Podcast Summary
Exploring Unconventional Ways to Make Money Work: Learn from individuals who have funded their adventures through various means, including crowdfunding, managing finances wisely, and raising money for good causes, in the new 'Making the Money Work' podcast series by This is Money.
The Financial Services Compensation Scheme (FSCS) has partnered with This is Money to release a new podcast series called "Making the Money Work." The series features interviews with individuals who have lived unconventional lives and explores how they funded their adventures. From crowdfunding and raising money for good causes to managing finances sensibly at home and then going on adventures, the podcast offers insights into various ways to make your money work for you. Whether you're planning a big trip or dealing with financial challenges in your everyday life, the series provides valuable information and inspiration. So, tune in to the This is Money podcast every fortnight for the next 10 weeks to learn more about making your money work for you.
FCA proposes minimum easy access rate for savings accounts and cash ISAs: FCA plans to set a minimum base rate for savings accounts and cash ISAs to ensure fairer returns for savers, including those who are less mobile or vulnerable, despite potential confusion about bonus rates
The Financial Conduct Authority (FCA) is proposing a minimum easy access rate for savings accounts and cash ISAs to address savers' dissatisfaction with low returns and the loyalty penalty. This means all providers would offer a base rate after an initial bonus period. The FCA aims for this baseline to be around the Bank of England base rate. However, some confusion arises as the proposal seems to mandate bonus rates and still allows customers to fall onto lower rates if they don't move. The FCA's intention is to ensure savers receive fairer returns, especially those who are less mobile or vulnerable.
FCA Proposes Rule to Protect Savers from Extremely Low Savings Account Rates: The FCA aims to shield apathetic savers from extremely low rates, but banks may not set base level high, leaving savers potentially losing out. Utilizing technology and digital savings platforms could offer higher returns while the FCA's proposal is implemented.
The Financial Conduct Authority (FCA) is proposing a new rule to prevent banks and building societies from offering extremely low savings account rates, aiming to protect those who don't move their money due to apathy or inertia. However, there's a concern that banks may not set the base level return high, leaving savers potentially losing out. The FCA's intention is to shield those who find moving their savings a daunting task due to the hassle and research involved. Yet, banks have a responsibility to their shareholders and may not prioritize customers' interests when setting rates. A potential solution could be the use of technology and digital savings platforms that assess the marketplace and move savings automatically, potentially offering higher bonus rates on a regular basis. The FCA's proposal may take some time to be implemented, and in the meantime, utilizing technology and digital savings platforms could be a viable option for those seeking better returns on their savings.
Digital savings platforms offer competitive rates but may not have all accounts: Older savers can benefit from digital savings platforms despite potential lower rates due to convenience and ease of management.
While using platforms like Hargreaves Lansdown's active savings or Raisins may not offer access to all available accounts, they do provide a selection of competitive rates. Older savers, who may be less digitally active, can still benefit from these platforms, but they often keep their savings with their existing bank due to convenience. The Financial Conduct Authority (FCA) is focusing on ensuring that those with savings are not being unfairly treated with low rates, rather than addressing the issue of those without savings. However, even with the competitive rates offered, most banks may still default to very low rates, which can result in significant losses compared to inflation. Ultimately, the convenience and ease of managing multiple savings accounts through digital platforms can outweigh the potential for slightly lower rates. It's important to note that older people's ability to use technology should not be underestimated, but rather, it's a mindset issue that needs to be considered when making policies.
FCA proposes to end bonus rates on savings accounts: Savers may need to move their money to new accounts annually for competitive rates, with FCA consultation taking a year to implement, UK housing market future uncertain
The Financial Conduct Authority (FCA) is proposing to end the practice of paying bonus rates on savings accounts after a set period. This means that savers may need to move their money to new accounts every year to maintain competitive rates. The consultation paper on this proposal was published yesterday, and it will likely take a minimum of 12 months before any changes are implemented. The housing market in the UK has seen a rollercoaster ride over the past decade, with growth, surges, and slowdowns. Factors such as confidence, stamp duty, government policy, and international economic conditions have all influenced the market. For the next decade and year, it remains uncertain whether the housing market will continue to bounce back or face another slowdown.
A decade of slow house price growth: Despite the influence of monetary policy, regulation, and economic conditions, house price growth in the past decade was significantly lower than previous decades due to high moving costs and only moderate income growth.
The housing market over the past decade has been influenced by a variety of factors including monetary policy, regulation, and economic conditions. The market was artificially supported by cheap mortgage finance and government help, but held back by the cost of moving, particularly stamp duty and deposit requirements. As a result, house price growth was relatively low compared to previous decades, with a 33% increase over the past ten years, which equates to just 2.85% annual growth. This is a significant decrease from the 117%, 180%, and 21% increases seen in the 2000s, 1980s, and 1990s, respectively. The housing market follows a typical cycle of rising and falling, but the past decade has been unusual due to the impact of the financial crisis and monetary policy. To understand the true value of house price growth, it's important to consider it in relation to other factors such as wages, inflation, and rental yields.
Factors Contributing to Higher Home Prices Despite Slower Gains: Mortgage rates, quantitative easing, and a lack of affordable houses have caused homes to become more expensive, despite slower house price gains.
Despite the recent decade seeing lower house price gains, homes have become even more expensive than before due to various factors such as low mortgage rates, quantitative easing, and a lack of houses falling to fair value after the financial crisis. The housing market experienced a "Boris bounce" at the end of last year, but most predictions suggest a steady growth with no significant inflation or falls in the next year. The health of the housing market depends on the number of transactions, as house prices are determined by supply and demand. Ultimately, it's unclear what people truly want to happen next in terms of house prices, with some desiring affordable homes while others aim to sell for the highest price possible.
Focus on housing transactions in 2023: Increase focus on housing transactions in 2023 to make the market more accessible, aim for house price stagnation, and encourage affordability through wage growth.
The focus for the housing market in 2023 should be on the number of transactions rather than house prices. The political uncertainty has led to a lack of stock in the market, keeping prices relatively steady. However, the ideal scenario would be for house prices to stagnate, allowing people to move without significant financial loss. This would require wages to increase and for houses to become more affordable compared to wages and inflation. The housing market should aim to be a place where people can sensibly plan their moves, rather than a lottery. For most homeowners, the benefit of rising house prices is largely theoretical, and at some point, they will likely need to move to a bigger home, which will only become more expensive with larger mortgages.
Factors hindering stable house price growth: Builders' supply constraints, mortgage market biases, and political considerations hinder stable house price growth, necessitating a multifaceted approach to balance the housing market
Achieving stable house price growth is a complex issue with various factors at play. While there's agreement on the desirability of stability, the housing industry's structure and market conditions make it challenging to deliver. Builders, for instance, have a responsibility to their shareholders to build only what they can sell, limiting the supply of new homes. Additionally, the mortgage market is biased towards certain borrower profiles, creating a divide in access to affordable finance. Politically, it's not expedient to pursue slower house price inflation due to the perceived benefits of rising asset values for individuals and the government. The upcoming budget may bring changes, such as the implementation of IR35 rules affecting contractors' tax status. Overall, addressing these issues requires a multifaceted approach to ensure a more balanced and equitable housing market.
Changes to UK Tax System: Private Sector Employment Status, Loan Charge, Capital Gains Tax, Inheritance Tax, and Pension Reforms: The UK tax system is undergoing significant changes, with new rules for employment status, ongoing issues with the loan charge, reduced relief time for capital gains tax on sold properties, potential simplification of Inheritance Tax, and ongoing debates over pension tax relief and Entrepreneur's Relief.
There are significant changes coming to the tax system in the UK, affecting both individuals and organizations. The private sector is soon to be held responsible for determining employment status, while the public sector has been dealing with this for some time. This is part of an ongoing effort to address tax evasion and ensure fairness. However, the implementation of this rule, particularly in the private sector, is causing confusion and concern. Additionally, there are ongoing issues with the loan charge, which has led to financial hardship for some individuals. In the realm of property, there are changes to capital gains tax for those who let out properties they previously lived in. The time frame for the Principal Private Resident Relief has been reduced, giving individuals less time before they are required to pay capital gains tax. The Office of Tax Simplification has suggested simplifying Inheritance Tax, making it less complicated for those who do not need to pay it. However, this tax remains unpopular due to its complexity and the emotional toll it can take. Pensions and entrepreneurship are also subjects of ongoing debate, with potential changes to pension tax relief and the Entrepreneur's Relief. The latter has raised concerns that some individuals may not be building businesses over a lifetime as intended. Overall, these changes highlight the need for continued dialogue and understanding as the tax system evolves to meet the needs of modern society.
New UK budget to bring significant changes under Boris Johnson government: Boris Johnson's new government may bring radical changes to UK finances, with a focus on Brexit, infrastructure development, and potentially unpopular reforms.
The upcoming UK budget, under the new Boris Johnson government, is expected to bring significant changes, potentially radical ones, to the country's finances. The chancellor, Sajid Javid, is seen as less conventional than his predecessors, and there have been calls for bringing in unconventional thinkers to reshape British politics. While some believe this budget might bring major overhauls, others think the government's focus on Brexit might delay such changes. However, with a new five-year mandate, the government may take this opportunity to implement difficult measures, such as those related to Britain's international competitiveness and infrastructure development in the north. The budget could also involve some people-pleasing policies, but the government's recent election win might give them the confidence to pursue more long-term, unpopular reforms. The extent of these changes remains to be seen, but the upcoming budget is poised to set a new tone for British politics and finance.
Reforming unpopular taxes for public trust: Discussed reforming stamp duty and inheritance tax, emphasized the need to address social care crisis with a fairer approach and simplified system, and considered reevaluating retirement savings models.
Unpopular taxes, such as stamp duty and inheritance tax, can be reformed or even abolished at certain political moments to build public trust and improve perception. However, the discussion also highlighted the pressing issue of social care, which is creating a potential regional crisis and is perceived as unfair due to the means-tested approach and the inclusion of personal assets in the assessment. The speakers suggested simplifying the system and potentially increasing the threshold for asset inclusion. The broader context includes the increasing number of nonagenarians and the shift towards longer retirements, which calls for reevaluating retirement savings models.
Addressing the social care crisis requires a broader conversation: The UK government aims to invest more in social care, address pension issues, and improve housing and benefits to tackle the social care crisis, with plans for universal free personal care by 2025 and improved access to 2,010 standards.
The social care crisis in the UK cannot be solved by focusing only on the NHS, but requires a broader conversation involving the pension sector, housing sector, and benefits system. The government aims to address this issue with a cross-party consensus, intending to invest an additional £1,000,000,000 annually and take a fairer approach to assessing the value of one's property in determining care contributions. With the state pension age rising, people are expected to work longer, but the pension value has decreased, leaving many struggling to pay for retirement. The areas with the highest percentage of people over 90, such as the New Forest, are popular retirement destinations, leading to a greater burden on local councils. A proposed solution is the launch of universal free personal care by 2025 and an immediate £8,000,000,000 annual increase in funding to improve care quality and access to 2,010 standards. This would enable more people to age in place, leading to better health and happiness.
Balancing Basic Care and Optional Extras for Long-Term Care Funding: A sustainable and equitable approach to long-term care funding is needed, balancing basic care for all with optional additional services for those who can afford it, with potential solutions including a care home model like Ryanair, tax breaks, a new ISA, home equity release system, and insurance-related plans.
The discussion revolved around potential solutions for funding long-term care for the elderly, with a focus on a system that balances basic care for all with optional additional services for those who can afford it. Damian Green suggested a care home model similar to Ryanair, where a basic level of care is provided, but extras come at an additional cost. The insurance industry also proposed financial solutions, such as tax breaks, a new ISA, a home equity release system, and insurance-related plans. However, concerns were raised about the feasibility and affordability of these options, particularly for young people who may struggle to afford retirement in the future. It was emphasized that any solution must be designed with both the present and future needs of society in mind. Overall, the conversation highlighted the need for a sustainable and equitable approach to long-term care funding.
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