Latest news with #HLSavingsandResilienceBarometer
Yahoo
30-06-2025
- Business
- Yahoo
Should the Lifetime ISA be replaced? Have your say
MPs have said that the complexity of lifetime individual savings accounts (LISAs) increases the risk of people making poor financial decisions. In a report released on Monday, the Treasury Select Committee said that dual-purpose design of LISAs raises the risk of consumers choosing "unsuitable investment strategies". People are able to use LISAs, which were introduced in 2017, to save for both a first home and retirement, using cash, stocks and shares or a combination of the two. In addition, an inquiry by the cross-party group of MPs highlighted confusion over the 25% LISA withdrawal charge for funds drawn down early, whereby savers lose the government bonus they have received, plus 6.25% of their own contributions. MPs said that this means LISA holders "risk losing a significant part of their savings due to withdrawals to cover unforeseen circumstances". Another issued that was raised was the LISA property price cap of £450,000. If a consumer uses their LISA savings to buy a home above that price then they must pay the 25% withdrawal charge. That price cap has remained unchanged since the LISA's inception in 2017 but average house prices in the UK have risen more than 30% since then, with the cost of a home in London hitting £564,000. Rachael Griffin, tax and financial planning expert at Quilter, said that the Treasury Committee's report "reflects many of the issues we raised in our evidence, particularly the view that the product is fundamentally flawed and not always delivering good outcomes for savers." Read more: Key questions to ask yourself to plan for a comfortable retirement She said that the £450,000 property price cap "no longer deals with the reality of the ever more expensive housing market. Many who have saved diligently find they cannot use their LISA for the property they need without facing a financial penalty." Griffin added: "This report should be the catalyst for serious reform. The Lifetime ISA does not sit comfortably within the wider savings system and trying to make it serve two purposes has only added to the confusion. There is a clear opportunity to replace it with simpler, more targeted tools that give people the right support whether they are saving for a home or planning for later life. This should be a major focus of Labour's upcoming ISA simplification programme this summer." At the same time, Helen Morrissey, Yahoo Finance UK pensions columnist and head of retirement analysis at Hargreaves Lansdown (HL), said: "The sweet spot of the LISA can rest in its ability to boost retirement savings among the self-employed." She pointed out that the HL Savings and Resilience Barometer found that only 21% of self-employed households are on track for a moderate retirement, compared to 36% of households overall. "It's a pressing issue that needs to be resolved and the LISA just might help us close the gap," she said. Morrissey added: "The report says that the LISA seems to work well with the self-employed and with further tweaks it could help further. We have long argued that if the penalty could be reduced from 25% to 20%, this could act as a further incentive for the self-employed to get a LISA, as they know they would not be losing a chunk of their own money in the event of early access. "We also believe that removing the age 40 limit on opening a LISA would open the product up even further given the fact that many people do not become self-employed until later in life." Do you think the LISA should be replaced? Vote in the poll below. Yahoo UK's poll of the week lets you vote and indicate your strength of feeling on one of the week's hot topics. After the poll closes, we'll publish and analyse the results each Friday, giving readers the chance to see how polarising a topic has become and if their view chimes with other Yahoo UK readers. Read more: What to watch this week: UK shop prices, US employment, Constellation Brands, M&S and Sainsbury's Global economy to slow amid 'most severe trade war since 1930s', says Fitch UK economy grew 0.7% in first quarter of the year
Yahoo
13-06-2025
- Business
- Yahoo
How far will your pension go as retirement costs soar?
The cost of retirement continues to creep up, with the Pensions and Lifetime Savings Association (PLSA) recently putting the cost of a moderate retirement at £31,700 per year for a single person and £43,900 per year for a couple. This includes the state pension, but shows how much heavy lifting our workplace or personal pensions need to do to fill the gap. This is hardly going to buy you a luxury lifestyle either – a moderate lifestyle covers all your basics, plus some nice extras such as two weeks in Europe a year and the ability to run a car. If you want something more luxurious, this data shows your pension is going to need to work much harder: a comfortable lifestyle is said to cost £43,900 per year for a single person and £60,600 for a couple. Read more: What is the Pension Investment Review? Before you throw your hands up in despair, it's fair to say that while these figures provide a useful rule of thumb, they aren't hard and fast. Our own data from the HL Savings and Resilience Barometer put the costs slightly lower. A moderate retirement for a single person was pegged at £26,129 per year and a comfortable retirement at £41,829. The key thing is to think about what retirement means for you – is it lots of travelling or something more sedate? You may find that what you need differs massively from these figures. Once you've got an idea of what you want, you can start to put a figure on what that might cost. It's important to factor in all costs. The PLSA data assumes you own your home in retirement, and this is no longer the case for many people. So, if this is you, you will also need to factor mortgage or rental costs into your plan. You can then use online calculators to see if what you've got in your pension will get you where you need to be. Putting your data in an online calculator can show you what you are on track for in retirement. This will either give you the confidence of knowing you've got enough, or the time to put a plan in place if you haven't. Read more: Should people keep working until later in life? They can even be used to model the impact of boosting your contributions over time, so you can see how much small changes can help you move towards your retirement goal. Boosting contributions every time you get a pay rise can also make a big difference and it's also worth checking to see if your employer is willing to increase their contributions if you increase yours. This is known as an employer match and can play a big part in boosting your pension. The data shows that coupled up retirees have a slightly easier time of things than their single friends. This is because they share a lot of costs and will have the benefit of two state pensions and two workplace or personal pensions. This is a big help, but it's important not to rely too heavily on a partner's pension to see you through retirement. Relationships may not last and there's a worry that you could find yourself approaching retirement with very little. It's always important to make your own provision – even if you stay together having your own income will give you more control over how you spend your money in retirement. Read more: How getting ahead on your tax return can help cut your tax bill Why it's important to plan for retirement with your partner How to plan for retirement and track your pension pot incomeSign in to access your portfolio
Yahoo
10-06-2025
- Business
- Yahoo
How far will your pension go as retirement costs go up
The cost of retirement continues to creep up, with the Pensions and Lifetime Savings Association (PLSA) recently putting the cost of a moderate retirement at £31,700 per year for a single person and £43,900 per year for a couple. This includes the state pension, but shows how much heavy lifting our workplace or personal pensions need to do to fill the gap. This is hardly going to buy you a luxury lifestyle either – a moderate lifestyle covers all your basics, plus some nice extras such as two weeks in Europe a year and the ability to run a car. If you want something more luxurious, this data shows your pension is going to need to work much harder: a comfortable lifestyle is said to cost £43,900 per year for a single person and £60,600 for a couple. Read more: What is the Pension Investment Review? Before you throw your hands up in despair, it's fair to say that while these figures provide a useful rule of thumb, they aren't hard and fast. Our own data from the HL Savings and Resilience Barometer put the costs slightly lower. A moderate retirement for a single person was pegged at £26,129 per year and a comfortable retirement at £41,829. The key thing is to think about what retirement means for you – is it lots of travelling or something more sedate? You may find that what you need differs massively from these figures. Once you've got an idea of what you want, you can start to put a figure on what that might cost. It's important to factor in all costs. The PLSA data assumes you own your home in retirement, and this is no longer the case for many people. So, if this is you, you will also need to factor mortgage or rental costs into your plan. You can then use online calculators to see if what you've got in your pension will get you where you need to be. Putting your data in an online calculator can show you what you are on track for in retirement. This will either give you the confidence of knowing you've got enough, or the time to put a plan in place if you haven't. Read more: Should people keep working until later in life? They can even be used to model the impact of boosting your contributions over time, so you can see how much small changes can help you move towards your retirement goal. Boosting contributions every time you get a pay rise can also make a big difference and it's also worth checking to see if your employer is willing to increase their contributions if you increase yours. This is known as an employer match and can play a big part in boosting your pension. The data shows that coupled up retirees have a slightly easier time of things than their single friends. This is because they share a lot of costs and will have the benefit of two state pensions and two workplace or personal pensions. This is a big help, but it's important not to rely too heavily on a partner's pension to see you through retirement. Relationships may not last and there's a worry that you could find yourself approaching retirement with very little. It's always important to make your own provision – even if you stay together having your own income will give you more control over how you spend your money in retirement. Read more: How getting ahead on your tax return can help cut your tax bill Why it's important to plan for retirement with your partner How to plan for retirement and track your pension pot income
Yahoo
24-03-2025
- Business
- Yahoo
How the spring statement could impact your finances
Speculation about Rachel Reeves' spring statement has been in full swing for weeks, with all sorts of ideas being thrown into the mix and then ruled out again. There's a tension at the heart of this, because the government has said this statement wouldn't contain major policy changes, but high borrowing costs, low economic growth and commitments on defence spending have sparked rumours of spending cuts and tax rises. As we prepare for the chancellor to give her statement on Wednesday, 26 March, it's worth taking stock of the key talking points and what actions you can take now. We've already had the news on spending cuts, affecting people with disabilities or long-term illnesses. It's a worrying time for anyone affected by this, because their financial resilience is already under horrible pressure. The HL Savings and Resilience Barometer shows that on average a household headed by someone with a disability has just £37 left at the end of the month, so there's little room to accommodate any cuts. Read more: How to make 'manifesting' work for your money For those currently in good health, it's vital to consider what would happen if you were unable to work for a long period. You may have benefits from your employer that would kick in, but check what would be available and whether you need to consider stand-alone critical illness cover or income protection. At this kind of time, you will be grateful for any emergency savings. It's one reason why it's so important to have emergency savings in place to cover 3-6 months' worth of essential spending while you're working age. For anyone alarmed by the ongoing debate about the future of the cash ISA, the good news is that there shouldn't be any changes announced in the spring statement. What's far more likely is that in the relatively near future, the government will publish some sort of consultation looking at ISAs more widely. We will need to wait and see what's raised in the consultation. It's essential that ISA reform prioritises improvements to the current regime rather than removing incentives to support investing and saving. There's also the hope it includes welcome changes, like dropping the Lifetime ISA penalty, allowing older people to pay into them, and raising the limit on the value of property that can be bought through the scheme. Read more: The best stocks and shares ISA providers ranked by Which? It doesn't mean savers and investors should sit on their hands though. There is still plenty of opportunity to take advantage of your ISA allowance in the current tax year – ahead of the 5 April deadline – and a fresh set of allowances at the start of the new tax year too. How you divide your annual allowance between cash and stocks and shares will depend on your time horizon, risk profile and objectives, but the majority of people should consider a mix of both. Another possible change, either now or in the autumn budget, is that income tax thresholds could be frozen beyond the current end point of 2028 – and stick around to 2029 or 2030. This is effectively a stealth tax, because it doesn't leave you any worse off today, but the impact over the years has already been fairly nasty. Average pay has risen 23% since thresholds were first frozen in 2021. If the personal allowance had risen with pay it would be £15,461 and the higher rate would be £61,632. Someone on the cusp of the higher rate threshold in 2021, would have had a tax bill of £7,540. Read more: Best cash-saving deals after Bank of England interest rate decision Pay rises since will have pushed that up by £4,545, and by the end of the freeze, if wages rise another 20%, it could add another £4,930. It means the freeze in thresholds could have more than doubled their tax bill. It means it's worth considering what you can do to keep a lid on your income tax bill – including pensions. When you start paying higher rate tax, there's also implications for your savings and investments – including a higher rate of capital gains tax and dividend tax. Using ISAs will protect money inside the wrapper from all these more: How to track down lost bank accounts and pensions How rising house prices can impact your finances What are green mortgages and are they the future?Sign in to access your portfolio
