Holborn Assets News reviews four snippets of UK personal finance news from this second week of April that highlight the need for expats (and their families) to keep their financial options open:
- UK housing market hits official doldrums
- Student loan interest soars with strong inflation
- Market-beating bond from NSI fails to beat inflation
- Royal Mail slashes Final Salary pension scheme
The landscape of personal finance is always changing – often in ways that don’t seem favourable. We as consumers have to stay informed and use that information to remain flexible – even if, as expats, we feel shielded from any immediate impact.
UK housing market hits official doldrums
The number of unsold properties held by UK estate agents on average is at its lowest for over 15 years, according to the Royal Institute of Charted Surveyors.
On average, just 43 unsold properties are on the books of each UK estate agent. In May 2008 this figure stood at 91. This month in March 2017, 13% less agents are predicting a rise in house prices than in February.
Commenting on what he described as a “flat market over the coming months”, Brian Murphy of the Mortgage Advice Bureau said, “this in itself is perhaps not a negative situation, as a calm and steady picture overall would benefit many, particularly given current political and economic factors.”
Student loan interest soars with strong inflation
This week’s announcement of March RPI at 3.1% means that some students will be charged as much as 6.1% on their student loans.
Students face different loan terms depending on when they arranged their student loan:
Students who took out a loan from 2012 onwards are obliged to pay back the amount on a sliding scale that, at its maximum for higher-tax band earners, charges 3% interest +RPI. Repayments are changed as soon as gross income exceeds £21,000. This means that some students now, on the higher tax rate, are faced with interest of 3% + 3.1% (RPI) = 6.1%.
Students who took out a loan before 2012 are charged interest at the lower of RPI or Bank of England base rate +1%. Repayments are changed as soon as gross income exceeds £17,775.
The average amount of loan balance at the time of beginning repayments for students in English Higher Education was £24,640 in 2016 – having risen over £8k since 2011’s figure of £16,160.
By comparison, equivalent figures for the rest of the UK are much lower:
Northern Ireland 2016 average amount of loan held at beginning of repayment: £19,720, Wales: £16,120, Northern Ireland: £19,720.
In 2015-2016, there were 2.28m students studying at UK higher education institutions. (More student statistics here at Universities UK)
A spokesperson from Save the Student said, “… in reality, this increase is just adding to the massive amounts of accumulative student loan debt that the government will never see.” Student loans are wiped after 30 years.
Market-beating bond from NSI fails to beat inflation
The UK’s government bank – NSI (National Savings & Investments) – has launched a 3-year bond this week that offers the best rates on the market, but still fails to match Consumer Prices Index inflation of 2.3% in March 2017.
The brand-new “Investment Guaranteed Growth” bond pays 2.2% on a maximum investment of £3,000, with a fee for early withdrawal of funds of 90 days interest. This works out as £66 interest for the first year and, assuming interest and the full seed sum is left to accrue, savers could walk away with just over two hundred pounds in return after 3 years.
When the 2.2% bond was announced in November 2017 it was – as the Chancellor promised at the time – genuinely market-leading. The closest rate offered by a 3-year bond on the market at the time was 1.63% offered by Ikano Bank.
Royal Mail slashes Final Salary pension scheme
90,000 workers could strike if the Royal Mail follows through on the announcement to close its final salary pension scheme in 2018.
The Royal Mail says the pension fund is faced by over a doubling of contributions to over £1bn in 2018. This is compared with a current contribution of £400m – which is already more than the £290m cash generated by the company last year.
Retail giants Tesco and Marks and Spencer made similar announcements over their own Final Salary pension schemes last year.