gordon Brown, focused on the promotion of financial literacy and inclusion around the world.
The FT Financial Literacy and Inclusion Campaign (FT FLIC) unveiled its strategic plan to boost the financial literacy of young people, women and disadvantaged communities at an event hosted by Roula Khalaf, editor of the Financial Times.
The plan will develop educational programmes to tackle financial literacy, initially in the UK and then around the world. It will seek to warn people about potential financial traps as well as empowering them to realise their aspirations. It will also campaign for policy change and clearer product communication by financial companies.
“Improving financial literacy for people that need it most, will empower and build financial resilience amongst communities that have faced growing inequalities exacerbated by the pandemic and austerity,” said Aimée Allam, executive director of FT FLIC.
“We have now outlined our ambitious goals to improve financial literacy, and our success will be determined by our ability to achieve these goals in an effective and measurable way.”
A survey, commissioned for the Financial Times by Ipsos Mori, reveals shortcomings in financial understanding among four constituencies that have clear gaps relative to the national average: deprived areas, the young, women and ethnic minorities.
According to the research, 90% of the 3,194 people polled across England learnt “nothing at all” or “not very much” about finance at school. The research also found that barely half of 3,000 respondents were able to correctly compare the costs of borrowing via credit cards or bank overdrafts, regardless of their wealth, ethnicity or gender.
Not only will FT FLIC provide financial educational content for individuals and teachers, it also intends to lobby for education policy to change, in particular pushing for financial literacy to be integrated into school curriculums. FT FLIC will also focus on helping close the financial literacy gap for women and communities marginalised from accessing mainstream finance.
FT FLIC will partner existing charities and other organisations in financial education, and become a hub for the aggregation of the best materials, as well as developing its own content.
Patrick Jenkins, the FT’s deputy editor who chairs FT FLIC, said: “According to the World Bank, two in three of the global population, including one in three in the UK, are financially illiterate.
“If that were true of language literacy it would rightly be regarded as a scandal. Happily getting on for nine in 10 people around the world are now able to read and write. But why is it not regarded as a scandal that financial literacy levels are so low?”
Speaking at the launch of FT FLIC Gordon Brown, former Prime Minister of the United Kingdom, said:“In surgeries, I came face-to-face with constituents who could not manage their finances or pay their bills, who racked up debts and fell into the hands of money lenders.
“I saw not only the despair that this brings and the impact it has on physical and mental health but the need for far greater financial literacy. Financial worries have been exacerbated by the pandemic and will certainly worsen when six million families in the UK find their universal credit is cut by £20 a week.
“I welcome this initiative to create an umbrella foundation that will not only work with current providers at the grass roots level, but it will also seek changes to policy.”
The launch of FT FLIC follows 15 years of successful FT seasonal appeals that raised more than £19.5m on behalf of charities and supported many worthy causes.
Parents and grandparents are choosing to pass on wealth early to help children get on the ladder
Over a third (35%) of High Net Worth Individuals (HNWI) and business owners in Scotland have met a financial planner for guidance on passing on wealth
A third of individuals have spoken with their loved ones about how they will distribute their assets
But only 2 in 10 (19%) have created a will
The ‘Bank of Mum and Dad’ continues to fuel the Scottish property market as parents and grandparents choose to pass on wealth early to help the younger generation get on the ladder according to research by Rathbone Investment Management.
Home ownership continues to remain out of reach for many young people, with house price growth increasing by 6.9% across Scotland in the last twelve months.[2] The COVID-19 pandemic has also caused financial difficulty for many and has exacerbated the challenges facing young people wishing to get onto the ladder. The ‘Bank of Mum and Dad’ has therefore stepped in to support.
Rather than passing down via inheritance with the risk of a large tax liability, 28% of those surveyed have or are considering passing on their wealth early in order to help children and grandchildren with property purchases or other significant expenses. 29% of individuals have put money into a trust for their children or grandchildren, and a quarter (26%) have contributed to their university expenses.
The decision to pass wealth down early is partly down to a larger trend over the last year that saw many look to get their financial affairs in order. Indeed, with national lockdowns and continuing social restrictions in place, many people have had more time to plan ahead and explore ways in which they can put a financial plan in place.
Over a third (35%) of Scottish High Net Worth Individuals (HNWI) and business owners surveyed have met a financial planner for guidance on passing on their assets.
More widely, a third of individuals (33%) have spoken with their loved ones about their financial plans for the future. However, only a fraction of people have made these plans official. Indeed, just two in ten surveyed (19%) have made a will.
Kindar Brown, senior financial plannerat Rathbone Investment Management: “COVID-19 has caused many individuals to think about how they might best support their loved ones financially. The difficulty of getting onto the property ladder has called for the ‘Bank of Mum and Dad’ to step up and provide a helping hand.
“With all the events of the last twelve months, putting a financial plan in place has moved further to the front of many peoples’ minds, highlighted by the uptick in enquiries to speak with a financial planner.
“Taking the time to review your financial affairs now and make sure everything is in order can provide peace of mind that your loved ones will be protected, and your wishes met, should the worst happen.
“As part of your plan, you could for example consider whether passing on wealth during your lifetime rather than within your will would make sense for your circumstances.
“If you won’t have need of the money in the future, then helping your children or grandchildren with those important – and often costly – life stages could be an effective and tax-efficient route to take, depending on your situation.”
Things to consider when creating a financial plan
Establish a financial plan
A good financial plan starts with aspirational goals – it is about focusing on what is important to you and what you want to achieve. It can help you determine whether you are on track to meet your goals and help you envisage your financial future.
You might want to plan for retirement and understand how much you will need to afford you the lifestyle you wish or perhaps you are concerned about the costs of long term care or making sure your family are provided for in the event of your death? Once you understand how much you require to meet your own lifestyle goals, you can identify how much you can afford to gift to your family during your lifetime without leaving yourself financially vulnerable.
A financial planner can guide you through the various aspects and help you put a plan of action in place.
Make a will and regularly review it
Although creating a will may seem a little daunting, it’s a good place to start when looking to get your financial affairs in order. A correctly drafted will can ensure that your wealth is distributed to your loved ones as you wish and can prevent delays in doing so.
It’s important to regularly review your will in order to ensure it reflects your current wishes. This is particularly important after life events like marriage, divorce and the birth of children or grandchildren.
Consider whether you want to gift and how much
Once you’ve established your financial plan and your will has been drafted, you will have a better understanding as to whether making gifts to your family is affordable. Gifting during your lifetime can be an efficient way to pass on wealth and help reduce the inheritance tax payable on your estate when you die.
There are a number of gifts you can make without paying tax including an exempt amount of £3,000 per annum and unlimited small gifts of up to £250 per person.
You can also of course gift larger amounts, however if you die within seven years of making the gift it may be liable to inheritance tax depending on the value of your estate
This report examines the progress made by the Government in the implementation of the recommendations made by the Select Committee on Financial Exclusion in its 2017 report Tackling Financial Exclusion: A country that works for everyone?
In the Liaison Committee’s report Review of House of Lords Investigative and Scrutiny Committees: towards a new thematic committee structure published in July 2019, the Committee recommended that the Liaison Committee (on a case by case basis) could hold follow-up evidence sessions on a former special inquiry committee’s recommendations, followed by the publication of a report.
This is the third occasion on which this new procedure has been utilised.
The inquiry found that over half of the population are classed by the Financial Conduct Authority (FCA) as having characteristics of financial vulnerability.
This issue has been exacerbated by the COVID-19 pandemic with 14.2m people in the UK now estimated to have low financial resilience – characterised by over-indebtedness or with low levels of savings or low or erratic earnings.
Types of financial exclusion can include: not being able to open a bank account, not being able to access financial services due to bank branch and ATM closures, not being able to access affordable credit.
The report recommended that a clear Government strategy and increased FCA powers are brought forward in order to stop people experiencing financial exclusion.
The report calls on the Government to introduce a requirement for the FCA to establish a statutory Duty of Care that banks and other financial services providers must operate toward their customers. This should replace the current insufficient requirement to ‘treat customers fairly’.
Other recommendations in the Committee’s report, Tackling Financial Exclusion: A country that works for everyone? follow-up report are:
The proposed legislation to protect access to cash should be brought forward without delay.
The Government should publish the timescale and details on the no-interest loan pilot.
The powers of the FCA to mitigate the trends in bank branch and free ATM closures should be reviewed and enhanced.
The Government should continue to work with the Post Office and UK Finance to roll out a public information campaign about the banking services that the Post Office offers.
Baroness Tyler of Enfield, who was Chair of the Select Committee on Financial Exclusion, said: “It’s time for the financial services industry to recognise they have a fundamental duty to ensure that banks act in their customers’ best interests and that products and services are fair by design.
“That duty of care should now be established in law and overseen by the Financial Conduct Authority to ensure greater consumer protection and prevent banks and others from profiting from their customer’s vulnerability.
“The COVID crisis has laid bare the extent of financial exclusion across the UK. We continue have more than a million adults in the UK without access to a bank account and more than half the country now have characteristics of financial vulnerability.
“It is now more important than ever that Government come forward with a comprehensive financial inclusion strategy that will ensure access to cash, protect the public and end the scandal of the poorest being overcharged for financial and other services. The Government should publish that strategy within 12 months and allow Parliament to assess it and hold them to account for its delivery.”
Gareth Shaw, Which? Head of Money, said: “Millions of people rely on cash as they are not ready or able to take advantage of digital payments. However, rapid closures to the cash machine and bank branch networks in recent years mean that many of these consumers risk being abandoned by their banks.
“Our research has shown that people in some deprived areas have seen significant cuts to free ATMs in recent years, while a domino effect of bank branch closures has taken place without enough regard to whether suitable alternatives are in place.
“The government must urgently set out its vision for the future of cash, including its promised legislation to protect access to it. This should include putting the FCA in charge of the cash system so that it can take the steps that are needed to ensure cash remains a viable payment option for as long as it is needed.”
