There are grave concerns that vast numbers of people could end up being hit financially due to the crippling taxes on the lifetime allowance after it was frozen. The eye-watering tax on anything saved over the threshold stands at 55%, and many are worried that more people will lose out because of this.
In the past, the lifetime allowance limit has increased every year in line with inflation. However, Chancellor Rishi Sunak has frozen the limit for the next five years, meaning it will not increase until 2025/26.
The allowance refers to the amount Britons can put into private pension pots to save towards retirement. By freezing the limit for five years, it is thought that the government could make an additional £1billion from those saving toward their pensions.
Huge tax bills for some savers
As a result of the hefty 55% tax on anything over the limit, many savers could face a huge tax bill. According to estimates, over 1.6 million savers could be hit with a tax charge.
Previously, the number of people faced with the tax charges stood at 1.2 million. Freezing the threshold means this could rocket by another 400,000 people due to what they have saved.
Steven Cameron, Pensions Director at Aegon said: “The allowance has been dramatically cut over the last decade and is now frozen at £1,073,100 till 2026. The Chancellor highlighted that higher inflation is with us in the near term at the very least which will further erode the real value of the lifetime allowance. It’s imperative that this freeze doesn’t continue indefinitely.”
He added, “Our analysis highlights how with good investment returns, many people who are likely to consider themselves a long way from the cap at present could be caught out.”
Mr Cameron also stated that while the government always encouraged people to save for retirement, those who had done so would now be penalised. He said that this was made even worse because inflation is now soaring, which would mean a further impact for those who had been saving regularly.
New government plans could mean compensation for scam victims
New plans being drawn up by the government could see many victims of scams being compensated after being tricked into transferring cash to fraudsters. This comes at a time when scams have become a huge issue, particularly since the start of the Covid-19 pandemic. In addition, many who have fallen victim to scams have not been reimbursed by banks. However, this could be set to change.
Data shows that Authorised Push Payment (APP) scams rocketed by over 70% in the first half of 2021. This type of fraud led to losses of £355million during that period. APP scams see innocent victims make payments to what they believe to be bona fide companies or authorities such as HMRC, local authorities, and banks, among others. Total losses from scams for the period amounted to £754million, so APP scams made up a large proportion of this.
However, while many people have fallen victim to these scams, banks are not obligated to refund them because the code under which they are governed is voluntary. As a result, some people have been able to get compensation while others have received nothing.
Banks to be forced to publish reimbursement data
In addition to plans that will see blameless victims of APP scams reimbursed, regulators will also force banking giants to publish data relating to the reimbursement of scam victims.
One of the problems highlighted with the current voluntary code is that it is interpreted differently from one banking group to another. This means that victims do not get treated equally. Under the new plans, there would be changes in legislation that would ensure all victims are reimbursed.
Anabel Hoult, the Chief Executive of consumer group Which?, said, "People are still losing life-changing sums of money every day, so the Treasury must move swiftly towards introducing the necessary legislation,"
Katy Worobec, managing director of economic crime at UK Finance, stated, "Over £300m has been reimbursed to thousands of customers since the APP voluntary code was introduced in 2019. We agree that more needs to be done and have long called for a regulated code, backed by legislation, to ensure consumer protections apply consistently."
Amazon to stop accepting Visa credit cards in January
Online retail giant Amazon has announced that it will no longer accept Visa credit cards as a means of payment in the UK. The move is set to occur in January 2022, with Amazon even offering incentives to customers to switch to alternative payment methods.
The move will shock many customers who rely on their Visa credit cards to purchase goods online. Amazon sales have rocketed over recent years, and especially since the onset of the pandemic. For many, finding another payment method could be a challenge, particularly for those who might struggle to get another credit card.
Amazon has confirmed, however, that the ban will only be on Visa credit cards and that those who shop with Visa debit cards can continue to make purchases as usual. In addition, those who have a Visa credit card set up as their default payment method will be offered £20 to switch if they are Prime members or £10 if they are not.
Rising costs associated with credit card transactions
According to reports, the reason behind the decision by Amazon is the rising cost of Visa credit card transactions. A company spokesperson said, "The cost of accepting card payments continues to be an obstacle for businesses striving to provide the best prices for customers."
Amazon stated that, in theory, the cost of Visa credit card transactions should be dropping as a result of technological advancements over recent years. However, the reality is that these costs are actually on the rise. In addition, Amazon claims that Visa has been hiking up its fees for years with no added value to the service it provides.
In the meantime, Visa released a statement to say that it is "very disappointed that Amazon is threatening to restrict consumer choice in the future. When consumer choice is limited, nobody wins."
Visa says it is trying to find a resolution so customers will still be able to use Visa credit cards when shopping on Amazon, adding that the two companies had a 'long-standing relationship’.
Neither company would provide details of how much Visa takes from Amazon to process credit card transactions. However, Visa says that its average costs are less than 0.1% of the transaction value.
Further calls for review into state pension age
There have been further calls for the government to put forward plans to ensure the state pension age is reviewed next year. While current plans will see the state pension age increase over the coming years, many want the government to review this and even consider dropping the age rather than increasing it.
At present, the state pension stands at 66 but is set to increase to 67 in 2028 and could rise to 68 by 2050. This is despite life expectancy in the UK falling, according to Office for National Statistics figures. The International Longevity Centre-UK (ILC) now wants the age increases to be reviewed based on life expectancy data.
Shorter life expectancy but longer wait for pension eligibility
As a result of the planned state pension age increases, many are concerned not only that life expectancy in the UK has dropped, but that people will be made to wait longer for their state pension eligibility in the future.
The ILC has called for the Department for Work and Pensions to set out plans for next year's State Pension Age Review. However, some believe the government may hold off from making changes or reviews because the drop in life expectancy is thought to be down to the pandemic.
The government has targets to increase healthy life expectancy by five years by 2035, but the ILC claims that very little has been done to achieve this.
David Sinclair, Director of the ILC, said, “COVID-19 has likely had an impact on life expectancy and certainly had an impact on the employment rates of older workers. It also highlighted the huge disparities in how long we live and how healthy we are. Too many people are being forced out of work before the state pension kicks in. The Government has set itself an ambitious target of tackling inequalities in life expectancy, but there hasn’t been an adequate plan to realise this goal.”
Millions could be missing out on unclaimed Premium Bonds
It has been revealed that millions of Brits could be missing out on significant amounts of cash due to unclaimed Premium Bonds prizes. Figures from NS&I, the government-backed provider that operates the scheme, show that more than £74million worth of prizes have not been claimed.
According to the figures, there are more than two million unclaimed prizes, meaning vast numbers of bondholders could be missing out on thousands of pounds. Five of the unclaimed prizes are worth £100,000 each, and another nine are worth £50,000 each.
Brits urged to check Premium Bonds
Those who have Premium Bonds or had them previously are urged to double-check to see if they have won.
The Banking Editor at MoneySavingExpert, Helen Saxon, said, "The headline figure of £74million is eye-catching, and hopefully it will serve as a kick up the backside for those who haven't checked in a while whether they've won. Many people find the months leading up to Christmas play havoc with their finances, so it's an ideal time of year to see if you're due a windfall. For some due larger prizes, these really are life-changing amounts of money. So, check now and remember (with apologies to the lottery) it could be you!"
There is a free app that can be downloaded onto mobile phones by those who have purchased Premium Bonds in the past, and there is also a facility to check on the NS&I website. However, it has been revealed some of the unclaimed winnings go back to 1957 when the scheme was first launched.
The value of the unclaimed prizes could be anything from £25 to £100,000 based on the data released. There are also two £1million prizes awarded each month, but none of these have gone unclaimed, according to the figures.
It also emerged that 2021 has been a very lucky year for Premium Bond holders in Bristol, with four of the £1million jackpots this year being won by people in the area. This month saw both of the £1million prizes going to Bristol bondholders.