Money
Should investors fear the ‘October effect’?
Dubbed the ‘greatest humourist the United States has produced’, Samuel Langhorne Clemens, known better by his pen name Mark Twain, is probably best known for the characters of Tom Sawyer and Huckleberry Finn.
For investors, it’s one of Twain’s lesser-known creations, Pudd’nhead Wilson, the titular character who gives his view on the month of October when investing:
“October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.”
Although Twain’s views on the stock market are meant to be sarcastic, they do in fact have a ring of truth to them. Since the beginning of the 20th century, plenty of market cycles have seen a dip in performance during this month.
The idea could have gained traction after the great Banking Panic of 1907, an event that led to multiple bank runs and heavy selling at the US stock exchange. All that prevented a serious financial crash was the work of a banking consortium to provide major funding to New York itself, during what was a notoriously cold October in the Big Apple.
The stock market crash that led to the US Great Depression of 1929 – a financial disaster on an unparalleled scale – began on 24 October, Black Thursday, with the market losing 11% of its value in frantic trading. Black Tuesday occurred the following week, seeing a loss of over 23% in just two days.
The black days of October have continued in more recent times, with Black Monday in 1987. On 16 October that year, all markets closed in London due to adverse weather but, after they re-opened, the speed of the crash accelerated. By midday, the UK blue chip index had dropped by 14% and a further 11% the following day – some of the largest losses on record.
Domestic stocks then continued to fall, albeit at a less precipitous rate, reaching a trough in mid-November at 36% below their pre-crash peak, not recovering until 1989.
Although October has had its fair share of market mishaps over the years, it’s interesting to note the month has historically heralded the end of more bear markets than the beginning. In fact, October gets a poor rap when considering most investors have probably lived through a range of highly volatile months.
The fact of the matter is that terrible market events do not all cluster in one particular month. If they did, it would make an investor’s job that much easier.
Maybe it’s Mark Twain’s fault, maybe it’s just investor psychology but, October, despite hosting Halloween, should be no scarier for investors than any other month of the year.
Perhaps it’s just a difference in lexicon between the British and our American cousins. After all, anyone from North America will tell you with glee that October hails the start of the fall – just not necessarily for financial markets.
Of course, despite volatility and extreme market events, investing over the long term remains a tried-and-tested route for investors and good outcomes.
Thomas Watts is senior investment analyst on Abrdn’s MPS team
Money
I won £200k on People’s Postcode Lottery and lost half a stone – I’ve had sleepless nights & still think it’ll disappear
A WINNING Postcode Lottery player bagged an eye-watering £200,000 and lost half a stone.
Alison and Tim Browne, from Breaston, Derbyshire, were gobsmacked when they discovered the lucrative jackpot.
The couple were one of three households who scooped the windfall in the Postcode Lottery Millionaire Street draw last week.
Mum-of-two Alison said their jackpot has seen her drop half a stone within a week due to lack of sleep.
“But it’s good! You have dreams that you have won lots of money, but then you wake up and think, ‘Damn, it’s a dream’,” she said.
“This is how I felt every night this week when I managed to get to sleep at 3am. Then I woke up and thought, ‘No, it’s not a dream!’
“Never in my wildest dreams did I think we would win this much.”
Tim admitted he didn’t even enter the competition – but his wife unknowingly had.
He said: “I can’t believe it. I’m just glad she didn’t phone to tell me the amount when I was driving!
“I didn’t even know she was doing People’s Postcode Lottery, to be honest.”
An overjoyed Alison added: “It’s a fantastic feeling and I can’t stop smiling. But we’re going to have a big, big party on the street.
“It’s wonderful. We’ve known George and Paul for over 30 years and we get on really, really well.
“It’s a lovely street, lovely neighbours, and a lovely place to live.
“I don’t know what to think. This is life-changing, it really is.”
The pair are plan to splurge the cash on a lavish holiday to celebrate their 40th anniversary.
And, they will finally be able to tick riding on the iconic Orient Express off their bucket-list.
Tim said: “It means everything. We always wanted to do the train trip across the Rockies in Canada and also the Orient Express.
“There’s lots of trips that we’ve never done and have never been able to do. And now we’ll be able to do them and that’s fantastic.”
Alison, a freelance school music exam coordinator, said: “We’ve been married 43 years now, but our 40-year anniversary fell during lockdown so we weren’t able to celebrate properly. Now we can do that.”
The couple share a son Matthew, who is autistic, and hailed the win for “the security this will bring him”.
Meanwhile, older son James, joked: “I’ll be happy with a pint in Spoons. It’s £6 a pint!”
Tim revealed he also dreams of welcoming a new puppy into the family to keep Pointer Finlay company.
The musician told how a new Gore-Tex waterproof jacket wouldn’t go a miss either.
Alison laughed: “If we get another dog we’ll need a house with a bigger garden.
“My son and daughter-in-law don’t want us to get another dog because they have to look after them if we go away.
“We’re all going away to Wales on holiday together next week so we can celebrate there.”
It comes as another lucky player who scooped a life-changing Postcode Lottery prize refused to believe she had won – until a key sign revealed it was fate.
Meanwhile, another punter doubled their £200,000 Postcode Lottery win by using a clever trick – make sure you don’t miss out.
Jo Deighton from Shoreham, West Sussex, was gobsmacked when she scooped nearly an eye-watering quarter of a million pounds.
Elsewhere, one Brit who bagged a £410,000 jackpot told how no one believed her – not even her husband.
Leyla Eaton’s jaw dropped after discovering she’d scooped the eye-watering prize.
The mum-of-two entered when she was struck by a “strong feeling” a huge windfall was coming her way.
How to play the People’s Postcode Lottery?
For just £12 a month, players can sign up through the official website to have a chance of winning millions of pounds.
Once signed up, players are automatically entered into every draw and prizes are announced every day of each month.
Tickets play for the Daily Prize, worth £1000 and revealed every single day.
Tickets could also win a jackpot of £30,000 for Saturday and Sunday’s Street Prize draws.
People’s Postcode Lottery also offers a £3million Postcode Millions draw each month – where your ticket plays for a share of the cash prize fund.
Winners are notified by email, text, post, or phone call, depending on the prize they win.
Jackpot winners are visited by the lottery team in person.
Money
Nine Budget predictions that Rachel Reeves could make including pensions shake-up and alcohol price rises
THERE’S less than a week to go until this year’s Budget, leaving many people wondering what the Government will announce.
The Budget gives an update on the government’s economic plans, which are based on official forecasts from the Office for Budget Responsibility (OBR).
It also gives Chancellor Rachel Reeves the chance to update Parliament on the government’s tax and spending plans for the next year.
Labour’s manifesto promise ruled out hikes to VAT, income tax rates and national insurance in line with its pledge to help “working people”.
The Government has so far refused to rule out several big tax changes, including a council tax reform and new pension rules.
Meanwhile, Sir Keir Starmer’s warning that the Labour Party’s first Budget in more than a decade “is going to be painful” has left many wondering what could be announced.
Here we take you through what could be in store.
Income tax
Experts suggest that Rachel Reeves could extend the “stealth” freeze on income tax thresholds for another two years.
The personal allowance, which is the amount that people can earn before they need to pay income tax, is frozen until 2028 but the Chancellor could extend it in next week’s Budget.
As worker’s wages rise in line with inflation this could drag thousands of people into higher tax brackets through fiscal drag.
Government sources have said that doing so would not breach Labour’s general election manifesto, which promised not to increase the rate of income tax.
The move could bring in as much as £7billion a year from 2028 onwards.
Capital gains tax
Another rumour is that Labour will make changes to capital gains tax in its Budget.
Capital gains tax is charged on the profit you make when you sell something that has increased in value.
Sir Keir Starmer has ruled out charging capital gains tax for first-time buyers, which is exempt under the current system.
Experts now predict that the rate charged for higher-rate taxpayers selling a second home will remain at 24%.
What is the Budget?
THE Budget is big news and where you’ll often hear announcements about taxes. But what exactly is it?
The Budget is when the Government outlines its plans for the economy including taxation and spending.
The Chancellor of the Exchequer delivers a speech in the House of Commons and announces plans for things like tax hikes, cuts and changes to Universal Credit and the minimum wage.
At the same time, the Office for Budget Responsibility (OBR) publishes an independent analysis of the UK economy.
Usually, the Budget is a once-a-year event and usually takes place in the Autumn, with a smaller update known as the Spring Statement.
But there have been exceptions in recent years when there have been more updates, or the announcements have taken place at different times, for example during the pandemic or when there is a General Election.
On the day of the Budget, usually a Wednesday, the Chancellor is photographed outside No 11 Downing Street with the red box.
She then heads to the House of Commons to deliver her speech, at around 12.30 following Prime Minister’s Questions (PMQs).
Changes announced in the Budget are sometimes implemented the same day, while others may not have a set date.
For example, a change to tobacco duty usually happens on the same day, pushing up the price of cigarettes.
Some tax changes are set to come in at the start of a new tax year, which is April 6.
Other changes may need to pass through Parliament before coming into law.
But the 20% tax when selling shares or other valuable assets such as paintings or furniture could be increased.
This move may not affect basic-rate taxpayers, who currently pay 10pc, although a change to their thresholds has not been ruled out.
The Government may also alter the current threshold at which capital gains tax is due.
At the moment the first £3,000 you make in profit for selling an item that has increased in value is tax-free.
But this threshold has been reduced several times by the previous Conservative government.
First from £12,300 in 2022-23, then to £6,000 in 2023-24.
Inheritance tax
The prime minister and chancellor could make multiple changes to inheritance tax, which currently has several exemptions and reliefs.
Inheritance tax is currently charged at 40% on the property, possessions and money of someone who has died if they are worth more than £325,000.
Fewer than one in 20 estates currently pays death duties as many estates fall below this threshold.
But the tax raises about £7 billion a year for the Government.
There are several exemptions and reliefs which mean you do not need to pay inheritance tax, including gifts or giving to charity.
It is thought that changes to several of these rules are being considered.
For example, gifts which are given less than seven years before you die may be taxed.
There are also exemptions if you leave land or pasture which is used to rear animals or to grow crops through agricultural relief.
It is not yet confirmed what changes will be made in the Budget on 30 October.
Employer national insurance contributions
Experts have suggested that the Chancellor could impose national insurance on employers’ pension contributions in the Budget.
Doing so could raise £15.4 billion, which would help to plug a £40billion funding gap in the public finances.
Employers currently pay national insurance for post workers earning more than £9,100 a year.
The amount they pay is equivalent to 13.8% of the employee’s earnings above this figure.
For an employee earning £30,000 the employer would pay around £2,884.20 in national insurance.
Former pensions minister Sir Steve Webb said that if the government put up the national insurance rate by 1% it could raise an extra £8 billion a year.
But he warns that it could leave millions of workers with lower wages and less generous pensions.
If an employer has to pay more tax then their costs will go up, so they would need to save money elsewhere.
They may do this by giving employees smaller pay rises or by reducing the amount that they pay into employees’ pensions.
Sir Steve said: “Changing national insurance contributions could leave hundreds of thousands of people with a poorer retirement.”
Pensions
The Government has so far failed to rule out changes to the lump sum you can take out of your pension without paying tax.
At the moment retirees can withdraw up to 25% of the total value of their pension tax-free, up to a maximum of £268,275.
But Labour is allegedly considering cutting the tax-free amount to £100,000 in a move which could raise around £2 billion.
It is not yet clear how this would work.
Another option being considered is to charge inheritance tax on pensions.
At present pensions are not considered to be part of your estate when you die, which means that you do not need to pay IHT on them.
But some suggest that Labour could change this in a move which could leave grieving families tens of thousands of pounds worse off.
What are the different types of pensions?
WE round-up the main types of pension and how they differ:
- Personal pension or self-invested personal pension (SIPP) – This is probably the most flexible type of pension as you can choose your own provider and how much you invest.
- Workplace pension – The Government has made it compulsory for employers to automatically enrol you in your workplace pension unless you opt out.
These so-called defined contribution (DC) pensions are usually chosen by your employer and you won’t be able to change it. Minimum contributions are 8%, with employees paying 5% (1% in tax relief) and employers contributing 3%. - Final salary pension – This is also a workplace pension but here, what you get in retirement is decided based on your salary, and you’ll be paid a set amount each year upon retiring. It’s often referred to as a gold-plated pension or a defined benefit (DB) pension. But they’re not typically offered by employers anymore.
- New state pension – This is what the state pays to those who reach state pension age after April 6 2016. The maximum payout is £203.85 a week and you’ll need 35 years of National Insurance contributions to get this. You also need at least ten years’ worth to qualify for anything at all.
- Basic state pension – If you reach the state pension age on or before April 2016, you’ll get the basic state pension. The full amount is £156.20 per week and you’ll need 30 years of National Insurance contributions to get this. If you have the basic state pension you may also get a top-up from what’s known as the additional or second state pension. Those who have built up National Insurance contributions under both the basic and new state pensions will get a combination of both schemes.
Stamp duty
Stamp duty land tax is due if you buy a property or a piece of land which is worth more than a certain price in England and Northern Ireland.
In 2022 the rate at which people start to pay it was increased from £125,000 to £250,000 for second-steppers.
Meanwhile, for first-time buyers, it rose from £300,000 to £450,000.
A discounted rate on property purchases of up to £625,000 was also introduced.
But these higher thresholds are only due to last until March 31 2025, after which point they will return to the original levels.
So far Labour has not committed to extending them.
If the higher thresholds are not extended then it could mean first-time buyers are slapped with tax bills which are £15,000 higher than before.
Cash ISAs
Savers have been rushing to open a cash ISA before 30 October to protect themselves from any tax surprises which could be announced in the Budget.
Cash ISAs are a tax-free way to save towards your financial future or invest in the stock market.
Every tax year you can save up to £20,000 in one account or split your allowance across multiple accounts.
The tax year runs from 6 April to 5 April.
You can only pay into one Lifetime ISA in a tax year and the maximum amount you can deposit is £4,000.
There is no limit on how much cash you can stash away over your lifetime.
Meanwhile, savers can be forced to pay tax on their nest eggs if they go over the personal savings allowance.
Basic-rate taxpayers can earn up to £1,000 in interest before they need to pay tax on their savings.
Higher-rate taxpayers can earn up to £500 in interest, while additional-rate taxpayers get no allowance.
But The Resolution Foundation, a think tank, has previously suggested that the government should slash the amount that can be saved into an ISA to £1,000.
They argue that by not having a cap the accounts mostly benefit those with lots of disposable income.
Alcohol duty
It has been reported that the Chancellor is considering increasing alcohol duties in the Budget.
Rachel Reeves has not ruled out pushing up the tax on spirits, beer and wine, which would raise an extra £800 million next year.
Alcohol duty is charged on all drinks which are more than 1.2% ABV strength, either at the point of production or when they are imported.
Usually, alcohol duty rises each year in line with inflation unless the Chancellor chooses to freeze it.
Although inflation is set to hit 2% next year, industry sources have said that alcohol duties could be pushed up to more than 6%.
But higher taxes could mean higher prices, which could deter drinkers and cause them to buy less.
Fuel duty
Drivers could be hit in the pocket if Labour decides to make changes to fuel duty in the Budget.
Fuel duty rates have been frozen since 2011-12.
It was cut by a further 5p in 2022 by the Conservatives in response to soaring fuel prices at the start of the war in Ukraine.
The RAC has predicted that the 5p cut could be scrapped, which could increase the cost of filling up a tank by an average of £3.30.
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Money
Exact code reveals day your Pension Credit will be paid as 74,000 apply after Winter Fuel Payment change
HOUSEHOLDS should be aware of the exact codes which reveal the day their Pension Credit will be paid into their account.
Pension Credit gives you extra money if you claim the State Pension and are on a low income.
Over one million retirees get the financial support, with the figure expected to rise as more households look to claim the benefit to get access to the Winter Fuel Payment.
That is because cuts made by Chancellor Rachel Reeves mean only those on means-tested benefits – which includes Pension Credit – get the £300 support.
Around 74,000 pensioners have applied for the benefit following the move.
If you are expecting to receive the benefit for the first time you should be aware that the money is paid in arrears on the last day of your benefit week.
What day you receive financial support depends on what benefit you have applied for and what date you first received the payment.
In this case, Pension Credit is paid every four weeks.
Usually, the day you receive the payment is allocated using the last two digits of your National Insurance number.
This code is made up of letters and numbers and never changes throughout your life.
If you are confused about where you can find your National Insurance number, it is usually on documents such as old payslips.
You can also check out this article here for a more detailed explanation of what to do if you can’t find your NI number.
Recipients then must look at the last two digits of this code to find out when they can expect to see their Pension Credit money paid into their account.
For example, if the last two digits of your NI number are between 00-19, your benefit week runs from Tuesday to Monday, with the Pension Credit payday being Monday.
If your NI number is between 20-39 then your benefit week runs from Wednesday to Tuesday, with your Pension Credit payday set to be Tuesday.
If your NI number is between 40-59, your benefit week runs from Thursday to Wednesday and your payday will be Wednesday.
Meanwhile, if your NI number is between 60-79, then your benefit week runs from Friday to Thursday and your payday will be Thursday.
Finally, if your NI is between 80-99, then your benefit week runs from Saturday to Friday and your Pension Credit payday will be Friday.
Caroline Abrahams CBE, charity director at AgeUK said a person’s payday doesn’t affect Pension Credit entitlement.
She explained: “We would urge anyone who is struggling right now to check whether they are entitled to extra money help.
“Age UK hosts a free and anonymous Benefits Calculator which can provide an estimate of the benefits that people could be entitled to so it’s worth checking.”
What can you get on pension credit?
If you live with a partner and you are both of State Pension age then your weekly income must fall below around £350.
However, if your income is slightly higher, you might still be eligible for Pension Credit if you have a disability, you care for someone, you have savings or you have housing costs.
You could get an extra £81.50 a week if you have a disability or claim any of the following:
- Attendance allowance
- The middle or highest rate from the care component of disability living allowance (DLA)
- The daily living component of personal independence payment (PIP)
- Armed forces independence payment
- The daily living component of adult disability payment (ADP) at the standard or enhanced rate.
You could get the “savings credit” part of pension credit if both of the following apply:
- You reached State Pension age before April 6, 2016
- You saved some money for retirement, for example, a personal or workplace pension
This part of Pension Credit is worth £17.01 for single people or £19.04 for couples.
Pension Credit opens the door to other support, including housing benefits, cost of living payments, council tax reductions and the Winter Fuel Payment.
Claims for Pension Credit also open doors to a number of freebies and discounts.
For example, Pension Credit claimants over 75 qualify for a free TV licence worth up to £169.50 a year.
Claims for the benefit also provide eligibility to £25 a week cold weather payments and the £150 warm home discount.
How to check your eligibility?
For those who are unsure if they can get access to the help, you can use the government’s Pension Credit Calculator.
This is available on the Gov.uk website and you have to put in your personal details to see if you qualify or not.
Before you begin the process you will need details of your earnings, benefits, pensions, savings and investments.
If you have a partner you must put in their details as well.
Applications for pension credit can also be made by ringing the pension credit claim line on 0800 99 1234.
You can get a friend or family member to ring for you, but you’ll need to be with them when they do.
You’ll need the following information about you and your partner if you have one:
- National Insurance number
- Information about any income, savings and investments you have
- Information about your income, savings and investments on the date you want to backdate your application to (usually three months ago or the date you reached state pension age)
If you claim after you reach pension age, you can backdate for up to three months.
Are you missing out on benefits?
YOU can use a benefits calculator to help check that you are not missing out on money you are entitled to
Charity Turn2Us’ benefits calculator works out what you could get.
Entitledto’s free calculator determines whether you qualify for various benefits, tax credit and Universal Credit.
MoneySavingExpert.com and charity StepChange both have benefits tools powered by Entitledto’s data.
You can use Policy in Practice’s calculator to determine which benefits you could receive and how much cash you’ll have left over each month after paying for housing costs.
Your exact entitlement will only be clear when you make a claim, but calculators can indicate what you might be eligible for.
Money
Major bank offering £50 payments to customers and you’d get cash before Christmas
A HIGH street bank is giving away £50 free to customers who move their savings account to it from elsewhere.
The reward is available to any new or existing customer who switches their Individual Savings Account (Isa) from another provider to the bank.
An Isa is a a type of savings account where you don’t pay tax on any interest earned, and you can save up to £20,000 a year tax-free.
Smaller savings pots don’t usually incur tax, but larger ones can.
For those putting away money for big purchases, like a home deposit, an Isa is worth considering.
The offer from Santander could be withdrawn at any moment – so those eyeing up the extra cash for Christmas should act fast.
Now Santander is offering free cash to those with a nest egg of more than £10,000.
Once the transfer is complete the bank will give customers a £50 e-voucher.
This can be spent at more than 100 restaurants, supermarkets and clothes stores including Argos, B&M and Primark.
Banks often offer incentives to attract new customers, typically for bank accounts, but sometimes for other products like savings accounts too.
Andrew Hagger, personal finance expert at Moneycomms, said: “This is a good incentive – especially for people who may be sitting on some poor performing Isas.”
But it’s important to check that an account is right for you before you switch, instead of moving your money just to get an incentive, and that you’re getting the best rate on offer.
How do I get the deal?
First you need to apply for a Santander Fixed Rate Isa.
You can also upgrade an existing Santander Isa to a Fixed Rate Isa.
Once the account is opened, you must complete a transfer in instruction.
Santander suggests that you do this on the day you open your account or upgrade.
What is an Isa?
Isa stands for Individual Savings Account.
There are four types: cash Isas, stocks and shares Isas, lifetime Isas and innovative finance Isas.
The main benefit of an Isa is that all the money you pay in is tax-free.
This means that you do not need to pay tax on the amount you have saved or any interest you earn.
Every tax year you can save up to £20,000 in one Isa account or split your allowance across multiple accounts.
The tax year runs from April 6 to April 5.
You can open one with most banks and building societies.
Some providers will have restrictions on the minimum amount you can pay in and may require you to deposit a certain amount in order to open an account.
You can do this online or in a branch.
The instruction asks for your non-Santander Isa to be transferred to your new Fixed Rate Isa.
You need to do this within the first 14 days of opening your Isa account.
When you complete the form you will need to ask for a full transfer of your existing non-Santander account, which must have a balance of £10,000 or more.
You must provide an up-to-date email address which the bank can use to email you the code to redeem your e-voucher.
Your account could take up to 30 days to transfer.
You will be sent a code to redeem your e-voucher within 14 days of your transfer completing.
When transferring an ISA you must follow the bank’s correct processes, or you could lose the tax-free status of your cash.
Never withdraw your cash from the account.
Is the Santander deal worth it?
Santander currently has three fixed-rate Isas on offer, with different terms.
A fixed rate means you lock in the interest rate at the start and it won’t change in that time.
Locking away your cash can mean you’re protected if interest rates fall, but you could miss out if they rise.
SAVING ACCOUNT TYPES
THERE are four types of savings accounts fixed, notice, easy access, and regular savers.
Separately, there are ISAs or individual savings accounts which allow individuals to save up to £20,000 a year tax-free.
But we’ve rounded up the main types of conventional savings accounts below.
FIXED-RATE
A fixed-rate savings account or fixed-rate bond offers some of the highest interest rates but comes at the cost of being unable to withdraw your cash within the agreed term.
This means that your money is locked in, so even if interest rates increase you are unable to move your money and switch to a better account.
Some providers give the option to withdraw, but it comes with a hefty fee.
NOTICE
Notice accounts offer slightly lower rates in exchange for more flexibility when accessing your cash.
These accounts don’t lock your cash away for as long as a typical fixed bond account.
You’ll need to give advance notice to your bank – up to 180 days in some cases – before you can make a withdrawal or you’ll lose the interest.
EASY-ACCESS
An easy-access account does what it says on the tin and usually allows unlimited cash withdrawals.
These accounts tend to offer lower returns, but they are a good option if you want the freedom to move your money without being charged a penalty fee.
REGULAR SAVER
These accounts pay some of the best returns as long as you pay in a set amount each month.
You’ll usually need to hold a current account with providers to access the best rates.
However, if you have a lot of money to save, these accounts often come with monthly deposit limits.
You may be charged a penalty for withdrawing cash early, or lose the rate of interest, so if you need access to the cash a fix might not be for you.
You need £500 or more to open one of these accounts, though remember you’ll need to pay in £10,000 to get the bonus.
The one-year fixed-rate Isa gives you 4.01% interest on your nest egg.
If you transferred the minimum £10,000 this would give you a return of £33.42 a month, or £401 over the course of a year.
The 18 month fixed-rate Isa has a slightly lower return, at 3.91%.
On a £10,000 nest egg you would get £32.58 in interest each month, or £391 a year.
The two year fixed-rate Isa has the least generous interest rate of all of the accounts.
How does tax on savings work?
Isas and savings accounts have different rules on whether you need to pay tax on your savings.
All money paid into your Isa is tax-free, so you will never need to pay tax on your nest egg or any interest you earn on it.
But you may be charged interest on your savings depending on how much you have in your account.
All savers have a Personal Savings Allowance, which allows them to earn some interest on their savings tax free.
Any interest made above these allowances will incur a charge.
Basic rate taxpayers can earn up to £1,000 without paying tax.
For higher rate taxpayers this is set at £500.
Additional rate taxpayers do not have any allowance and so pay tax on all of their interest.
Once their allowance is exceeded, savers pay tax on their interest at their rate of income tax.
This would be 20 per cent for a basic rate taxpayer and 40 per cent for higher-rate taxpayers.
It has an interest rate of 3.81%, which would give you £31.75 a month, or £381 a year, on a £10,000 balance.
If you want to withdraw money from the account before its fixed-term has ended then you will need to close your account.
A charge equivalent to 120 days’ interest will be applied.
However there are Isas paying better rates of interest.
Virgin Money has the best one-year fixed-rate cash Isa of all banks and building societies.
It offers a return of 4.61% on your nest egg.
If you had £10,000 in savings this would give you £38.42 a month in interest – £5 more than the best Santander account.
Over the course of a year you would earn £461 in interest, £60 more than with the Santander account.
If you take into account the £50 bonus you would still be £10 better off after a year with the Virgin Money account.
Plus there is no minimum amount you need to open this account, which makes it a good option for savers with smaller pots.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Savers need to be wary of cash sweeteners if the account itself does not offer the best value compared to other similar accounts.
“Santander’s rates are not market leading and there are a plentiful amount of challenger banks offering much higher rates.”
How do I compare rates?
You can find a full list of the best Isa accounts by using a comparison website such as Compare the Market and Moneyfactscompare.co.uk.
These will help you save you time and show you the best rates on offer.
You can also filter your searches by length or account type.
As a rule of thumb, you only want to consider an account that pays more interest than the current level of inflation, which is 1.7%.
It’s also worth checking regularly as rates can change from one day to the next.
It is a good idea to keep some money in an easy-access savings account which you can use in an emergency.
Once you have found an account you like you should contact the bank or building society you want to move to.
You will need to fill out an Isa transfer form to move your account.
Do not withdraw money from one account to pay into another as you will not be able to reinvest it as part of your tax-free allowance again.
It should not take longer than 15 working days to transfer money between cash Isas.
It can take up to 30 days for other types of transfer.
If your transfer takes longer than it should then contact your Isa provider.
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Money
High street fashion brand with 100 stores bought by owner of Hobbs, Whistles and Phase Eight
A MAJOR fashion brand with 100 UK branches has been bought out by a major fashion group.
White Stuff has been snapped up by The Foschini Group (TFG) in a deal believed to be worth around £50million.
TFG, a South-African fashion group, already owns fashion brands Hobbs, Whistles and Phase Eight.
White Stuff, which was founded in 1985, currently runs 113 stores and 46 concessions inside John Lewis and M&S branches.
No stores will close and no staff will be let go as part of the deal.
The retailer currently employs more than 1,200 people.
George Treves, co-founder of White Stuff, said: “Today marks a significant and emotional milestone for Sean and me.
“We have spent over 40 years building this company from the ground up.
“We have achieved more than we ever dreamed possible, thanks to the incredible dedication of our team, the support of our customers, and the commitment of our suppliers.”
It comes after the founders of White Stuff were said to be exploring a sale of the business earlier this year.
At the time it was understood no stores would be closing as part of any deal.
Last November, bosses also announced plans to open more shops, with several having opened since then.
In April this year, White Stuff reported record revenues of £154.8million, with 85% of revenue coming from online and store sales.
TFG said all colleagues across the business would keep their roles as part of the deal struck today, but that founders George Treves and Sean Thomas would step down.
The acquisition marks TFG’s expansion into the fashion retail market, having bought out Phase Eight in 2015, followed by Whistles then Hobbs.
Justin Hampshire, chief executive officer of TFG London, said: “We are thrilled to welcome the White Stuff team into the TFG London family.
“We have long admired the White Stuff brand which is synonymous with unique detail and exceptional quality.
“The addition of White Stuff to TFG London diversifies and strengthens our existing womenswear portfolio, adding the first lifestyle brand while also bringing a well-established menswear offer and its loyal and resilient customer base.”
He added that White Stuff would be looking to increase its number of stores and concessions across the UK.
White Stuff had been in advanced talks with TFG over a sale of the business for the last couple of days, Sky News reported.
A number of other parties were also believed to be interested in snapping up the retailer.
Today, Jo Jenkins, chief executive officer of White Stuff, said: “We have spent over 40 years building this company from the ground up.
“We have achieved more than we ever dreamed possible, thanks to the incredible dedication of our team, the support of our customers, and the commitment of our suppliers.
“Together, we have built something truly special.”
Companies that have been bought out
White Stuff is not the first company to have been bought out in recent years and months.
Carpetright was bought out by rival Tapi in a rescue deal in July this year, with 1,000 jobs cut and store closures announced.
CDS Superstores, trading as The Range and Wilko, also bought out Wilko’s website and some stores last year.
It came after Wilko collapsed into administration last year.
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Is the pensions onion about to get even bigger?
Rumours are rife of potential changes to the tax-privileged status of pension schemes as part of the Budget and its objective of filling some of the alleged £22bn black hole in public finances.
I have no idea whether these rumours have substance but I do have concerns over any changes to pensions tax, tax relief and related legislation relief.
I think back to 2010 and the new government at that time, which, in a discussion document, said reform of pensions tax relief was “a necessary part of its commitment to tackling the fiscal deficit”.
In that discussion document, it put forward a range of options, including:
- Redesign and the application of the annual allowance
- Different methods for valuing defined benefit (DB) contributions
- The appropriate level for the lifetime allowance (LTA)
- The rate of tax relief for additional-rate payers
We all know what then happened – the annual allowance was dramatically reduced, along with a reduction in the LTA, the complexities increased, compounded by the introduction of pension freedoms in 2015 and the tapering of the annual allowance from 2016 and, recently, further chaos with the abolition of the LTA.
Today’s pensions legislative and taxation landscape has become ridiculously and unnecessarily complicated
I suspect the new government will be grappling with the above options, apart from the LTA and maybe some other ideas. We will soon find out. However, my concerns are not just about the likely negative impact of any such changes on pensions savers and savings but more about the potential for more legislative complexity as any changes are implemented.
Shortly before the new government was elected, I came up with a short list of pensions-related suggestions for an incoming government to consider.
Top of my list was pensions simplification. It is now over 20 years since the then-Labour government set out its proposals for simplifying the taxation of pensions. These proposals were enacted in April 2006 – ‘A Day’ as it was known.
It was suggested pensions tax simplification would:
- Improve choice and flexibility for providers, employers and individual savers
- Improve competition among pension providers
- Encourage individuals to save for retirement
- Reduce administration and compliance costs for employers, administrators, providers and advisers
Those were all laudable objectives but, unfortunately, they have all been lost in the mists of time. Today’s pensions legislative and taxation landscape has become ridiculously and unnecessarily complicated.
I advocate one pensions regulator for all DC pensions and one ombudsman to deal with all complaints
There is no prospect of increasing consumer engagement with pensions while the current complexities remain or, worse still, increase.
My fear is that further tampering with the pensions tax regime will simply add further layers to the pensions “onion” – the skin of which is now almost impenetrable.
The government has recently announced a Pensions Investment Review, with the aim of boosting investment, increasing saver returns and tackling waste in the pensions system.
The focus is almost entirely on workplace defined contribution (DC) pensions, examining primarily scale and consolidation, costs versus value and alternative investment strategies to boost UK growth.
In parallel with this review, it should invite proposals and submissions on how we can produce a radically simplified tax regime for DC pensions. I would ignore DB pensions for the purpose of this exercise.
Shortly before the new government was elected, I came up with a short list of suggestions for an incoming government. Top of my list was pensions simplification
All parts of the pension savings lifespan would need to be considered, including decumulation, with the aim of removing as many anomalies or other historical quirks, such as the artificial age 75 death benefit threshold and the multiple drawdown structures that currently hinder post-retirement planning.
There is scope to take a considerable element of cost out of the operations of DC pensions with a new simplified regime to the benefit of all DC pension savers. I shudder to think of the actual cost of monitoring, administering and advising on pensions under the current regime when one takes into account all those involved, even allowing for the potential positive impact of AI and associated technologies.
There are plenty of industry experts who could help in designing a simplified regime, rather than leaving it to civil servants. Once completed and accepted, this team of experts could then consider potential simplification of a separate DB regime and the trickier cross-border issues such as pensions transfers.
There is a lot more that could and should be done to improve the pensions landscape. For example, I advocate one pensions regulator for all DC pensions, regardless of whether they are workplace or individual arrangements, and, similarly, one ombudsman to deal with all complaints and one compensation regime. These regulatory changes would go hand in hand with the simplification proposal.
Is this all possible? Yes. Is it likely? No. Sadly, adapting the title of the song made famous by Marvin Gaye and Tammi Terrell, “the pensions world is just a great big onion” that threatens to get even bigger. I doubt the remedy suggested in the song of planting love seeds is likely to be effective in producing a simpler pensions world!
John Moret is principal at MoretoSipps
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