Sensible savers resist raiding Retirement fund
With the pandemic leading to global instability, sensible savers put the brakes on withdrawals from their pensions. That’s according to data published by HMRC in April, which showed a 4% decrease in the average amount withdrawn from flexible pension pots – down to an average of £6,800 in the first quarter of 2021 compared with £7,100 in the same period of 2020.
Total withdrawals from pensions have risen slightly from those record lows but are still low by historic standards as many retirees are wary of taking too much out of their hard-earned pension pots. Now, as markets begin to look more positive than they were a year ago (the FTSE 100 closed 18% higher on 31st March 2021 than the same point in the previous year), with positive vaccine news buoying economic forecasts, the sensible savers may well be seeing the rewards of their restraint.
Of course, it could be argued that in 2020 opportunities to spend were considerably reduced, with restrictions on shopping on the local high street and pub lunches with friends. The relatively flat increase in withdrawals from flexible pensions in 2021 (£2.7bn in Q1 2021 compared with £2.5bn in Q1 2020) may well be due in part to the higher levels of savings retirees find themselves with as such spending opportunities have been paused.
Mortgage lending reaches a new high
March saw a huge increase in mortgage lending to a record high, as buyers rushed to complete purchases ahead of the expected end of the stamp duty holiday. Net borrowing reached £11.7bn for the month, the highest level since records began in 1993, according to data from the Bank of England.
The stamp duty relief exempts buyers from paying tax on the first £500,000 of residential property purchased in England and Northern Ireland. In Wales it only applied to properties purchased up to a value of £250,000. In the March budget, it was extended to the end of June, after which it will be tapered from 1st July until 30th September, potentially further accelerating mortgage borrowing in the coming months.
Moneyfacts magazine noted that the government’s new mortgage guarantee scheme acted as a catalyst for new mortgage products to be launched to market, with 95% loan-to-value (LTV) lending increasing for the first time since August last year – the number of available 95% LTV deals has increased by 78 to 112. Growth in product choice is good news for prospective buyers, with lenders showing confidence and rates reducing slightly as more choice becomes available.
Bank deposits are also up; £16.2bn was deposited in March, over £12bn more than the monthly average for the year to February 2020. This highlights the restricted spending opportunities linked to pandemic lockdowns, which may, in turn, be helping buyers to save for house deposits for their planned moves.
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HMRC have their eyes on crypto-gains
Most of us are not about to invest our hard-earned money in the unregulated world of cryptocurrencies, a world of assets that hold no intrinsic value and fluctuate wildly. But for a handful of gamblers out there, gains have been made – one cryptocurrency, Bitcoin, has tripled in value in just six months. It is gains such as these that have prompted HMRC to make it clear they would like to see their portion via Capital Gains Tax.
It has always been a requirement to declare all assets, but HRMC have now specifically requested declaration of “crypto assets, electronic money accounts, online payment platform accounts, electronic wallets, financial technology accounts, community and informal banking accounts, accounts connected to value transfer systems, money service business accounts, foreign exchange accounts and electronic accounts assets and liabilities in whatever form, regardless of how or where these assets are held”.
The explicit mention of the asset class seeks to clear up myths that profits or gains from cryptocurrencies are akin to gambling or lottery-type winnings. However, the potential for confusion remains as some might consider crypto speculation to be trading activity and gains the profits of a trade, which would usually be subject to Income Tax rather than Capital Gains Tax.
The Treasury and the Bank of England are also showing an interest in digital currencies. They have established a task force to assess the case for a UK Central Bank Digital Currency. The task force will explore the potential for a new form of digital currency that could exist alongside the present forms of money.
The future waits for no one
As Freddie Mercury sang, “time waits for nobody”. That’s why, with restrictions on in-person contact in 2020, rather than putting off the important task of drafting or revising a Will many people embraced technology and progressed their estate planning using remote Will-writing. In fact, in the UK, remote Will-writing increased by 267% in 2020 compared with 2019.
It wasn’t just tech-savvy youngsters who embraced digital Will-writing, demand increased in all age groups from Baby Boomers to Gen Z. The state of the world appeared to give more focus to the task of putting a Will in place for many, according to an online report referenced in Today’s Wills & Probate. It is likely no coincidence that one Will-writing firm experienced the highest demand for Wills on 6th April, the day the Prime Minister went into intensive care, whilst they saw the lowest demand on 2nd December, the day the Pfizer vaccine was approved in the UK.
Whilst the report shows that when it comes to estate planning many will embrace whichever route, in-person or remote, is most accessible at the time, it is perhaps more of a worry that without a prompt to consider estate planning in the first place many may not have secured the future for their loved ones.
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Source: Moneysavingexpert.com 06.05.2021.