Money Management March 2017

Money Management March 2017  report government measures that will distort childcare costs with a family earning the national average spends up to 1/3 of their net income on childcare costs, according to the IEA (Institute of Economic Affairs).

Money Management March 2017The government currently spends well over £7 billion a year on childcare benefits. The IEA claims that current government subsidies, such as the free hour’s entitlement, have distorted childcare prices & made childcare much more expensive. 

As well as pushing childcare prices up, the IEA believes that government interventions have significantly reduced parental choice & not produced an improvement in childcare quality.

Len Shackleton, editorial and research fellow at the Institute of Economic Affairs, said:

“Regulation has led to an excessive formalisation of childcare & preschool, which has not only pushed up the subsequent costs but paid scant attention to parental choices.

“Many families may not wish to partake in the structural form of preschool that the government requires as standard.”

Childcare Policy Recommendations

The IEA report makes a number of childcare recommendations:

  • abolish universal childcare ‘free hours’ & directly target provision towards people that need it most
  • replace tax-free childcare provision with a universal credit system as this would be preferable for unemployed & part-time workers
  • remove staff-child ratios & mandated qualifications of carers to allow different kinds of childcare & encourage more parental choice.

Len Shackleton of IEA said:

“At a time when many families are facing rising living costs, it is important the government rethinks its involvement in childcare provisions.”

Talk to our Warrington IFA, Manchester IFAAltrincham IFAWilmslow IFA, Liverpool IFA or Knutsford IFA team about the provision for childcare costs today.

Self-employed face financial stress

1 in 5 self-employed households faces increased financial stress, according to Scottish Widows’ Centre for the Modern Family.

Of 2,305 adults recently surveyed, 19% with a self-employed relative claimed that their family member has had more financial concerns since becoming their own boss.

20% also said this person is a lot more stressed as a direct result while 11% said their whole family is now under increased stress.

Further findings from the survey:

  • 53% left traditional employment in search for more flexibility in their work/home life balance
  • 53% wanted the option to choose their own working hours
  • 17% wanted to fit work around caring and childcare responsibilities
  • 46% of mothers chose self-employment in order to fit working hours around childcare.

Anita Frew, Chair of the Centre for the Modern Family, said:

“With more and more access to practical & financial support, individuals feel better equipped to make their path into self-employment less stressful for themselves & their families. This brings them more of the benefits which attracted them to the idea of self-employment in the first place.”

Finance For The Self-Employed

27% of surveyed say that better financial help and support from the government would encourage them to become self-employed.

50% of surveyed also wanted more practical help such as online forums & guidance for self-employment.

If you’re looking into self-employment as your next career move, you may need finance to support you.

Some available sources to you include:

  • funds from a family member or friends
  • grants from a local charity or trust
  • bank loans or commercial finance.

Talk to our Warrington Financial Advisor, Liverpool Financial Adviser, Wilmslow Financial Advisor, West Kirby Financial Advisor, Altrincham Financial Advisor or Manchester Financial Adviser team today about self-employment.

Savers unaware of Lifetime ISA

The Lifetime ISA launches on the 6th April 2017, but 2 out of 3 people still do not understand what it is, according to Aegon.

Of the 2,000 adults recently surveyed, 36% were completely unaware of the ISA whilst a further 31% aged 16 to 34 did not understand how it actually works.

The Lifetime ISA will only be available to those aged between 18 & 40. People can make annual contributions of upto the value of £4,000 per year whilst still receiving a 25% government bonus on their investment.

Funds can be used for either retirement or towards buying a first home.

46% of those surveyed aged between 16 to 34 expected to open one. 32% said they would seriously consider using it to save for a house deposit.

Only 26% of those surveyed stated an interest in using the new ISA to save for their retirement.

Steven Cameron, pensions director at Aegon, said:

“The Lifetime ISA is an attractive for prospective for first-time buyers, but for other people such as employees saving for retirement, workplace pensions almost always offers a greater incentive to the saver than the Lifetime ISA 25% bonus.”

Lifetime ISA vs The Workplace Pension

There have been ongoing discussions in the industry about whether the Lifetime ISA will actually be useful enough for retirement saving compared to the workplace pensions offering.

Whilst considered as a valuable addition to the savings marketplace; the Lifetime ISA is not really a direct substitute for the workplace pension as an ISA savings plan does not attract direct employer contributions.

However, the Lifetime ISA might in fact be appropriate for those who are not actually eligible for auto-enrolment or for individuals who are self-employed (although they can now also contribute into a pension plan and gain tax relief).

Also, for those individuals who have used up all of their pension annual contribution allowances, then a LISA might be an appropriate choice.

Talk to our team today about your retirement strategy and the information provided in this Money Mananagement March 2017 article.

Working to 65 could increase pension pot by half

The number of people in full or part-time employment over the age of 65 reached more than 9.8 million in 2016 according to new figures released by the DWP (Department for Work and Pensions).

This has increased over 4 million people since 1996 & the average age of leaving the employment market has risen each year over the past 20 years.

In 2010, 25% of the overall working age population were aged over 50. The Department of Work & Pensions estimates that this will increase to as much as 1 in 3 by the end of 2022.

The DWP figures also show that:

  • 25% of men & a third of all women reaching state pension age have not worked for five years or more
  • over a million people aged between 50 & 64 not in employment say they would be willing to work if they could.  

The Benefits Of Working Longer

The Department for Work and Pensions points towards the benefits of working past the age of 50, not only for the workers themselves but also for their employers.

By retiring at the age of 65 instead of the age of 55, the average male earner could have earnt £280,000 in extra income and increase their pension pot by as much as 55%.

In 2015, employers listed the following benefits of employing older workers:

  • 75% believed the experience of older workers is the main benefit
  • 65% value the reliability of older workers
  • 54% value the role that older workers play as mentors
  • 20% believe older workers are much more productive.

Talk to one of our Warrington Estate Planning, Altrincham Estate Planning, Manchester Estate Planning, Liverpool Estate PlanningWilmslow Estate Planning or Knutsford Estate Planning specialist about your retirement.

Important information about this Money Management March 2017 article 

The way in which tax charges (or tax relief, as appropriate) are applied depends upon individual circumstances & may be subject to change in the future. ISA & pension eligibility depend upon personal circumstances. You cannot normally take pension benefits until age 55.

This Money Management March 2017 document is solely for information purposes and nothing in this document is intended to constitute advice or a recommendation. You should not make any investment decisions based upon its content. The value of investments can fall as well as rise & you may not get back the full amount you originally invested.

Whilst considerable care has been taken to ensure that the information contained within this Money Management March 2017 document is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information.

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