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Under-30s not saving enough for retirement

70% of under-30s are not saving enough to reach their ideal retirement income, according to Scottish Widows.

The report found that under-30s make average contributions of £184 a month, including employer contributions. These savings would result in an estimated annual pension of £15,000 – well short of their desired retirement income of £23,000 a year.

The survey of 5,314 adults found the number of people saving enough increased from 46% to 56% since auto-enrolment was introduced in 2012.

Despite the rise, 1 in 5 adults (18%) are still not saving for retirement.

Scottish Widows estimates that in order to achieve the £23,000 annually in retirement, someone aged 25 would need to save £293 each month. 

Someone who started saving aged 35 would need to put away £443 a month or £724 for a 45-year-old.

Over-50s would need to put aside £1,445 a month to reach their desired income.

Catherine Stewart, retirement expert at Scottish Widows, said:

“Auto-enrolment may well be lulling people into a false sense of security that they are putting away enough for a comfortable retirement. For many, particularly those only making the minimum contribution that is simply not the case given retirement is looking more expensive, and longer, than ever.”

Contact us to discuss retirement planning.

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Landlords hit by mortgage interest relief changes

Landlords with a single property could be pushed into a higher tax bracket due to changes to mortgage interest relief.

The National Landlords Association (NLA) polled 754 landlords and found that 16% with a single property said they will move into a higher income tax bracket – a 7% increase from Q4 2016.

Changes to relief on finance costs on residential properties was brought in on 6 April 2017, restricting costs to the basic rate of income tax.

These include mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages.

This means that landlords will only be able to deduct a share of finance costs when calculating rental profits.

This is being phased in over 4 years:

Tax year Percentage of costs deducted from profits Percentage of costs available a basic rate reduction
2017/18 75% 25%
2018/19 50% 50%
2019/20 25% 75%
2020/21 0% 100%

NLA estimates that a landlord with a single property would need to increase rent by more than 11% to continue getting the same yield from the property. This equates to a rise of £116 per month for the average rental property. 

Richard Lambert, chief executive officer at the NLA, said:

“Single property landlords are responsible for providing a huge proportion of the UK’s private rented homes, and these findings show that, slowly, more and more are waking up to the fact their tax bills could be significantly higher in the coming years.”

Contact us today to discuss your tax obligations.

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Flexible working set to increase

Almost two thirds (65%) of private sector employers think flexible working will increase over the next 5 years, according to Aviva.

The study of 500 employers and 2,000 employees found 51% of businesses said flexible working increases productivity and 68% said it improved staff satisfaction.

Of those who currently work flexibly, 37% were happier at work and 34% were able to manage their responsibilities outside of work more effectively.

Flexible working also improved retention and recruitment with 63% of workers more likely to stay with an employer who offers flexible benefits.36% saw flexible working as a key factor when considering a new job.

Flexible working options most valued by workers:

  • working from home (23%)
  • working longer hours over shorter number of days (22%)
  • working flexible hours across the week (19%).

Gareth Hemming, director of SME insurance at Aviva, said:

“Businesses may need to rethink the way their employees work and should consider the benefits flexible working could bring in meeting business goals. 

“It can also support employees looking to manage their work-life balance better as they juggle work with busy lives, looking after family young and old, managing health or even wanting more time to pursue other interests.” 

Talk to us about how flexible working can benefit your business.

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Homeowners rely on parents to move up property ladder

More than a third (35%) of homeowners rely on financial help from family and friends to move up the property ladder, according to Lloyds Bank.

Out of 525 people surveyed, 32% need an average of £21,231 from their parents to secure their next home.

9% would borrow money from their grandparents, while 6% would borrow from friends.

Of those who need financial support, 47% believe their parents would have to cut back in order to help them move up the property ladder.

63% plan to use the equity from their current property to get the deposit they need to move and 41% would use their personal savings.

Homeowners also spoke about what delayed them from purchasing their next home:

  • not finding the right property (32%)
  • lack of affordable property available (26%)
  • the cost of stamp duty (24%).

Andy Mason, mortgage director at Lloyds Bank, said:

“Parental support continues to play a vital role in helping young people to get on the property ladder. However, it is clear that despite improved conditions for this part of the housing market, ‘second steppers’ will still rely on the BoMaD, with hard-pressed parents being once again called on for financial help. 

“Without this extra financial support, second steppers believe that they wouldn’t be able to make the next move on the property ladder for some time.”

Contact us today to discuss your personal financial planning.

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Millennials drive workplace pension participation

78% of eligible employees participated in a workplace pension scheme in 2016, according to the Department for Work & Pensions.

The biggest jump in growth was from those under 30 working in the private sector with the number of people participating increasing from 24% in 2012 to 68% in 2016.

By industry, 89% of those working in the energy and water sector took part in a workplace pension, compared to 44% working in agriculture and fishing.

By region, employees in the South West saw the biggest rise in participation with 94% having enrolled into workplace pensions.

Alistair McQueen, head of savings & retirement at Aviva, said:

“Today’s millennials face financial pressures like never before. House prices have sky-rocketed, a ‘job-for-life’ is a thing of the past, and it is not uncommon to begin your career with thousands of pounds of student debt.

“Millennials want to prioritise long-term saving before short-term spending and they are putting their money where their mouth is. No longer can people claim that today’s millennials are living just for today.”

Talk to us today about your workplace pension.