Archive for August, 2015

What Next For Inflation?

Friday, August 28th, 2015

inflationThe UK has now experienced deflation for the first time since records began in 1996. The Office for National Statistics believes that the last time the UK experienced deflation was in the 1960s.

This was so long ago that you may well be asking yourself “What exactly is deflation and what does deflation mean for our economy?”.

Inflation v Deflation – What’s The Difference?

In very simple terms, inflation is when the overall cost of living goes up and deflation is when the cost of living goes down. The word overall is important because prices of different items can go up and down at different times.

How Is The Overall Cost Of Living Measured?

There are two main measures used for determining changes in the cost of living. The older method is called the Retail Price Index (RPI). This was introduced in June 1947. The newer method is called the Consumer Price Index (CPI) and was introduced in 1996.

Both systems use an “average basket of goods” to keep track of how much “average consumers” are spending. In other words, they select a range of items which they think most people need (or want) to buy. They then track the prices of these items.

There are, however, important differences in what they track. For example, the RPI includes the cost of housing (including the impact of Council Tax) but the CPI doesn’t. They also use different methods for calculating the average.

Summing all this up in a nutshell, the CPI is almost always lower than the RPI.

Can Inflation Be Managed?

It’s the Bank of England’s job to try. The BoE runs the Monetary Policy Committee. This has the job of achieving exactly 2% inflation per annum.

Of course, that’s a difficult job so the Bank gets a bit of breathing space. The government accepts inflation of between 1% and 3% per year.

If, however, inflation goes either higher or lower, the BoE is called upon to explain itself. The Governor of the Bank of England, must provide a public, written explanation of why it missed its target.

It must also advise the government what it intends to do to get back on target. The BoE’s main tool for managing inflation is the use of interest rates. In very basic terms, raising interest rates encourages people to save. Lowering interest rates encourages people to spend.

Why Does The Bank Of England Try To Keep The Cost Of Living Going Up?

In very simple terms, deflation has much the same effect as waiting for the January sales to buy Christmas presents.

Customers assume (rightly or wrongly) that the item(s) they want will be cheaper after Christmas so they wait until then to buy them.

Extended periods of deflation can essentially become a time of Mexican stand-off. Buyers get used to seeing prices dropping so they put off making purchases to get lower prices.

Unfortunately this can put producers (and retailers) out of business. Over the long term, this reduces supply and can stimulate inflation. In the short term, however, it can lead to painful redundancies.

Right now, for example, low oil prices are leading to lay-offs in the oil industry.

So Is Deflation Automatically Always Bad?

That is an interesting question. It’s possible that some deflation on essential items such as food and utilities might actually be helpful. It would give hard-pressed families a respite.

It might even be enough to free up money for other purposes. For example, it might allow families to pay down debts. It might allow them to treat themselves to some non-essential purchases.

The question would be whether or not the end producers would be able to support deflation for any meaningful length of time. If not, then the pendulum could swing the other way towards high inflation – and cause a lot of pain in the process.

Guide To House Buying Jargon

Tuesday, August 25th, 2015

housebuyingWhen you buy a house, you hear lots of unusual terms.

Here are our ‘dictionary’ definitions of terms used when buying a house to help you understand the convoluted world of property jargon.

Arrangement Fee

As the name suggests, it is the fee that the mortgage lender charges for arranging the loan.


To be behind with ones mortgage payments.

Building survey

The essential survey you must take out on the property, to assess its construction and condition, to make sure it doesn’t collapse the moment you open the front door.


A ‘chain’ of buyers and sellers i.e. the people you are buying the property from are in a ‘chain’ with sellers they are buying from, and you might also be in a chain with buyers of your property. At any given time this chain might, and frequently does, break down.


A payment made to an estate agent on completion of the house sale.


When contracts, keys and monies have changed hands between buyer and seller.


A legally binding agreement.


The complicated legal work your solicitor does to help you buy a property and make sure your rights are protected.


A legal agreement specifying the uses of the land or property.

Credit check

An examination of your previous credit worthiness, debt repayments and defaults. A poor credit score can limit your chances of further borrowing


A document granting legal ownership to a person of a property.

Endowment mortgage

A mortgage paid off by an endowment, which is an investment policy that pays out after a specific and fixed period of time or on the holder’s death.

Exchange of contracts

Where two people exchange contracts over a property.

Fixed rate mortgage

Where the interest rate on a mortgage is fixed for a period of time, normally in anticipation of a future rate rise.


The land beneath the property. Ownership of this is particularly important if you are buying a flat.


The rather dubious practice of offering a higher bid on a property to secure it, after it has been offered to somebody else.


The practice of demanding a lower price on a property at a crucial moment in the sale in the hope that the vendor will agree to prevent the sale from falling through.


Policies that pay out compensation to the holder in the event of accident, damage or ill health.

Interest only mortgage

A mortgage where the actual balance of the loan is not repaid, only the interest payments on the loan.

Land certificate

A document that verifies the ownership of a piece of land.

Land registration

The recording of ones ownership of a particular piece of land.

Land registry fee

The cost of the previous entry.


The ownership of a property for a fixed period of time, normally relating to flats. The leasehold ultimately belongs to the freeholder (see Freehold above).

Loan to value (LTV)

The ratio between the amount borrowed in a mortgage and the value of the property.

Local authority search

A search on a property carried out by your solicitor to find out who legally owns it and who has owned it in the past.


A property loan, typically 25 years in length.

Mortgage deed

The document that aforementioned loan agreement is contained within.

Mortgage indemnity guarantee

An insurance policy taken out by the lender to guarantee against the borrower from defaulting on their mortgage payments.

Mortgage offer

How much the bank will lend you.

Peppercorn rent

A nominal amount, normally £1, needed to satisfy the criteria for the creation of a legal contract.

Repayment mortgage

A mortgage where the borrower repays both the interest and the capital of the loan.

Stamp Duty

A compulsory tax due on all properties over the value of £125,000, calculated as a percentage of the property’s overall value.

Structural survey

A general term to cover three different types of survey, the condition report, the homebuyer’s report and the building survey (see above Building Survey).

Subject to contract

The seller of a property has accepted an offer on the home but the deal is not complete until contracts are exchanged.


The professional who carries out the survey.

Title deeds

A document detailing the ownership of a property.

Under offer

A property where an offer has been accepted and paperwork is pending (see Subject To Contract).


The person(s) selling the property.



Does It Make Sense For Britain To Quit The EU?

Friday, August 21st, 2015

BritainEUHowever it is eventually phrased on the ballot paper, the underlying question is essentially the same. “Should Britain stay in the EU?”

Sometime between now and the end of 2017, the great British public will be required to answer it. So, is the grass really greener on the other side of the EU fence? What would happen if the UK actually did leave the EU? Let’s look at some of the key points of EU membership and see how the UK might be affected in the event of a “Brexit”.

Free Movement Of Citizens

The free movement of citizens is a key part of the Maastricht Treaty and therefore of the EU. It is what enables Polish workers to come to the UK. It is also what enables British retirees to make their homes in sunnier climates. Polish workers compete against local job seekers. British retirees may need to make use of their host-country’s medical facilities. There are economic pros and cons to many aspects of EU membership.

There are also security issues to consider. The recent “I am an Immigrant” campaign stressed the positive contribution immigrants make to the UK. At the same time, British teenager Alice Gross is believed to have been murdered by Latvian builder Arnis Zalkalns. He already had a conviction for murder in his home country. The EU’s open-borders policy, however, allowed him to come to the UK regardless.

There have also been issues with Polish criminals organizing sham marriages with people who want UK residency.

Likewise, there are ongoing issues with the Eurotunnel being targeting by refugees living in France.

Free Movement of Goods, Capital And Services (AKA The Common Market)

Much has been made of the UK’s access to the single/common market. This allows the UK to export goods to the EU without import duties being paid by the recipient. Of course, it also allows other EU countries to export goods to the UK without paying import duties.

In fact it allows people from the UK to go on shopping sprees in the EU and bring their purchases back to the UK without paying customs duty. In the early days of the EU this led to the infamous “booze cruises”. These were trips made, usually to France, specifically to buy alcohol more affordably.

Small and light, cigarettes are also easily brought back from other EU countries where the purchase price is lower. Of course, this has implications for the NHS and its funding.

Like the free movement of citizens, there are pros and cons to the single market. It is also worth noting that the UK already trades on a global basis in any case. This demonstrates that it is quite possible to import and export without a free-trade agreement being in place.

The Single Currency

During the negotiations for the Maastricht Treaty, the basis for the modern EU, the UK opted out of the single currency.

It did, however, sign up to a clause in the treaty which requires EU members to aim for “ever closer union”. This is not just a statement of ideals. It is a legally-binding requirement. In very simple terms, the UK’s decision to keep the pound is directly contradictory to the principle of “ever closer union”.

This raises significant legal questions over the feasibility of the UK keeping the pound in the long term. David Cameron has stated that he aims to negotiate and opt-out to this requirement. The price of him achieving this may be giving up the UK’s veto in the EU. The price of him not achieving this may be the UK’s giving up the pound and adopting the Euro.

Making Your Plans for Automatic Enrolment

Wednesday, August 19th, 2015

A Matter Of Life And Death

Tuesday, August 18th, 2015

lifedeathThere is one topic that no one likes to think about – death. And yet, it is something that we must prepare ourselves for in order to take care of our loved ones and ensure family protection.

Making plans for the end of life is a vital task and one that, if not dealt with by each of us, falls to our families and next of kin to arrange.

There are two main tasks that everyone with dependents must undertake in order to protect their loved ones, arranging life insurance and writing a will. This article is a quick guide to help you explore the options available to you.

Why do I need life insurance?

Life insurance is a policy that is taken out to pay off any major expenses such as mortgages, outstanding debts or university fees for children if you die unexpectedly. There are two main types of policy, term insurance and whole life cover.

Term insurance is the more basic of the two types of cover and insures a person for a certain period of time and up to a certain value.

This type of cover will only pay out if you die within the specified period of the policy, and if you live longer, the premiums that you have paid into the scheme are non refundable.

You can take out decreasing term cover, meaning that over the years, the contributions you pay into the scheme lessen.

This makes sense as you pay off your mortgage month by month, the lump sum your loved ones would need if you unexpectedly died would be smaller. It also means that the policy will become more affordable over time.

Whole Life Policies

Unlike term insurance, whole life policies are not limited by time, they only expire when you do. As with the other types of policy, they pay out when you die, but you do not have to guess when that might be.

Generally, these policies cost more, but they offer the you more flexibility and don’t leave loved ones in serious financial hardship if you die following the policy’s expiry.

Why should I make a will?

With the advent of the internet, making or changing a will has become quicker and easier than ever before. If you have ever asked ‘How do I make a will?’, it is now easier and more straight forward to do than it has ever been.

A will is a simple legal document that states what should happen to your money and property after your death. If you die without one, your estate will be legally termed intestate.

This means that a loved one will have to apply for probate – the right to be the executor of the estate and decide what happens to your wealth.

There are legal guidelines for executors on how wealth must be shared out in this instance, but without your own will, you cannot be sure that your wishes will be carried out.

What could happen if I don’t make a will?

Writing a will can also limit the amount on inheritance tax that you are exposed to, meaning that if you die without one, the tax man might be able to take a considerable part of your estate.

Despite the importance of writing a will in order to protect your wealth when you die, a 2014 survey revealed that only 48 percent of adults in the UK have drawn one up.

This lack of planning might partly be due to the fact that people generally tend to avoid considering their own mortality. It might also be due to a lack of quality information about the problems dying intestate can cause.

The Financial Conduct Authority does not regulate Will Writing.

10 Things To Do To Get Your Finances Ship Shape

Friday, August 14th, 2015

FinancesShipAs spring moves into summer, people can start to think about their physical shape and how good they look in their holiday clothes. How about also taking a few minutes to look at your financial shape? Making sure you’ve ticked off all the boxes in this 10-step check-list will help keep them looking good too.

  • Make a Will

If you have any assets at all and there is anybody in life you love more than the Inland Revenue, make a will. Even if you are young and single with no dependants, make a will. If you do die unexpectedly, it can make life much easier for your loved ones.

  • Get Life Insurance

If you have anyone who depends on you financially, then life insurance should probably be high on your agenda. The bad news is that even young people can die unexpectedly. The good news is that it’s relatively unlikely so young people tend to get the best life insurance deals.

Shop around online to see what’s on offer.

  • Start Saving into a Pension

It’s never too soon to start saving into a pension. Later, however, is still better than never.

Saving into a pension has two big plus points. Firstly contributions attract tax relief. Secondly, those in workplace pensions can get additional contributions from their employer.

The fact that pensions have these benefits means it may be worth contributing to them even if you are still clearing debts.

  • Clear high-interest debts

Mortgages, car loans and student loans are designed to be paid off over the long term. These types of loans tend to have relatively low interest rates.

Personal loans and credit card or store card debt is an entirely different matter. This kind of debt tends to be very expensive. Therefore it is generally best to pay it off as quickly as possible. If your credit rating is good, you may be able to get a 0% interest balance-transfer deal. This can help to freeze the amount of the debt instead of having interest added every month. Ideally you should pay off the debt before the deal comes to an end.

  • Look at Moving Your Mortgage

A mortgage is a significant expenditure. Make sure you are getting the best deal you possibly can. If you’re not, see if you can move to a new mortgage.

  • Learn to Budget Properly

Look after your pennies and your pounds will take care of themselves. Little purchases can slip under your mental radar and have a significant impact on your finances.

You don’t need to stop making convenience or impulse purchases. You just need to know where your money is going. Then if you are looking for savings ideas, you know where to start trimming your expenses.

  • Organise Savings Pots

Some bank accounts will allow you to tag your money for designated purposes. This can be a great way of keeping on top of your savings goals. For example you could have dedicated pots for holidays or Christmas.

  • Get an ISA

ISAs are essentially tax-efficient accounts. They can be used for cash savings or for a wide range of investments. In short, they help you to make more from your money and give less to the tax man.

  • Take a look at investments

Investments can help to make your money grow over the long term. There are many different kinds of investments available to suit all kinds of tastes. Take a look and see what suits you.

  • Make Time To Review Your Finances

As you go through life your circumstances will change and your finances need to stay in sync with those changes. Therefore make time at least once a year to ask yourself “How to organise my finances?”. This will help to ensure that you make any changes you need to.



How Pension Changes Affect Everyone

Tuesday, August 11th, 2015

ChangesPensionIn the past three years there have been dramatic changes to the way people save for their pensions in the UK and the role that employers have in helping them to build up a pension pot.

The process of setting up new workplace pension schemes, called auto enrolment, has been ongoing since 2012 and employers of all sizes, from major corporations down to individuals with nannies or carers have to comply.

This blog is a quick guide to your rights and responsibilities if you are an individual employer and just employ one person to help you.

What Is Auto Enrolment?

The government’s rationale for the auto enrolment pension scheme is to plug the gap in pension provision.

Between 2010 and 2012 the Office of National Statistics calculated that 45 percent of men and 49 percent of women in the UK had no private pension provision at all.

Large companies were the first employers who were required to provide auto enrolled workplace pensions for their staff.

Between 2012 and 2014, large, medium and smaller businesses were added to the roll out of auto enrolment, and now in 2015 individuals with single employees are also obliged to provide pension cover.

Do I Need To Contribute Towards My Nanny’s Pension?

If you employ anyone over the age of 22 who is paid more than £10,000 you need to provide them with a pension. The Government has sent letters to those affected, but still, many people are unaware of their legal responsibilities.

Employers with 1-30 members of staff will go through the auto enrolment process over the next two years, and by October 2017 all employers will be expected to have made provision for their staff.

The amount that you will be obliged to pay in pension contributions for your employee(s) depends on the PAYE (pay as you earn) number that HMRC assigns to your employee(s).

What To Do

If you employ someone (a carer or nanny for example) and they do not have self employed status, you need to take action.

The government’s regulations are backed up by fines and penalties, so it is important to understand your responsibilities and comply with them by the deadline.

You might already have received a letter with the start date for your first payment into an employee’s pension scheme, most employers are given 18 months notice from the start of the scheme.

If you are unsure about when you need to start making payments, you can check with the Pensions Regulator.

How Much?

Initially, you will need to contribute one percent of the employee’s qualifying income. The employee will have to contribute 0.8 percent of their income and the government will add and additional 0.2 percent through tax relief.

Your contribution will rise to two percent in the second year of payments, but the qualifying income is not the employee’s entire salary.

It is any earnings between £5,824 and £42,385, therefore, if you pay an employee £10,000, you will only have to pay a pension on £4176 (10,000 – 5,824), meaning that your contributions will be £41.76 in the first year and £83.52 thereafter.

Getting Help

Many people find the idea of organising pension payments for others daunting and difficult, but fortunately there are numerous payroll companies who, for a small charge, can organise pension payments.

Even if you outsource the task of pensions payments to an agency, the cost will still be born by you.


Ten Financial Tips For New Graduates

Friday, August 7th, 2015

2With university fees of up to £9,000 a year and predictions that students might be paying back their loans in their 50’s, financial planning after graduation has never been more important.

This blog article will explore the top ten most important financial considerations for new graduates and the spending, saving a borrowing pitfalls to avoid.

No New Debts

Leaving university with potentially a lifetime of debt in tuition fees means that new graduates need to be especially careful not to take on any new debt.

Taking out credit cards, hire purchase agreements on cars or buying any other big ticket items on instalments, can leave you over-burdened by debt and any disposable income you might have will be sucked up in repayments.

Leave Mortgages For Later

In the long run it always makes more financial sense to own a property than to rent it, but for new graduates, the costs involved are huge.

Stricter lending rules and spiralling house prices mean that for many graduates, home ownership is prohibitively expensive, but it also presents an obstacle to job mobility.

Recent graduates often need to be mobile to find new career opportunities and a property can tie them down.

Pay Off Your Debts

The longer you are in debt, the longer you will be working hard to pay interest, so your first post-graduation priority should be to get out of debt as quickly as possible.

In order to pay your debts most effectively, start with the highest interest debt first (typically this will be a credit card, store card or personal loan), and then pay off lower interest debts like student loans later.

Start Saving

At university when funds are often short and there are constant demands on your income, there is little scope for saving.

However, after graduation, it is one of the most important habits to get into. Having regular savings, even if you are putting away a small amount each month is essential; as your income rises, so does the temptation to spend it.

You will need to protect your savings from taxation and the best way to do with is with an ISA or NISA, which can be easily set up through your bank.

You might have previously wondered ‘what is an ISA?’ or ‘how does an ISA work?’. It is a savings account which has an annual tax free allowance of £15,240.

Avoid Credit Cards

As previously mentioned, debt is a way of draining the lifeblood from your finances and a credit card can often be the quickest way of building up a debt burden for the future.

The best time to own a credit card is when you can be sure that you’ll rarely need it.

Pay into a Pension

As with savings, pensions are an important part of your financial future that cannot be neglected. If you have asked yourself ‘What is a pension pot?’, it is time to become more financially educated about preparing for the future.

When you start your first job, investigate the workplace pension scheme, or, if you are self employed, it might be an idea to set up a private pension instead.

It is always worth asking the question, can I be getting more from my pension? Especially when you are reviewing your annual pension statement.

Continue Learning

One of the keys to boost your future earning potential is to carry on educating and acquiring skills.

If you increase your knowledge, experience and ability through further study or an internship, your worth within the job market will inevitably increase.

Budget Effectively

The suggestions in this blog involve a degree of discipline with your money and a requirement to budget effectively.

If you don’t have a clearly structured financial plan then the chances of you being able to save prudently are slim.

Have a picture of your income and your expenses, work out what is left (and where you can cut back), and divide that between your savings and pension.

Emergency Fund

Life is full of surprises, not all of them pleasant, which is why it is important to have a contingency fund.

Most financial advisors recommend that you build your emergency reserves enough for three months of living costs or the equivalent of three months salary.

For most people, this can’t be done overnight and requires a long term commitment to saving.

The advantage is that savers with cash reserves are less financially insecure if they become unemployed and don’t have to take the first job on offer.

Invest if you can…

Creating a strong financial basis for the future often means investing spare cash prudently and watching these investments accumulate value. After ensuring your financial stability, you might be thinking ‘Where do I Invest for growth?’

If you have managed to pay off debt and accumulate some savings, adding to a portfolio of investments is one of the best ways of making your money work effectively for you (though the value of investments can go down as well as up).


Our Top Ten Ideas For Remortgaging

Wednesday, August 5th, 2015

Our top ten ideas for remortgaging

How The Rich Get Richer

Tuesday, August 4th, 2015

11-300x251.pngWhat have the philosopher Pierre Bourdieu and the finance advice guru Robert Kiyosaki got in common?

They both know how and why some people accumulate wealth and others remain poor and struggle financially all their lives.

The key is the values parents teach their children, though both men have expressed this in different ways.

Bourdieu, a sociologist, tried to understand why people seemed to stay within their social class and rarely ever leave it.

He concluded that it didnt have much to do with the amount of cash that was readily available; instead he argued that there were different types of capital.

Educational capital, for example, was the sum total of knowledge and training a person received, which gave more educated people broader horizons and less educated people a more limited outlook.

However, in terms of accumulating wealth, the most important capital that parents passed down was ‘cultural capital’.

This is the sum total of outlooks, attitudes and values towards everything in life, including the vexed issue of making, saving and investing money.

Bourdieu said that this explained inequality; there was an inequality of ideas, beliefs and values being passed on to subsequent generations.

Some people instinctively know how to be sensible with money and how to acquire more of it, where others struggle.

Kiyosaki, in a less academic but more practical way has argued the same thing and has a loyal following of fans round the world.

He believes that sound financial planning is something that is passed from rich dads to their children (along, presumably, with their wealth) and poor money advice is also passed on.

Kiyosaki has argued that in order to be wealthy money should be spent on assets, as opposed to luxuries.

The bigger portfolio of shares, bonds, property and other investments a person can acquire, the sooner they will enjoy a life of leisure and abundance.

There is an important relevance to these ideas in the 21st Century, as the gap between rich and poor has widened in the past decade more rapidly than at any other time since the 19th Century.

More people than ever before are looking for advice and guidance on how to invest their wealth and how to protect it.

The number of gurus offering help and insights has dramatically multiplied with the advent of social media, meaning that finding advice has never been easier, but sourcing quality advice grows harder and harder.

Finding an advisor who can give reliable, expert and unbiased advice is more difficult, as the number of experts grows.

Ultimately you need someone who has more to offer than well meaning platitudes and statements that start with the words I was like you once…’

Getting on the Sunday Times Rich List might not be a possibility for all of us, but becoming better off by following tried and tested investment planning is possible for anyone.

It must of course be stated that there is no such thing as a get rich quick scheme and the value of investments can go down as well as up, meaning that if you invest, you might not get out what you put in.

This is why sound advice on financial planning is so eagerly sought, as investors seek to limit the risks and maximise the potential gains.

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