Childcare, property news, waiting longer for the State pension, student debt, care worries, losing out by not seeking help, fixing mortgage repayments, charitable donations on the up, and we’re not living as long as we thought we might!

All here – and more – in our Summer news round-up.

 

Summer childcare costs rise
The cost of summer childcare has risen by 4 per cent over the past year to £125 per week, reports the BBC. There is a shortage of council-run schemes, which typically cost about 20% less than private ones. Many families will struggle to meet these costs over the summer.

Pension could double Buy-to-Let returns
Research suggests returns from investing in a pension could be double those from Buy To Let property over the next twenty years, says the Mail. This assumes a return from property of 3.5% rental income plus 4.5% a year capital growth, as compared with returns of 6 per cent a year in the pension. The gap in total returns – 435% for the pension as against 237% for BTL – is so large because of the tax relief on pensions and the higher taxes on BTL introduced by the last government.

Longer wait for state pension
Six million people now aged between 39 and 47 will have to wait a year longer to get their state pension, says the BBC. The government announced that the rise in state pension age from 67 to 68 will be brought forward six years to 2037-39. The government said the new rules would save taxpayers £74bn by 2045/46.

Warning on pension freedoms
Many of the one in three people who have taken cash from their pensions  since the rules changed in 2015 did so without taking advice, says the Telegraph. It cited warnings from the regulator that it might have to step in, and advisers said many of those who hadn’t taken advice would probably have paid too much tax already or would do so in future. In particular, taking money out of  a pension, paying tax on the withdrawal and then putting the cash into an ISA would result in them getting much lower returns on their money.

Care worries
Three in four people worry that they will be overwhelmed by the cost of paying for care in their old age, and almost the same proportion favour a ‘cap’ on the total cost of care, says the Mail. The Conservative party scrapped a manifesto promise to raise the threshold for state support to £100,000 and now plans to consult on introducing a care cost cap.

Leasehold concerns
New research by the London School of Economics says that leaseholders are being overcharged to extend the term of their leases, says the Independent, adding to the perception that leaseholders are being exploited. Recently housebuilders Wimpey had to provide £130 million to extend the leases on properties it had sold, while other buyers of leasehold property discovered their ground rents will double every ten years.  The Home Owners Alliance warned that the issue of leasehold properties is worsening  the country’s home ownership crisis and accused  the sector of “widespread malpractice and lack of consumer understanding”.

Get that longer fix
There has been a sharp rise in the number of borrowers remortgaging to secure fixed rates over a longer term, says the Times. Concerns over the effects of Brexit and a fear of rising interest rates have prompted borrowers to go for 5-year terms or longer rather than the more typical 2-year deal. Many lenders are offering rates of under 2 per cent on 5-year fixes.

Save 18% for a pension
To provide for a comfortable retirement, today’s new employees need to save 18% of their earnings to supplement the flat-rate state pension, according to a think-tank report, says the Financial Times.  The actual rates used in auto-enrolment pension savings schemes are far below that level. So people entering the workforce today face a “monumental savings challenge”, the International Longevity Centre-UK said in its report.

Worry over slowdown in life expectancy gains
A report commissioned by the government has confirmed there has been a sharp slowdown in gains in life expectancy, says the Financial Times. Up till 2010, a woman gained on average an extra year of life expectancy every five years (for men it was an extra year every 3.5 years), but since then the gains have halved to one year for an extra ten years for women and six for men. The report’s author pointed to a decline in the rate of increase in annual healthcare spending from 3.8% a year up to 2010 to 1.1% a year since then.

Don’t rush to pay off their debt
Financial Times columnist Merryn Somerset Webb returns to the subject of student debt as the interest rate on student loans has risen to 6.1%. She points to flaws in the system: all British universities charge pretty much the same regardless of how much their graduates will earn, and graduates repay too little from low salaries and too much from high ones. But the key for parents is that any unpaid debt is written off after 30 years (a recent report says 77% of graduates won’t repay the debt in full and write-offs will cost the government £5.9 billion a year). So let them take on the loans, she says, and wait to see if they get a high-paying job: only in that case does it make sense to pay off the debt.

Rise in charitable legacies
There has been a sharp rise in legacies to charities, says the Financial Times. The amount exempted from inheritance tax in 2016 was £840 million, up 79% from the figure five years ago. The main reason, says the FT, is the new tax break introduced in 2012 by George Osborne: the rate of inheritance tax drops from 40% to 36% if charitable legacies are 10% or more of  the estate above the £325,000 threshold. The proportion of Wills including charitable legacies has risen from 4.6% in 1997 to 6.4% in 2016.

For more on any of the above, or if you would like to speak to someone about your own financial plans, get in touch with us via this link.