Image Credit Image Credit Many younger people now rely on the bank of Mum and Dad to help get them on the housing ladder. But parents may also have some useful life lessons to impart when it comes to saving towards a more secure financial future. Research among the over 50s found that half regretted not starting a pension earlier, while almost two-thirds said they wished they had saved more into their retirement funds. Those embarking on careers today have the benefit of auto-enrolment pensions, with employer contributions, once they earn more than £10,000. Of the over 50s surveyed, 25% delayed starting a pension until they were in their 30s, often putting mortgage payments and family needs ahead of pension contributions. However, financial experts warn that parents' advice is not always correct when it comes to how much to contribute to a pension plan. A quarter of those aged over 50 think that putting 5% of earnings into a pension will be enough to fund a decent retirement – the current minimum auto-enrolment contribution. Experts disagree, stating that these minimum levels could leave people with insufficient funds in retirement. The Pension and Lifetime Savings Association believes that people should be savings around 12% of their earnings into a pension if they want a comfortable retirement. Where possible, younger workers should look to increase pension savings beyond minimum levels, and ensure their pension contributions increase with any salary rise. This should help protect against the same financial regrets when they reach their parents’ age. B The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. The Financial Conduct Authority does not regulate auto enrolment. National insurance cut comes through If you are an employee, in July you should see the benefit of the change to national insurance contribution (NIC) thresholds announced in the Spring Statement. At best your NIC saving will be worth about £28 a month. No-fault divorce In England and Wales, divorce has become much simpler and potentially quicker with the introduction of no-fault divorces since 6 April 2022. However, the reform has done nothing to simplify all the related financial issues, so professional advice will still be necessary. No-fault evictions In the Queen’s Speech the government announced that it would be introducing a Renter’s Reform Bill. Among its measures the Bill would remove the option of nofault evictions which English landlords currently have (often called section 21 evictions). Managing energy price rises Ofgem, the utility regulator, is consulting on a proposal to adjust the energy price cap every quarter after forecasting a jump from £1,971 to about £2,800 in October. That figure is likely to drop to around £2,400 for many households following the Chancellor’s end of May measures including a £400 per household rebate. But a mid-winter bill amendment is still coming at the start of 2023. News round up NEWS IN BRIEF Charitable giving – doing it right The war in Ukraine and cost of living crisis have prompted many people to support charities helping those affected. Various schemes can boost the value of your charitable donations. Gift aid Charities can claim back basic rate tax on donations, meaning for every £1 you give the charity gets £1.25. This scheme is for UK taxpayers. Higher rate and additional rate payers can also reclaim the tax paid on donations through self-assessment. This can effectively lower the net income at which their tax is calculated, which can be beneficial for those earning just over £50,000 who pay the High Income Child Benefit Tax Charge. It isn’t just big national charities like DEC, Cancer Research or Trussell Trust that use gift aid. If you make a voluntary donation (of at least 10%) on top of the standard ticket price to many museums and art galleries, then the total value of your purchase can benefit from gift aid. You can also use gift aid when buying an annual membership to these organisations. Give as you earn Some companies allow employees to make regular charity donations direct from their gross salary, exempting these donations from tax, although they are subject to national insurance contributions. Charitable legacies If you leave a charitable donation or legacy in your will, it won’t be included within your estate when calculating inheritance tax (IHT). What’s more, if you bequeath at least 10% of your net estate to charity, any IHT due is charged at 36% rather than 40%. Share gifting Shares donated to charity are not subject to capital gains tax (CGT). The value will also be deducted from your taxable income, potentially reducing income tax. If a charity can’t accept shares directly you can sell them on their behalf, again avoiding CGT, although you will need an instruction from the charity. B The Financial Conduct Authority does not regulate tax, Wills or estate planning advice. Tax treatment varies according to individual circumstances and is subject to change. – Credit: fizkes/Shutterstock.com CHARITY PENSIONS What I wish I’d known – lessons from the other side of 50 Credit: Ink Drop/Shutterstock.com
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