HM Revenue and Customs (HMRC) is changing the way taxpayers who use a repayment agent can receive overpaid tax to protect them and raise standards among repayment agents.
HMRC will introduce legislation to change the way repayment agents are paid for their services and better protect customers from the unscrupulous tactics used by some operators. This means stopping the use of legally binding ‘assignments’ as part of claiming an Income Tax repayment, which could only be cancelled if the agent and taxpayer both agreed to do so. This can be challenging for customers who become dissatisfied with their agent, or who simply wish to take over managing their own claim.
Under new arrangements, if a taxpayer chooses to use a repayment agent to reclaim overpaid tax and wants it sent to the agent, they will need to make a nomination, which they can cancel at any time. The new process will make it easier for taxpayers to stay in control of their repayments.
Angela MacDonald, HMRC’s Deputy Chief Executive and Second Permanent Secretary, said: “Taxpayers deserve better – we want to make sure they are better protected before choosing to enter into an agreement with a repayment agent. HMRC’s updated standards for agents will level the playing field and provide the benchmark we expect all repayment agents to meet.”
As a result, HMRC is today also setting out the following measures:
updated standards for agents – applicable to all tax agents and include greater transparency requirements
a new HMRC registration process for repayment agents – to make the agent sector more transparent so customers better understand what they are signing up to
Victoria Atkins, Financial Secretary to the Treasury, said: “For too long taxpayers have been left in the dark as a result of misleading and opaque agreements with repayment agents.
“These new measures will ensure those who are entitled to claim a tax repayment or relief can do so freely and easily – whether they choose to do this themselves or by using an agent.
“This Government is making it easier to navigate the system for all taxpayers using an agent to claim money that’s owed to them.”
Victoria Todd, Head of the Low Incomes Tax Reform Group, said: “We welcome these additional steps, which show HMRC recognises the important role they play in consumer protection.
“Refund companies have a legitimate role in the tax system, but the practices of some of these companies in recent years have been unacceptable. The proposed changes will hopefully address problems around the use of assignments, increase transparency for taxpayers and set clearer standards for these companies’ behaviour.
“Alongside this, it is important that more effort goes into raising awareness of refunds and ensuring it is as simple as possible for taxpayers to access them. We look forward to working with HMRC on the detail of the proposals.”
These changes form part of the government’s commitment to tackle problems in the repayment agent market, which is currently an unregulated sector.
Responses to HMRC’s recent consultation overwhelmingly supported the need for improving standards in the repayment agent sector.
greater evidence of customer consent. This aims to ensure that taxpayers better understand the agreement they’re entering into
stricter transparency rules, including introducing a 14-day ‘cooling off’ period for customers after entering into an arrangement with an agent, and an obligation on agents to ensure all communications and advertising material are fair, clear, accurate and do not mislead or conceal material facts
Further details on the approach to registration for repayment agents will be set out in due course.
If taxpayers think they are owed a tax rebate, they can claim directly from HMRC via the free and secure service on GOV.UK and will receive 100% of the money owed.
Cash strapped Scots are being advised on how to survive the tough gap between December and January’s payday
Penny-pinching pros at NetVoucherCodes.co.uk have put together ways to help ease the pressure on your finances during this stretch.
Many workers receive an early payday in the run up to Christmas and although this is helpful during the festive season, the next payday can often seem far away.
Brits are being advised to cook in bulk and check their monthly subscriptions as ways to keep an eye on their spending.
Consumer expert, John Stirzaker from NetVoucherCodes said: “A lot of people get paid early in December to help fund their Christmas which is great at the time but it can often leave us feeling like the next payday is miles away which can be difficult, especially in today’s climate.
“January tends to feel like a bit of a tough month for most people but there are a few things you can do to help ease the financial pressure like cancelling unwanted and unused subscriptions.
“Other ways to help lighten the load in January include cooking in bulk and avoiding January sales.”
How to survive the wait until January payday:
Shop smarter
An obvious solution is to refrain from doing any unnecessary shopping on clothes and luxury items that you can go without.
However, it’s not always that simple and if you do find yourself having to buy something try using price comparison websites or look for discount codes.
Cook in bulk
Instead of cooking a separate meal each night why not try meal prepping and cooking in bulk. This way you can freeze your food and take it out when you need it.
This is cheaper than buying ingredients for a different meal each night and not only does it save you money, but it saves you time as well in the week whilst you’re busy working.
Avoid unnecessary spending
It can be very tempting to grab that coffee on the way to work or pop out and buy lunch while on your break. Try making a coffee before you leave and consider meal prepping for the week ahead. That way you won’t be tempted to buy lunch knowing you have plenty to last you for the week.
Dry January
If there’s ever a time to do it, you may as well stop drinking with the rest of the nation. As well as being good for your health, you’ll also find it’s good for your bank account.You’d be surprised how much money you save in a few weeks when you aren’t spending it on alcohol.
Sell unwanted items
Social plans tend to die down in January with everyone in similar financial situations so this should give you some free time to go through and clear out any unwanted items.
And perhaps you’ve been given things at Christmas that could replace other items you have. Selling these online is a great way to get a bit of extra money in January.
Check monthly subscriptions
Collectively, Brits have been known to spend around £1.8 billion on unwanted subscriptions a year.
Now is a good time to go through your subscriptions and cancel any that you do not use or need or maybe even put some on hold until the next payday.
Think about gym memberships, streaming services and delivery subscriptions.
Don’t be tempted by January sales
January sales can be very tempting and you may be thinking if there’s any time to grab a bargain it’s now. But the truth is if you didn’t need it in time for Black Friday or Christmas, then you probably don’t need it now.
Avoid racking up unnecessary debt
A lot of retailers now offer a buy now pay later scheme and whilst these might seem like a good idea now, they’ll be an unnecessary worry come January.
· Overall, nearly a third of adults in Scotland have less than £100 put away.
· Almost half of people who use credit are anxious about how much they owe.
· Over a third are anxious about the number of credit products they have.
· Free help is available, but six in seven people still struggle to talk about money.
Almost a million people across Scotland have no savings and another 450,000 have less than £100, according to new research from the Money and Pensions Service (MaPS).
The survey of 301 adults, carried out for Talk Money Week (November 7-11), shows that one in five (20%) have nothing put away and another one in ten (10%) have £100 or less.
This leaves almost a third of adults living without a financial safety net to cope with the rising cost of living or unexpected bills, meaning some may have to use credit.
MaPS says although credit is an important tool when used and managed well, it’s crucial that people understand what they can afford and have a plan to pay it off.
However, the figures also reveal that many people are already finding this difficult. Among the 82% of Scotland residents who use credit, two in five (43%) are now anxious about how much they owe. Two in five (40%) are worried about the number of different products they have.
As cost of living pressures start to hit home, MaPS says it’s more important than ever to talk about money before problems set in. However, the survey also reveals that 85% of people still avoid discussing their finances.
Asked why, the most common responses were ‘not wanting to be judged’ (24%), ‘shame or embarrassment’ (20%) and ‘fear of burdening others’ (17%).
During Talk Money Week, MaPS is encouraging everyone to open up about money, plan for their financial future and take free debt advice as soon as they need it.
The organisation says its MoneyHelper service can be people’s first port of call, offering free guidance on topics like everyday money, savings and where to find free debt advice.
It also provides a range of information on dealing with money issues, including step-by-step guides on how to talk to your creditors or discuss money with family and friends.
Allison Barnes, Scotland Manager at the Money and Pensions Service, said: “Over a million people across Scotland find it a challenge to save and this leaves them vulnerable when sudden expenditure items arise. When you add in the anxiety that they feel with their credit commitments, the weight of that worry can quickly become overwhelming.
“This Talk Money Week, we want everyone to start the conversation with family or friends and share the burden of any money worries. By dealing with the problem head on, people can discover just how helpful free debt advice can be and see the importance of talking to their creditors early. They can also begin to find a way forward, no matter how difficult their situation might feel.
“Free help and guidance on how to do all of this is available via our MoneyHelper service and I’d urge everyone who needs it to get in touch today.”
The week is an opportunity for everyone to get involved with events and activities across the UK which help people have more open conversations about their money – from pocket money to pensions – and continue these conversations year-round.
This year’s Talk Money Week will focus on the theme of ‘credit’ – to help demystify some of the jargon, build people’s understanding of credit products, and what their options are, including other forms of support that might be suitable. However, we encourage people to use the week as an opportunity to talk about any aspect of money.
Castle Community Bank (Castle) the credit union based in Leith, Edinburgh, has boosted its growth plans and financial inclusion ambitions by making key appointments to its Board and Executive team.
Experienced non-executive director Stephen Pearson has been appointed as Chair of the Board. Following a career in law and financial services, Stephen has also recently been appointed Chair of the newly formed Financial Inclusion For Scotland.
As Chair of Castle, Stephen will be responsible for leadership of the board, ensuring that it effectively oversees Castle as it continues to grow and support its members through the cost-of-living crisis.
Last year Castle appointed a new chief executive, Adrian Sargent, who, alongside the previous chair, Ian Irvin, has overseen a period of substantial growth to ensure its sustainability in a difficult financial climate.
In addition, on 1 October 2022 Suzanne Gush was appointed as Chief Financial Officer. Suzanne has significant financial services experience and will support the board and management team in this next phase of Castle’s growth.
Stephen Pearson said: “The current cost-of-living-crisis and challenging UK financial climate, illustrate how important it is that all communities have access to fair savings and loan products as well as financial education.
“I’m looking forward to helping Castle and its partners make a positive difference in north Edinburgh and beyond, at such a key time for the organisation.”
Adrian Sargent said: “Stephen will be a great asset for Castle as we continue growing. Being fintech enabled, Castle is now well placed to help its members from a position of increasing strength. With Stephen’s fresh perspective and ethical fintech-savvy, Castle can find new ways of supporting our members.
“At Castle we are about sustainability for both the organisation and the community, and we are passionate about working hard for our communities. I’m excited about the next chapter for Castle, working with Stephen, Suzanne and the rest of the team.”
Castle offers savings and loans like any high street bank, but instead of making a profit for shareholders, Castle can invest surplus revenue into projects supporting its community.
As a credit union, Castle is regulated by both the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA) who are part of the Bank of England.
The Castle team sees the community bank as a force for good for its members who can access fair products that would otherwise be unavailable to them from mainstream banks. Castle also seeks to encourage thrift and financial well-being – essential tools for surviving the cost-of-living crisis.
How the new interest rates affect house prices and rent
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
The Office for National Statistics announced last month 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, currently at 1.75%, 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% in September. 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 set for September 15th.
Twice as many workers think pensions are a better bet than property for retirement saving
Nearly one in three who don’t save into pensions say other financial priorities mean they can’t afford to
Twice as many workers see occupational or personal pensions as a safer way of saving for retirement than property investment, new analysis* from Handelsbanken Wealth & Asset Management shows.
More than half (57%) of retirement savers who are still working believe pensions are the most secure retirement saving method, compared with 25% who chose property and one in seven (14%) who opted for ISAs, stocks and shares and saving accounts, according to Handelsbanken Wealth Management & Asset Management’s analysis of the latest Government data.
Those relying on property as their biggest source of income in retirement are even fewer – just 11% of those who are not retired expect it to be their most important source of income when they stop working. That compares with 46%, who think their main income will be from their occupational or private pension.
Some 23% believe their State Pension, benefits, or tax credits will be their largest source of income, while 12% think it will be their savings, investments, earnings, income from a business or sale of a business.
The data shows the number of people saving into pensions has risen to a new record high of 21.8 million after an increase of 40% – or 6.1 million – in the past decade, with most of this growth coming from new savers into defined contribution pensions.
Auto enrolment, which was launched in 2012 and made enrolment into workplace pensions automatic, has boosted the number of defined contribution pension holders to 9.9 million from 2.8 million, while the number of savers with defined benefit – or final salary – schemes has grown by 1.5 million to 8.8 million.
That has cut the number of people below State Pension Age who do not have a workplace or private pensions by 14% or 2.6 million in a decade, but there are still major issues for those who do not contribute. Nearly a third (29%) say they have too many other expenses, bills and debts or simply cannot afford a pension, while more than half (54%) say their income is too low, they are not working, or are still in education.
Christine Ross, Head of Private Office (North) and Client Director at Handelsbanken Wealth & Asset Management said: “It’s great to see confidence in pensions growing, with people rating them as the best way to save for retirement. More importantly, the number of people who are saving into pensions is increasing.
“It’s vital to use all of the tax-efficient options available to create a flexible retirement plan, as well as trying to start saving as early as possible, with the earliest savings having the longest period of time to grow.
“Employers are now obliged to make contributions for their staff, which helps many savers get on the retirement planning ladder. Some company pension schemes even offer additional ‘matching’ contributions if the employee pays more than the minimum. That can be as good as a pay rise and the money will grow, tax free, in the pension scheme for many years.”
Company pension schemes of course do not apply to the self-employed – and Handelsbanken Wealth Management & Asset Management’s analysis shows there is a greater reliance on property for retirement among those who work for themselves.
More than two-thirds (69%) of over-55s below State Pension age own a property, but that rises to 81% among the self-employed in that age group. And 25% of those that are self-employed in this age bracket own other properties in addition to their home compared to just 15% of those who are employed.
Financial expert explains the money-saving trend taking TikTok by storm
‘Cash stuffing’ is a money-saving technique currently blowing up on social media.
With the cost of living crisis impacting the majority of the UK, Gen-Z and Millenials are looking for new ways to save. Within the past year, Google searches for the term ‘cash stuffing’ have increased by 274% (Source: Google Trends/Glimpse) and the TikTok hashtag has generated over 498 MILLION views to date.
Dan Whittaker, Personal Finance Expert at CashLady.com, has released comments explaining the trending method of saving at home, how it works, along with the downsides:
What is ‘cash stuffing’?
“Cash stuffing is a method of saving money by physically withdrawing money from your bank account and organising it in a folder system.”
“Using a personalised folder containing several labelled envelopes, savvy savers divide their monthly outgoings into categories, label each envelope with a category, then select a budget for each category and put the allocated amount of cash into the envelope.
“For example, if your monthly take home pay was £1,000, you would make your essential payments as normal, such as rent, mortgage and bills. Then, you split the remaining money into several categories within your folder.
This could be for things like ‘the weekly shop,’ ‘birthday funds,’ ‘socialising,’ ‘holiday savings’ or ‘pocket money for kids.’ Each category and its envelope would contain the exact amount allocated in your budget.”
“The technique is also sometimes referred to as the ‘cash envelope system’.”
“At the end of the month, you can see clearly how much money you have spent in each area and track it on a spreadsheet. You can then readjust your budgets for the next month to stay on track. If you’re lucky enough to have funds left over, these should be moved into a separate folder which acts as bonus savings for whatever your ultimate saving goal is.”
Why does it work for some people?
“This method of saving can be a great way to keep you motivated to achieve your savings goals. Breaking down larger savings goals into smaller monthly targets makes the task of saving less overwhelming, and being able to literally see the money saved each month can lead to a greater sense of achievement.”
“Also, seeing your money physically dwindle can make you more aware of the current state of your finances. Using Apple Pay, Paypal or even online banking can sometimes feel as though you aren’t actually spending money as there is no physical cash exchanged. With cash stuffing, you have a visual representation of your earnings and outgoings which can lead to a greater sense of awareness of your finances; when you see what you’re spending, you think more about what you’re spending.”
“This is perhaps why the method is particularly popular amongst young people, who have been brought up using online banking and are seeking a new way to view and manage their money.”
“Another bonus with this method is that you’re avoiding the risks that can come with credit cards or overdraft fees. Avoiding credit cards altogether stops those prone to overspending from racking up debts, as once your monthly budget is gone, it’s gone.”
What are the downsides? “Security is the biggest downside. When your money is locked away in your bank it is protected by the banks security systems and protected by schemes such as the Financial Services Compensation Scheme.”
“However, with your money living outside of your bank in cash form, it may be more vulnerable to theft, loss or damage (for instance from fire). If this were to happen then you would essentially have no recourse to recover that money. If you are interested in this technique, investing in a safe or something similar would be advisable.”
“You also aren’t earning any interest on your money while it is not deposited in a bank, building society or other savings scheme.”
How can I do it?
“If you want to give Cash Stuffing a try then firstly, you need to think about what you typically spend money on. Dividing your usual spending into categories will help you to start your envelope system. Spends such as shopping, dining out, entertainment, petrol, gifts and groceries might be the most consistent monthly costs to begin with.”
“Then, think of your longer-term savings goals. Assign an envelope for this, where you can start to deposit any spare change at the end of each month. This could be for a car deposit or saving for a renovation or holiday for example, but having a specific goal is a great way to keep you motivated. Having these additional folders means you’re always allocating some money to long-term goals.”
“Next, you need to work out how much money to assign to each category. If you know you spend too much on socialising, then lower your budget in that category, and so on. After you’ve budgeted, it’s worth creating a spreadsheet to track your spending, simply writing down how much you allocated and then spent that month. This creates an awareness of your spending habits and helps see where you went right and where you could cut back. Any leftovers can be added to your long-term envelopes to encourage you to keep going.”
“The important thing is to only spend what is in that envelope. Restrict your spending to only using the allocated amount on each category and you should have savings in no time.”
A report by leading UK data scientists has revealed that the over-50s are being hit hardest by the current financial crisis and could face a lifetime of financial insecurity.
That’s according to new research from the University of Edinburgh’s Smart Data Foundry, supported and funded by abrdn Financial Fairness Trust.
According to the report, economic inactivity rates have risen a third amongst the over 50s since 2019, and people aged 50-54 face double the financial vulnerability risk than those aged 70-74.
Findings reveal that people in their 50s and 60s are facing the ‘perfect storm’ of circumstances including redundancy, ill health or caring commitments combined with a lack of savings and pension provisions.
To offset this loss of income, many people are being forced to withdraw lump sums from their pension pots to deal with pre-retirement income shocks.
And with the majority of pension pots worth under £30,000, this is causing knock-on issues with income tax and entitlement to benefits. Worryingly, the research also identified that those people who do cash in their pension pots early are 1.75 times more at risk of financial vulnerability in the future.
To tackle this, Smart Data Foundry is calling on the Department of Work and Pensions to act now to reduce the risk of pension assets being spent before retirement. It recommends an increase to the current capital limit of £16,000 for means tested benefits and, for those on Universal Credit, the reform of the Support for Mortgage Relief (SMI) loan facility by removing the zero earnings rule.
Chair of Smart Data Foundry,Dame Julia Unwin, explains: “We are seeing a pattern of people in their early to mid-fifties going from being in positions of comfortable, middle-aged breadwinners eyeing their future retirement over the horizon, to a generation suddenly finding themselves facing long-term financial hardship.
“A combination of being unable to secure viable work, confused messaging over pensions, little by way of state aid, and the savage cost-of-living rises resulting in many making decisions that could have long-term negative consequences.
“With this report and our key recommendations, we are calling for UK Government to intervene to protect and support the most vulnerable before it is too late. If they don’t act now, we will undoubtedly see even bigger problems in the years ahead. Data doesn’t lie; the evidence is there – older workers are at very real risk of financial vulnerability, but it is not yet too late to act.”
The research study also uncovered a widespread lack of understanding about the benefits system, confusion about claims processes, and hardship arising from payment frequency. To improve the transition to retirement, the report calls for increased government investment in the Pension Wise guidance service and expansion to include the state pension.
According to the findings, older workers are encountering barriers to returning to work, including lack of digital skills, unavailability of flexible working, lack of specific government initiatives, ageism, psychological barriers, and retraining needs.
The longer the unemployed worker remains out of work, the harder it is for them to find a suitable position and the greater their risk of falling into forced retirement.
The report calls for a government-funded employment programme targeted at those who need support in changing careers, starting from the first day of unemployment for the over 55s.
Lead researcher Dr Lynne Robertson-Rose from the University of Edinburgh added: “We set out to understand the financial vulnerability amongst those in their 50s and 60s and have been surprised by the bleak picture that the data paints.
“Any disruption in earning capability in the decade before the state pension is forcing older workers to draw down on savings earmarked for retirement with little ability to top up the pot, leading to the risk of financial vulnerability becoming lifelong.
“We have access to rich data supplied to Smart Data Foundry by UK financial institutions and these insights have furnished us with the information that enabled us to make policy recommendations. It also flags opportunities for the financial services and fintech sector to innovate in order to help individuals better manage their finances.”
Karen Barker, Head of Policy and Research at abrdn Financial Fairness Trust, added:“Making decisions about your pension is tricky to navigate, and for those on lower incomes, advice is too expensive.
“The Government needs to improve access to advice on pensions planning for those on lower incomes to avoid a living standards catastrophe.”
MORE SUPPORT NEEDED, SAYS SCOTTISH FINANCE SECRETARY
The most vulnerable households across Scotland will receive support of over £1,000 this year, including a new one-off £650 cost of living payment
Universal support increases to £400 across Great Britain, as the October discount on energy bills is doubled and the requirement to repay it over 5 years scrapped
This new £15 billion support package is targeted towards millions of low-income households and brings the total cost of living support to £37 billion.
New temporary Energy Profits Levy on oil and gas firms will raise around £5 billion over the next year to help with cost of living, with a new investment allowance to encourage firms to invest in oil and gas extraction in the UK.
Millions of households across the UK will benefit from a new £15 billion package of targeted UK government support to help with the rising cost of living, the Chancellor announced yesterday.
The significant intervention includes a new, one-off £650 payment to more than 8 million low-income households on Universal Credit, Tax Credits and legacy benefits to be made in two tranches starting in the summer, with separate one-off payments of £300 to pensioner households and £150 to individuals receiving disability benefits – groups who are most vulnerable to rising prices.
Rishi Sunak also announced that the energy bills discount due to come in from October is being doubled from £200 to £400, while the requirement to pay it back will be scrapped. This means the vast majority of households will receive a £400 discount on their energy bills from October.
The new Cost of Living Support package will mean that the most vulnerable households in Scotland will receive over £1,000 of extra support this year.
To ensure there is support for everyone who needs it, Mr Sunak also announced a £500 million increase for the Household Support Fund. This brings the total Household Support Fund to £1.5 billion.
To help pay for the extra support – which takes the total direct government cost of living support to £37 billion – Mr Sunak said a new temporary 25% Energy Profits Levy would be introduced for oil and gas companies, reflecting their extraordinary profits. At the same time, in order to increase the incentive to invest the new levy will include a generous new 80% investment allowance. This balanced approach allows the government to deliver support to families, while encouraging investment and growth.
The Chancellor of the Exchequer Rishi Sunak said: ““I know that people in Scotland are anxious about keeping up with rising energy bills, which is why today we have introduced measures which will take the support for millions of the lowest income households over £1,000.
“As a nation we have a responsibility to help the most vulnerable, which is why this support is mostly targeted at people on low incomes, pensioners and disabled people. But we understand that all households in Scotland will be concerned about the rise in energy costs this Autumn, so every household is set to get £400 off their energy bills from October, with no repayments necessary.
“It is right that companies making extraordinary windfall profits from rising energy prices should contribute, and I’m introducing a temporary energy profits levy to help pay for this support, while still encouraging the investment that generates jobs in Scotland.”
Scottish Secretary Alister Jack said: “Global issues are causing real pressures in the cost of living for UK families. We understand how tough it is at the moment for many households, which is why the Chancellor has today announced a further £15 billion support package.
“A total of £400 per household towards fuel bills will help protect families from rising energy costs. Cash payments of £650 for low-income households on means tested benefits will target support at the most vulnerable in our society at this difficult time. This comes on top of our existing £22bn support package.
“Some of these measures will be paid for by a temporary levy on oil and gas companies – one which incentivises investment in the UK’s energy security.”
There is now more certainty that households will need further support, with inflation having risen faster than forecast and Ofgem expecting a further rise in the energy price cap in October.
So as part of the UK government’s targeted support, the Chancellor announced that around eight million of the lowest income households on Universal Credit, Tax Credits, and legacy benefits will receive an automatic £650 cost of living payment in two instalments via the welfare system this year.
Yesterday’s announcement is on top of the government’s existing £22 billion cost of living support which includes February’s energy bills intervention and action taken at this year’s Spring Statement including a £330 tax cut for millions of workers through the NICs threshold increase in July and 5p cut to fuel duty.
Energy Profits Levy
Surging commodity prices, driven in part by Russia’s war on Ukraine, has meant that the oil and gas sector have been making extraordinary profits. Ministers have been clear that they want to see the sector reinvest these profits in oil and gas extraction in the UK.
In order both to fairly tax the extraordinary profits and encourage investment, the Chancellor announced a temporary new Energy Profits Levy with a generous investment allowance built in. This nearly doubles the tax relief available and means the more investment a firm makes, the less tax it will pay.
The new Levy will be charged on oil and gas company profits at a rate of 25% and is expected to raise around £5 billion in its first 12 months, which will go towards easing the burden on families. It will be temporary, and if oil and gas prices return to historically more normal levels, will be phased out.
The new Investment Allowance, similar in style to the super-deduction, incentivises companies to invest through saving them 91p for every £1 they invest. This nearly doubles the tax relief available and means the more a company invests, the less tax they will pay.
The government expects the combination of the Levy and the new investment allowance to lead to an overall increase in investment, and the OBR will take account of this policy in their next forecast.
The Levy does not apply to the electricity generation sector – where extraordinary profits are also being made due to the impact that rising gas prices have on the price paid for electricity in the UK market, which has also been making extraordinary profits partly due to record gas prices but also due to how the market works.
As set out in the Energy Security Strategy the government is consulting with the power generation sector and investors to drive forward energy market reforms and ensure that the price paid for electricity is more reflective of the costs of production.
The Chancellor announced yesterday that the Treasury will urgently evaluate the scale of these extraordinary profits and the appropriate steps to take.
During the announcement, the Chancellor also set out the government’s strategy to control inflation through independent monetary policy, fiscal responsibility, and supply side activism – a plan he said that should see inflation come down and returning to its target over time.
Finance Secretary Kate Forbes has welcomed the short term action announced by the Chancellor of the Exchequer, but warned more support is needed for households and businesses as the cost of living crisis worsens.
Following calls from the Scottish Government, the UK Government has taken steps to ensure that cash grants, rather than loans, are provided to those on lowest incomes. Ms Forbes has also cautiously welcomed the decision to introduce a Windfall Tax on energy companies benefiting from significant profits but commented that it means Scottish industry is disproportionately funding interventions across the UK.
Responding to the Chancellor’s statement, Ms Forbes has said UK Ministers should have acted earlier and gone further to provide more support that would make a real long term impact, including following the Scottish Government’s lead by doubling the Scottish Child Payment to £20 per week – which is due to increase to £25 from late 2022 helping lift an estimated 50,000 children out of poverty in 2023-24.
Ms Forbes said: “Many households will be relieved to see the support belatedly announced today, but we still need a long term solution to the cost of living crisis and reassurance that the UK Government is going to tackle long term inequalities rather than provide one-off bursts of crisis support.
“Rather than listen to our plea for a comprehensive funding package that fully addresses the unprecedented rise in the cost of living and uses the full £30 billion of fiscal headroom, this piecemeal approach makes it highly likely that more support will be needed later when energy prices rise significantly in the autumn.
“There is also a severe lack of support for businesses – many of them are still struggling to recover from the pandemic and now face crippling increases in energy costs and the damaging impacts of Brexit on supply chains and the labour market. Without urgent economic support there is a real risk that the UK economy is heading for a recession.
“Inflation is at its highest levels in 40 years and the UK Government’s failure to fully invest in increasing incomes, tackling inequality and boosting economic competitiveness will only risk pushing households into further debt and poverty
“The UK Government has almost £30 billion of fiscal headroom, spending only half of this during a cost of living crisis does not go far enough, especially when a further £5 billion from the Windfall Tax will be raised.
“The introduction of a windfall tax is a start, but as a stand-alone measure this means Scottish industry is carrying the weight of UK-wide interventions.
“The removal of the £20 Universal Credit uplift last year was a hammer blow to hard pressed families and the Chancellor’s failure to restore it and increase it to £25 only places a disproportionate burden on the shoulders of those who need help most. The statement was also worryingly silent on public-sector pay with no related consequential funding, when the lowest paid need urgent assurance in the face of rising inflation.
“The refusal to reverse the National Insurance increase implemented in April and temporarily suspend VAT on household energy bills will also cost families hundreds of pounds annually at a time when their budgets have never been more squeezed.
“The Scottish Government has already taken action to support people, communities and businesses as much as possible, with almost £770 million per year invested in cost of living support. We have increased eight Scottish benefits by 6%, closer to the rate of inflation, and introduced a range of family benefits not available elsewhere in the UK.”
Commenting on the government’s cost of living support package announced today (Thursday), TUC General Secretary Frances O’Grady said: “Unions have repeatedly called for an Emergency Budget to help families, and a windfall tax on energy companies.
“The Chancellor should have acted far sooner after his inadequate Spring Statement. His dither and delay has caused unnecessary hardship and worry for millions.
“While today’s intervention is badly needed, we should have never been here in the first place.
“Years of attacks on wages and universal credit have left many households on the brink.
“The government still doesn’t have a plan for giving families long-term financial security.
“With energy bills rising 23 times faster than wages we urgently need to get pay packets rising and to pay universal credit at a permanently higher rate – not just a one-off boost.
“That’s the best way to protect livelihoods and to support the economy.”
The provider paid more than £3.5 billion in claims over the past five years
Covid-19 claims paid out last year amounted to over £73 million, double the amount paid in 2020
Nearly 17,000 customers and their families benefitted from an average pay out of £47,243
Project Smile launches to support children going through a difficult diagnosis
Legal & General paid out a record 46 personal protection claims every day in the UK during 2021, totalling £797.9 million – an increase of £33.9 million from 2020 – and benefitting 16,890 customers and their families.
As the UK’s number one individual Life Insurance provider Legal & General has paid out more than £3.5 billion in claims over the past five years across its Life, Critical Illness Cover (CIC), Terminal Illness Cover (TIC) and Income Protection (IP).
Overall, the provider paid 97% of individual protection claims with an average pay out of £47,243.
Of the small percentage not paid, almost nine in 10 were because of ‘deliberate or reckless misrepresentation’. Over 30% of misrepresentations were due to lifestyle factors that should clearly have been in the customers knowledge, with the majority of these being linked to alcohol.
Legal & General continues to work closely with its partners and distributors to help minimise misrepresentation and do more to explain how insurance claims work so it can support even more customers in 2022.
As in 2020, the pandemic impacted the 2021 claims data; with almost one in seven life claims Covid-19 related. Legal & General paid out 1,579 Covid-19 life claims at an average of £46,769 per claim, making up a combined total of almost £74 million – over £34.6 million more than last year.
The difference in claims for men versus women when it came to Covid-19 related deaths is stark. Only 35% of Life Insurance claims came from women, compared with 65% from men. Legal & General’s figures continue to reflect those from the Office for National Statistics that show men are more likely to pass away from Covid-19 than women2. In contrast, 60% of Legal & General’s overall Life Insurance claims are for men, again indicating an increase when looking at Covid-19 claims specifically.
Income protection continues to play an important role
All IP products include Legal & General’s Rehabilitation Support Service. It gives customers access to an in-house team of healthcare professionals who offer wide-ranging physical and mental health support at no extra cost.
Project Smile
This year saw the launch of Project Smile, an initiative to support children going through a difficult diagnosis.
For every claim relating to a child’s illness paid, the provider sends a gift to the child to help bring a smile to their face. Gifts are chosen according to the preferences of the child and can include anything from a voucher to a Peppa Pig toy.
David Banks, Director of Claims and Underwriting said:“Paying claims is core to what we do. As we continue to come back from Covid-19, we remain focused on giving our customers and their loved ones financial support when they need it most. But more has to be done to tackle misrepresentation.
“At Legal & General we’re working closely with partners and distributors to help make the underwriting process as transparent and streamlined as possible. We hope that increasing knowledge around the lifestyle and general health information required will minimise misrepresentation and help us support even more customers in their moment of need.
“We’re proud to have paid out more than £797million in claims last year, but it’s the personal impact behind the figures that’s most important. We know an injury or illness affects the whole family, none more so than when it happens to a child. That’s why we have launched Project Smile.
“Our assessors get to know the families throughout the course of a claim – we wanted to go beyond just dealing with the paperwork and show that we are thinking of them through what is likely to be the most challenging time of their lives.”
