With the start of the new financial year now upon us, a lot of us will be thinking about what the next 12 months will hold. Inflation is causing price rises across the sectors, it is unlikely we will see much reduction in the coming months, and a lot of us will be keeping a close eye on the Bank of England over the next 3 months in regards to the base rate.
However it is not all doom and gloom, Spring is just around the corner and whether you’re putting money aside for your first home, saving for a nest egg or looking to protect either your income or your health our team are on hand to help you achieve your financial goals in the 2nd quarter of 2023.
So, this season, enjoy the seasonal weather and get outdoors for a spot of Spring sunshine and let us take care of your finances.
According to recent research by Cirencester Friendly*, almost 23% of their claimants are aged 30 or under. This is an eye-opening statistic that highlights the importance of Income Protection for young people. Many of us don't like to think about the possibility of becoming ill or injured, but it's important to be prepared in case the worst does happen.
If you're under 30, you might think that Income Protection is something that only older people need to worry about. But the truth is that accidents and illnesses can strike at any age, and it's important to be prepared. Income Protection can provide a safety net in case you're unable to work due to an illness or injury.
Imagine you're a young professional in your mid-20s, working hard to build your career and save for the future. You're healthy, active, and don't smoke, so you might think that you're unlikely to need Income Protection. But what if you were diagnosed with a serious illness, such as cancer or multiple sclerosis? What if you were injured in an accident and couldn't work for months, or even years?
This is exactly what happened to Sarah, a 28-year-old non-smoker who works in the IT industry. Sarah was diagnosed with breast cancer last year and had to take six months off work for treatment. She had some savings to fall back on, but they quickly dwindled as she paid for her mortgage and other everyday expenses. Without Income Protection, Sarah would have been in a very difficult financial position.
Thankfully, Sarah had taken out Income Protection a few years ago. This meant that she was able to claim a monthly benefit while she was off work, which helped her cover her bills and maintain her standard of living.
Sarah's story is a powerful reminder that illness and injury can happen to anyone, at any age. Income Protection is a valuable tool for protecting your financial security and giving you peace of mind. If you're under 30, don't assume that you don't need it – take the time to explore your options and find a policy that works for you. You never know when you might need it.
Case study 1: First Time Buyer
Meet John, a 28-year-old working professional who has just landed his dream job in Bedford. He has been renting a flat for the past five years and is ready to step on the property ladder. John has saved £25,000 and has a good credit score. He is looking for a mortgage to purchase a two-bedroom flat in Bedford, which is priced at £198,000.
First Time Buyer Mortgage:
As a first-time buyer, John can take out a 5-year fixed-rate mortgage at a rate of 4.43% with a deposit of £25,000. This means he will need to borrow £173,000.
With a term of 25 years, John will have to pay £948.54 per month for the next 25 years, bringing the total repayment to £284,562. However, after deducting the deposit, John will only need to pay £259,562 for the property.
Case Study 2: Remortgage
Meet Sarah, a 35-year-old mother of two who purchased a three-bedroom semi-detached house in Bristol five years ago. Her mortgage term is coming to an end, and she is looking to remortgage her property to get a new deal.
Remortgage:
Sarah has a remaining mortgage balance of £120,000, and the current interest rates are higher than they were five years ago. So, she is looking for a new deal that remains affordable. Sarah was on a 2.6% interest rate but after shopping around the most suitable deal she can find has come out at 5.8% interest. This is quite a significant jump. Sarah decides to speak to a mortgage adviser who is able to access the whole market to see if they can help find something more suitable. the adviser finds her a new deal at 5.14%.
Sarah’s repayments were £642 a month when she was on a 2.6% interest rate. The 5.8% interest rate Sarah has found would mean repayments of £846 a month, which Sarah has expressed to her adviser is unaffordable. Despite the adviser finding a rate of 5.14% it still means Sarah would be looking at £801 a month. The adviser and Sarah discuss her needs and agree a term extension from 20 years to 25 years would be the most suitable option. The adviser secures the deal and £711 a month repayment which despite being an increase for Sarah, remains affordable.
Case Study 3: Buy-to-Let
Meet James, a 42-year-old property investor who owns three rental properties in Manchester. He is looking to purchase a fourth property to expand his portfolio.
Buy-to-Let Mortgage:
James is looking to purchase a two-bedroom flat in the city centre for £200,000. He plans to rent it out for £1,000 per month, generating an annual income of £12,000.
After consulting with a mortgage adviser, James decides to take out a buy-to-let mortgage with a 25% deposit. He chooses a five-year fixed-rate mortgage at 5.8% interest, which means he will have to pay £713.22 per month for the next five years. After five years, James plans to sell the property, and the anticipated sale price is £240,000.
With his rental income and anticipated capital gain, James expects to make a profit of £58,732 over five years.
Are any of these you? Or someone you love? We can help you to find the most suitable deal for your needs and explore the market to help you secure a rate that’s right for you.
Risk warning: Your home or property may be repossessed if you do not keep up repayments on your mortgage. You may be charged a fee for mortgage advice.
“Total debt held by over-55s up by almost 20% in five years”
Recent research carried out by Later Life Lender more2life and economics consultancy Cebr has revealed that that the total amount of debt owed by the over-55s will rise to £294bn this year, up from £272bn in 2021 and £209bn in 2017. This is a leap of two fifths (41%) in five years and the total is set to soar even further over the next decade, to £402bn by 2032. This is a significant rise of 92% in just 15 years.
Over 55s are not the only demographic to be pushed towards credit and loan options following the increases in the cost of living and rising bills, but this significant rise
“55–64-year-olds bear the brunt of later life debt”
Most of this debt is held by younger retirees aged 55-64 who are typically still working while repaying mortgages and supporting children. Total debt held by this group is expected to rise from £196bn last year to £210bn in 2022. Indeed, half (50%) of 55–64-year-olds say that they are currently in debt or have been in the past five years, equating to 4.4m people.
“Unsecured debt to rise by over a third this year”
Unsecured debt amongst the over-55s grew rapidly from less than £20bn in 2015 to over £25bn in 2019 but contracted slightly over 2020-2021 as spending reduced during the pandemic. However, unsecured debt is expected to rise by over a third (34%) in 2022, reaching £20bn, as the cost-of-living drives many to borrow to make ends meet. Currently, almost 40% of retirees have spent more than they receive in income in some months in 2022 (with 8% saying this often or always happens), which will likely only rise further as this debt level increases.
Again, those aged 55-64 are most likely to have larger unsecured debt levels in 2022, with the average credit card debt of those with debt standing at £2,800. Other types of unsecured debt levels are expected to average £10,700 per individual with debt. Higher interest rates are unlikely to deter this rise in unsecured borrowing in the short term, but by the next decade should see the total amount plateau at £19bn.
“Nearly 5m over-55s struggled with credit card debt in the past five years”
More than one in five (22%) over-55s revealed that they had credit card debt in the past five years which they had not paid off in full each month, equating to 4.7m people. The second most common type of debt was an overdraft, with 9% (1.9m people) noting that they had used this solution over the same period.
Following this period of growth in debts among over 55s, it’s important to understand that there are options available that could not only support those facing escalating debts but that could also support loved ones as their outgoings rise too. It’s important to speak to us to understand the options available for the finances of you and your families.
Risk warning: Your home or property may be repossessed if you do not keep up repayments on your mortgage. You may be charged a fee for mortgage advice. This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration. Check that this mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in any doubt, seek independent advice.
Did you know that phishing scams are one of the most common ways cybercriminals steal personal information from unsuspecting individuals? According to Proofpoint’s 2022 State of the Phish Report*, 83% of organisations fell victim to a phishing attack last year.
Meanwhile, Verizon’s 2021 Data Breach Investigations Report* found that 25% of all data breaches involve phishing.
Phishing is a type of cyberattack where fraudsters send emails or messages that appear to be from a reputable source, such as a bank or a well-known company, in an attempt to trick recipients into revealing sensitive information, such as passwords, credit card details, or social security numbers. These scammers often use psychological tactics, such as urgency or fear, to convince people to take immediate action and reveal their personal information.
To protect yourself from falling victim to a phishing scam, there are a few things you can do.
- First, be suspicious of any email or message that asks for your personal information, especially if it's unsolicited. If you're unsure if a message is legitimate, do not click on any links or download any attachments.
- Second, check the email address of the sender to make sure it's legitimate. Scammers often use email addresses that are similar to a reputable company, but with slight variations, such as substituting an "o" with a zero.
- Third, look for signs of a phishing attempt, such as poor grammar, misspellings, or unusual formatting. Legitimate organizations typically have a professional image and take care to avoid errors in their communications.
- Fourth, be careful when clicking on links in emails or messages. Hover your mouse over the link to see the URL before clicking on it. If the URL looks suspicious, do not click on it.
- Fifth, keep your computer software up to date, including your antivirus and firewall software. This can help protect you from malware that can be used to steal your personal information.
- Lastly, be cautious when entering personal information online. Only enter sensitive information on secure websites that have a padlock icon in the address bar and start with "https" rather than "http." If you're unsure if a website is secure, do not enter any personal information.
By following these tips, you can help protect yourself from falling victim to a phishing scam. Remember to stay vigilant and always think twice before clicking on links or entering personal information online.
Home Insurance is an essential policy that provides peace of mind to homeowners by protecting their homes and belongings against unforeseen circumstances. Homeowners Insurance can help cover losses that result from events such as fire, theft, or natural disasters. In this article, we will explore the recent changes in pricing policies for Home Insurance and the importance of having the right coverage for your needs.
One of the most significant changes in Home Insurance in recent years is the ban on price walking. Price walking is a practice used by insurance companies that involves increasing the cost of insurance for customers each year, even if there are no claims made. This practice unfairly targets loyal customers who have remained with their insurer for several years. However, new regulations now prohibit this practice, ensuring that loyal customers are treated fairly and not subjected to unreasonable increases in insurance costs.
When it comes to choosing the right Home Insurance, it is crucial to evaluate your needs carefully. There are two main types of Home Insurance: Buildings Insurance and Contents Insurance. Buildings Insurance covers the structure of your home, including the roof, walls, and floors. It also covers permanent fixtures such as bathroom suites and fitted kitchens. Contents Insurance covers your possessions, including furniture, electronics, and clothing.
For homeowners who rent out their property, Landlords’ Insurance is also an important consideration. Landlords’ Insurance typically includes Buildings Insurance, as well as cover for any furnishings or appliances that are provided to tenants. It can also include cover for loss of rental income in the event of damage to the property.
It's important to note that not all Home Insurance policies are created equal, and it's essential to review the details of any policy you are considering. Consider factors such as the level of cover provided, the excess you will need to pay in the event of a claim, and any exclusions or limitations. Ensure that you have sufficient cover to protect your property and belongings adequately.
Did you know that many Home Insurance policies will cover damage caused by falling satellites? While it's an unlikely scenario, it's good to know that you're covered if the worst should happen. Additionally, did you know that some insurers offer discounts for homeowners who install home security systems? These systems can help reduce the risk of theft or vandalism, making your property less of a risk to insure.
In conclusion, Home Insurance is an essential policy for any homeowner, providing protection and peace of mind. With recent changes in pricing policies, it's more important than ever to review your Home Insurance to ensure you're getting the best value and the right cover for your needs. Take the time to review your policy, consider your options, and don't forget to take advantage of any discounts or benefits offered by your insurer.
Chancellor Jeremy Hunt's Spring Budget 2023: A Focus on Growth
Chancellor Jeremy Hunt announced his first Budget in the House of Commons on the 15th March, which aimed to encourage those who have left their jobs to return to work and promote business investment. The Budget also includes measures related to fuel, alcohol, pensions, wages, energy bills, childcare, universal credit, and economic growth. Here are the main announcements:
Fuel, alcohol, pensions and wages
- Cap on amount workers can accumulate in pensions savings over their lifetime before having to pay extra tax (currently £1.07m) to be abolished
- Tax-free yearly allowance for pension pot to rise from £40,000 to £60,000 - having been frozen for nine years
- Fuel duty frozen - the 5p cut to fuel duty on petrol and diesel, due to end in April, kept for another year
- Alcohol taxes to rise in line with inflation from August, with new reliefs for beer, cider and wine sold in pubs
- Tax on tobacco to increase by 2% above inflation, and 6% above inflation for hand-rolling tobacco
Energy bills, prepayment meter and nuclear power
- Government subsidies limiting typical household energy bills to £2,500 a year extended for three months, until the end of June
- £200m to bring energy charges for prepayment meters into line with prices for customers paying by direct debit - affects 4m households
- Commitment to invest £20bn over next two decades on low-carbon energy projects, with a focus on carbon capture and storage
- Nuclear energy to be classed as environmentally sustainable for investment purposes, with promise of more public funding
- £63m to help leisure centres with rising swimming pool heating costs, and invest to become more energy efficient
Childcare, universal credit and back to work plans
- 30 hours of free childcare for working parents in England expanded to cover one and two-year-olds, to be rolled out in stages from April 2024.
- The phasing will work as follows:
- From April 2024, working parents of 2 year-olds will be able to access 15 hours of free childcare.
- From September 2024, working parents of 9 month to 2 year-olds will be able to access 15 hours of free childcare.
- From September 2025, working parents of 9 month to 2 year-olds will be able to access 30 hours of free childcare.
- Families on universal credit to receive childcare support up front instead of in arrears, with the £646-a-month per child cap raised to £951
- £600 "incentive payments" for those becoming childminders, and relaxed rules in England to let childminders look after more children
- New fitness-to-work testing regime to qualify for health-related benefits
- New voluntary employment scheme for disabled people in England and Wales, called Universal Support
- Tougher requirements to look for work and increased job support for lead child carers on universal credit
- £63m for programmes to encourage retirees over 50 back to work, "returnerships" and skills boot camps
- Immigration rules to be relaxed for five roles in construction sector, to ease labour shortages
Government debt, inflation and economic growth
- Office for Budget Responsibility predicts the UK will avoid recession in 2023, but the economy will shrink by 0.2%
- Growth of 1.8% predicted for next year, with 2.5% in 2025 and 2.1% in 2026
- UK's inflation rate predicted to fall to 2.9% by the end of this year, down from 10.7% in the last three months of 2022
- Underlying debt forecast to be 92.4% of GDP this year, rising to 93.7% in 2024
Corporation tax, Investment Zones and tax breaks
- Main rate of corporation tax, paid by businesses on taxable profits over £250,000, confirmed to increase to 25%. Small companies (less than £50,000) will still pay 19%. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective corporation tax rate
- Companies able to deduct investment in new machinery and technology to lower their taxable profits
- Tax breaks and other benefits for 12 new Investment Zones across the UK, funded by £80m each over the next five years
- Reduced paperwork for international traders, who will also be given longer to submit customs forms under streamlined rules
Other measures
- Commitment to raise defence spending by £11bn over the next five years
- Prison sentences for those convicted of marketing tax avoidance schemes
- £200m this year to help local councils in England repair potholes
- An extra £10m over next two years for charities in England helping to prevent suicide
- Streamlined approvals process promised for new medical products
- £900m for new super computer facility, to help UK's AI industry
For further advice on any of the points raised in this year's Spring Budget, please get in touch.
Source: BBC News
* https://protectionreporter.co.uk/cirencester-friendly-claims-disclosure-reveals-23-of-claimants-were-aged-30-or-under.html
* https://www.itgovernance.eu/blog/en/the-5-biggest-phishing-scams-of-all-time
