Osborne: Britain ‘Needs to Save More’

05-AprilChancellor George Osborne believes that Britain needs to save more, announcing a new “Budget for savers” aimed at rewarding Britain’s savers. Mr Osborne noted the importance of saving during an answer to a question about the 2014 Budget, which the government delivered on the 19th of March.

The new budget is aimed at people who have “worked and saved hard all their lives” and strongly encourages an increase in saving. The Chancellor said: “We need to save more. The measures I have set out incentivise savings and reward savers, but it can’t happen overnight.”

Included in the new budget is a massive overhaul of Britain’s pensions. Rules that required people to use their pension balances to purchase an annuity will soon be removed, making it easier for people to withdraw from their savings. It also raises the amount that can be saved tax-free using an Isa – people will now be granted a £15,000 annual limit on tax-free savings.

The Chancellor denied that the new budget is designed to encourage savers to take money from their pensions. Mr Osborne noted that the new budget makes pensions more flexible, and that since it was a new area of policy, it remained “uncertain” how it would affect pensions and savings.

Other questions answered by Mr Osborne relate to the growing concern that there is a property bubble affecting the UK. Osborne noted that people should see London as a separate housing market from the rest of the UK, and that the Help to Buy scheme had not resulted in an increase in home prices.

He also stated that individuals and the government need to remain “vigilant” about the growing level of household debt in order to avoid a repeat of the 2005 onwards period. An estimated nine million individuals in the UK are trapped in a “debt cycle” and use one credit card to repay another, according to the FCA.

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European Savings Crisis Could Affect EU

january-16Europeans could lose some of their savings through currency devaluation, warns a shocking new report from the European parliament’s budgetary control committee.

The report states: “As a consequence of the macro-economic assistance programmes and ECB lending operations, EU citizens face a meltdown of their life savings with interest rates being lower than 1 pc … around the current inflation rate.”

Analysts believe that the devaluation of the Euro could threaten the stability of the entire European Union, as well as the international acceptability of the European currency. According to the report, the situation “could potentially put the EU as a whole at risk.”

The European Union’s average inflation rate measures 0.8 per cent in December – a rate that economists claim surpasses the average bank interest rate. The Eurozone’s benchmark rate is just 0.25 per cent. Members of the European Parliament claim the low interest rates are “robbing people” of their investments.

Ukip deputy leader and MEP Paul Nuttall claims that the report was a “rare bout of honesty and realism”, and that the European Central Bank was “robbing people of the value of their savings” through its artificially low interest rates and significant inflation rates.

Bundesbank head Jens Weidmann, also a member of the European Central Bank’s governing council, claims that the low interest rate policy has positive effects and potential risks for the EU.

“Ultra-loose monetary policy is a therapy with risks and side-effects. It cannot become a permanent therapy.” Weidmann believes that, over time, the positive effects of the European Central Bank’s current policies will be reduced, while the risks continue to rise.

Millions of pensioners throughout Europe have been affected by the rising inflation levels and poor interest rates. In Germany, “creeping expropriation” of savings has resulted in a 15 per cent decline in spending power for many people.

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december-19With the cost of living on the rise, more and more homeowners are struggling with surprising bills and unforeseen expenses. Credit limits are being pushed and, due to the massive rise in the cost of living in recent years, a large number of people are on a day-to-day schedule, unable to pay for anything beyond their next paycheque.

In tough times, the importance of emergency funds becomes ever more clear. Home finance experts call these funds ‘rainy day’ savings funds, and advise that everyone, whether homeowner or tenant, individual or family member, keep a small amount of savings ready for any surprising bills or sudden expenses.

Why is the rainy day fund so important? Several reasons. The first is that the labour market has, despite a few key improvements, remained turbulent and unpredictable over the past two years. Job security – once a concrete term – doesn’t mean quite the same thing that it did prior to the 2008 financial crisis and recession.

Because of this, planning for a financial rainy day isn’t just a good idea, it’s often far more of a necessity. Experts recommend keeping at least three months of personal expenses saved away in case you’re beset by surprise bills, with six months an even better option.

The growing cost of living is another reason for the importance of a ‘rainy day’ cash fund. Energy costs have risen over the past two years, making it more likely that an energy bill could surprise you and catch you financially off-guard. Keeping a fund on hand makes it easy for you to account for unexpectedly large utility bills.

Preparing for the worst is always a good financial plan, even if you expect the very best to happen. Whether three months or six, keeping a ‘rainy day’ fund puts you in the lead compared to other individuals and allows you to weather rocky financial weather without the stress and worry of a paycheque-to-paycheque planner.

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Avoiding Excess Household Debt: 3 Expert Tips

december-18According to new figures from the Bank of England, household debt in the UK hit a record high in recent months. Individuals now owe in excess of £1.43 trillion – far more than at any other point in recent history. The total amount of household debt now exceeds the level recorded in September 2008, just after the financial crisis.

On average, each UK adult has approximately £26,489 in debt – a figure that’s made up of everything from credit card balances to home loans. It’s a startling amount – a figure equivalent to an entire year’s worth of income for many of the UK’s workers.

Want to avoid falling even further into the debt trap? As the country borrows more and more, a growing number of households are saying ‘no’ to the great temptation of borrowing and are reducing their debt using three simple strategies.

Keep track of savings

A lot of household debt is the result of poor money management, not a lack of cash or overly costly lifestyle. Keep good records of where you keep your money, what you spend it on, and when it comes in and goes out and you’ll be more aware of the reasons for your borrowing.

Double check your insurance

You might be paying for more than one form of insurance cover. If you buy a new car or consumer product, check to see if you receive coverage from the manufacturer or retailer. You could be spending more than you need to on insurance for items that are already protected.

Use your credit cards wisely

Credit cards might not be a blessing, but they certainly don’t need to become a curse for your personal finances. Use your credit cards wisely, and apply a common sense approach to whether or not you can really afford to buy something. If you can, use a credit card that gives you the best deal, not the longest repayment window.

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Experts Suggest 5 Tactics for Improving Your Credit Rating

december-07With the property market bouncing back, a growing number of people are seeking affordable mortgages. Mortgage rates fell to record-breaking low levels in the last few months, reaching 3.3pc in September for existing mortgages and just 3.08 per cent for new mortgages.

The growing interest in property has been fuelled by government schemes such as Help to Buy. Other factors have also affected the housing industry, such as a greater level of competition between lenders searching for new business in a growing and increasingly healthy market.

Because of the massive losses many lenders incurred during the financial crisis, a growing number have taken more cautious approaches to lending. Customers face new barriers from far pickier lenders, and small mistakes in the past are now more than enough to have significant consequences for individuals.

Financial experts recommend that would-be borrowers try to establish a record of timely repayments before taking out any loans using several tactics. These include building an address history – a long period of residence at one address, which can suggest career and personal stability.

Increasing your access to credit is also a good strategy. Without a strong history of responsible borrowing, lenders have little to assess your suitability as an applicant for a mortgage. Experts recommend having some access to credit, even if you only use it for occasional purchases.

Staying within established credit limits – whether it’s an overdraft or credit card – is also sensible. Exceeding an overdraft is seen as a warning that you lack any financial stability – a warning that lenders take very seriously. Keep your accounts open and avoid nearing your credit limit on a frequent basis.

Finally, try to keep your existing credit cards open as long as possible. Interestingly, it’s better to save several credit cards that are rarely used – or even unused – than it is to have none at all. Lending experts recommend that borrowers “mature” their accounts by keeping them open without necessarily using them for borrowing.

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Britons saving more in fear of a recession

The newest data released by the Office for National Statistics state that Britons are saving more as 7.4% of households report increasing their savings in the second quarter which is up from 5.9% in the first quarter. This increase in the amount households are saving is in response to a feeling that a recession is imminent.

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Leading think tank recommends ISAs ‘should be scrapped’

A leading think tank has recommended that Individual Savings Accounts (ISAs) should be scrapped as they have failed to encourage families to save.

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Tax free savings still popular with British investors

After four years where net investments in Individual Savings Accounts UK based unit trusts and open ended investment companies (OEICs) fell, recent figures show that investment in ISAs in March hit a nine year high.

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Brits expect interest rates to rise in 2011

British savers expect interest rates to rise in 2011 with two third expecting rates to be higher before the New Year.  That’s the results of a new survey from Lloyds TSB which shows that beleaguered savers are hopeful that they may have something to celebrate this year – in the form of higher savings rates.

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Brits leaving more cash in savings accounts

Over half of British savers are withdrawing less from their accounts in 2011 as they seek to maintain their balances.  The recent survey from Birmingham Midshires found that withdrawals were down in the first quarter of 2011 with account holders also increasingly worried about the effect that rising inflation is having on their savings.

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