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Money & Rights

Money and Rights News: April

Energy price cap rises

The energy price cap, which was only introduced in January is already rising by 10 percent this month (April), meaning the typical consumer on standard and default tariffs will see their annual energy bills rise from £1137 to £1254.

Ofgem chief executive Dermot Nolan admits this is "the largest single rise in the last few years"- going back as far as 2008. The regulator said the increase was mainly down to higher wholesale costs, which are about 17 percent higher now than when it first set the cap in November 2018.

Ofgem also announced a £106 a year increase to the cap on prepay tariffs from April 1- rising from £1136 a year to £1242 for a typical household. 

However, as we reported in February, the price cap is causing much confusion as it isn't the maximum you can be charged. The price cap sets a limit on the rates you pay for each unit of gas and electricity so the more you use the more you'll pay. The only way to ensure that you are getting a good deal is to switch to a cheaper supplier. 

Auto enrolment pension contributions rise

The number of workers automatically enrolled into workplace pensions has passed ten million for the first time, indicating the success of the scheme to encourage more people to save for their retirement. 

From this month the auto enrolment total minimum contribution will rise from five to eight percent, meaning for example that an individual paying in £40 a month from take-home pay will receive a £10 bonus from the Government in tax relief and £30 from their employer bringing the total amount going into their pension to £80.

Kate Smith, Head of Pensions at Aegon, says that "it is important to note that whilst contributing eight percent of salary may seem significant, just saving the minimum amount will still leave people with a shortfall in retirement and where people can they should look to save more than the minimum contribution levels"

She adds "This is just a start, there's much more to do to encourage people to engage with their pension and make the appropriate levels of pension savings to fund the retirement they aspire to".

Pensioners overtaxed by £400m

Pension savers have been overtaxed by £400 million since pension freedoms were introduced to figures from HM Revenue & Customs (HMRC). The problem arises when over-55s make lump sum withdrawals from their pension. Although the first 25 percent of money taken out is tax-free, the remaining 75 percent is taxed at the individual's marginal rate. 

In tens of thousands of cases lack of information and up-to-date tax codes leads HMRC to apply an 'emergency' tax code, which results in pension savers being overtaxed. Those in this situation reimbursed eventually, but repayments take time. The taxman has had to pay back tax on around 174,000 occasions since 2015, totalling £402 million in repayments. 

In the fourth quarter of 2018 alone, figures show over £30m was repaid to over 13,000 people. 

Helen Morrissey, Pensions Specialist at Royal London says: "HMRC is utterly shameless in the way that it over-taxes people and then expects them to claim a refund. The system should run for the convenience of the taxpayers, not the convenience of HMRC. It is time that this over-taxing spree was brought to an end".

TV licence fee rises

The cost of the annual television licence fee increases from £150.50 to £154.50 from April 1. Currently people aged over 75 enjoy fee-free viewing and use of BBC television and online services such as iPlayer, but at the time of writing the BBC, which funds the scheme is considering scraping it.

A report commissioned by the corporation showed the cost in lost revenue the licence fee would otherwise attract from over 75s is £745 million per year and will rise to £1 billion by 2029/30 due to the UKs ageing population.

The report notes that older generations have "seen a marked improvement in their absolute and relative living standards" since 1999/2000 when the licence fee concession for over 75s was introduced. 

Postcode lottery for care funding

Families face an over 65s care funding postcode lottery, with people in some areas of teh country four times as likely to be fully funded than others, according to analysis by Key, the independent equity release adviser. A Freedom of Information request by the company revealed on average just one in three (31 percent) of over-65s are fully-funded for care- but there are major regional differences. Local authorities in the East of England are the most likely to provide full funding. On average 68 percent of applicant were fully-funded- four times as many as in Wales and the East Midlands where 16 and 17 percent respectively are fully funded

Beware of 'fronting'

GoCompare estimates that one in ten young driver car insurance policies are 'fronted'- this is where an older, experienced driver, usually a parent or grandparent pretends that they are the main driver to reduce the premium. As the average cost of car insurance for a 17 year-old is now £1964 you might be tempted, but the website warns don't! It's illegal. 

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