Sunday, March 29, 2020

Rising UK Inflation Is Good News For Pension Savers

Must read

Financial Package On The Way For Self-Employed

Financial support is coming for freelance and self-employed expats who pay their taxes in the UK, Prime Minister Boris Johnson has promised. In his last...

Support For Dropping Helicopter Cash Takes Off

The time for more governments to consider dropping helicopter money on households trapped in dire financial straits due to the coronavirus outbreak is with...

How Coronavirus Is Impacting The Climate And How We Work

Coronavirus will change the way we live and do business, according to a technology expert. Up to now, the technology has been available but not...

Cost Of Living Overseas Is A Shock For Expats

The cost of living in a new country is a concern for many expats who find their bills are higher than expected. Half are forking...

Expats saving for retirement and drawing the state pension are the biggest winners from the latest spike in the cost of living.

Inflation has hit a five-year high of 3% for the year to September– up from 2.9% in August and the peak since April 2012.

This means that Chancellor Phillip Hammond should dole out some generous increases in inflation-linked pensions in his Autumn Budget 2017 in November.

That’s because the index-linked rises are all based on September’s inflation rate.

Expat retirement savers will see the lifetime allowance of £1 million jump by £30,000.

Pensions set to rise

The lifetime allowance is the limit on how much anyone can save into a UK pension. The cap was dropped to £1 million in April 2016, but then Chancellor George Osbourne announced the allowance would rise in line with inflation from April 2018.

Expats with QROPS pensions are unaffected. Although incoming cash from a UK pension is tested against the lifetime allowance, once in a QROPS, no cap on growth applies.

Expat state pensioners should also see their retirement cash rise 3% from April 2018.

The maximum flat rate pension will go up from £159.55 a week (£8,296.60 a year) by £4.78 to £164.33 (£8,545.49 a year).

The old state pension will rise from £122.30 a week (£6,359 a year) by £3.66 to £125.96 (£6,550.38 a year).

Interest rate hike to follow?

Financial experts argue the Chancellor should scrap the lifetime allowance as the cap serves no real purpose other than to penalise high-earners.

“We continue to see this limit as a penalty for those who have invested wisely,” said Nathan Long, a pension analyst at financial firm Hargreaves Lansdown.

“With an annual contribution limit of £40,000 or lower for some higher earners, the LTA serves little purpose and should be done away with altogether.”

Meanwhile, Bank of England governor Mark Carney expects inflation to peak before Christmas and then start to fall towards the target of 2% – but fears that ideal rate of the cost of living won’t be reached for at least three years.

He also warned higher than desired inflation could see a wage squeeze for some time yet and that a small interest rate rise could be on the way.

- Advertisement -

More articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisement -

Latest article

Financial Package On The Way For Self-Employed

Financial support is coming for freelance and self-employed expats who pay their taxes in the UK, Prime Minister Boris Johnson has promised. In his last...

Support For Dropping Helicopter Cash Takes Off

The time for more governments to consider dropping helicopter money on households trapped in dire financial straits due to the coronavirus outbreak is with...

How Coronavirus Is Impacting The Climate And How We Work

Coronavirus will change the way we live and do business, according to a technology expert. Up to now, the technology has been available but not...

Cost Of Living Overseas Is A Shock For Expats

The cost of living in a new country is a concern for many expats who find their bills are higher than expected. Half are forking...

Spending Cash Is Becoming A Thing Of The Past

The days of handing over cash could be numbered as the economy is in a shift to digitisation, warn campaigners.