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Britain is back on track, so what does it mean for your money?

By Sally Hamilton and Toby Walne, Financial Mail on Sunday, London on

Published in Senior Living Features

The economy is recovering and the Government is slowly getting a grip on its borrowings. But what did the Autumn Statement mean for households?

From January, household energy bills are to be cut by pounds sterling 50 a year. This will be used to offset the financial pain of price hikes this winter of more than pounds sterling 100 a year by the Big Six - Scottish Power, EDF Energy and Eon.

The pounds sterling 50 comes from the Government reducing the requirement on energy suppliers to provide green energy through projects such as wind turbines.

Phil Radnor, 32, and wife Caroline, 34, who have an 18-month-old son, Jack, welcome the move but they are still worried their household bills are going up.

IT consultant Phil, of Lichfield, Staffordshire, says: 'We switched energy suppliers last winter when the first wave of price hikes came in, using the cashback website Quidco to save money. But even with the savings we made, our household bills are still soaring.'

From next September, families with children aged under seven will get a free school meal each day - from reception to Year Two.

It will affect 1.8 million children in England and save families an average pounds sterling 430 a year. The policy will cost pounds sterling 600 million and a further pounds sterling 150 million will be spent on revamping school kitchens.

A rise in fuel duty of 2p a litre for petrol and diesel, due next September, has been put on hold until May 2015. Without the freeze, motorists would have paid an average pounds sterling 11 extra to fill up at the pumps. Fuel duty remains at 57.95p a litre, where it has been since March 2011.

The paper car tax disc is being scrapped next October, though the tax must still be paid. Motorists will have to pay online, by phone or at a post office but will be able to do it monthly by direct debit for a 5 per cent surcharge.

Motorists will still get a yearly reminder to pay. The cost of putting your car through an MOT is frozen at pounds sterling 54.85 until 2015. Train fares will rise by 3.1 per cent from January, less than originally agreed.

MANY taxpayers will be able to keep more of their hard-earned income from April next year as the personal tax allowance rises to pounds sterling 10,000 - a boost of pounds sterling 560 per person.

In April 2015, some married couples and civil partners will be able to save up to pounds sterling 200 a year by transferring up to pounds sterling 1,000 of their own personal allowance to a lower-earning partner - if neither is more than a basic-rate taxpayer.

Sarah Pennells of money website SavvyWoman fears too many couples will not be eligible for the marriage perk.

'It will mean some couples are better off by pounds sterling 200 a year, but many others, such as those where both partners work and pay tax, won't be able to take advantage of it,' she says. Other tax initiatives included in the Autumn Statement are plans to provide an online service for inheritance tax for the first time, simplifying the red tape facing families dealing with a relative's estate.

Investors selling up shares or property will also keep more for themselves from April next year, with the annual capital gains tax allowance rising by pounds sterling 100 to pounds sterling 11,000.

Savers will be able to shelter more of their money from the taxman from next April, with an increase in limits on a range of schemes.

The annual cap on Isas rises by pounds sterling 360 to pounds sterling 11,880, of which pounds sterling 5,940 can be cash. The amount that can be saved in Junior Isas (Jisas) and Child Trust Funds goes up to pounds sterling 3,840.

Hopes for new rules allowing Child Trust Funds, no longer open to new savers, to be transferred to better-value Jisas were dashed, with no mention of any initiative to blend the schemes.

Employees were also given more incentive to save, with the raising of limits for workplace Save-As-You-Earn and Share Incentive Plans.

The maximum investment in shares under Share Incentive Plans will rise from pounds sterling 3,000 to pounds sterling 3,600 a year. Shares are bought out of pre-tax pay every month but must be held for five years.

The amount an employee can put into a SAYE scheme doubles to pounds sterling 500 a month. Cash is put in a special bank account and at the end of the three or five-year term, savers have the option to buy shares with the proceeds, usually at a considerable discount.

Peer-to-peer lending - where individuals lend directly to other individuals and businesses in return for interest that beats bank savings rates - was expected to become an allowable investment in Isas but failed to be included this time round.

Bruce Davis of specialist peer-to-peer lender Abundance Generation says the Treasury has invited players in the market to a meeting in January to discuss its eventual inclusion.

Retail bonds with less than five years to run are also tipped to be included in Isas in the near future.

Paul Killik, senior partner of broker Killik and & Co, says: 'We welcome the proposed removal of the five-year rule on fixed-income investments as it will help take away the distortions in the price of retail bonds around their five-year anniversary.

'It also opens up the option of private investors being able to purchase existing bonds in the stock market and for companies to issue bonds of less than five years until maturity.

'Recent bond issues have been around seven years in duration and Premier Oil has just closed a new bond having raised pounds sterling 150 million at 5 per cent a year until maturity in 2020.'

 

Signs that the end of cuts to rates paid to beleaguered National Savings & Investments savers were also given in the Autumn Statement.

The Treasury has allowed NS&I to raise more money from the public.

Anna Bowes of comparison service Savings Champion, is cautious. She says: 'National Savings is still attracting more money than it needs so it is unlikely rates will go up in a hurry.'

Maureen Kirwan, 37, a financial trader, lives with electrical engineer husband Phil, 54, and two-year-old daughter Grace in Limehouse, East London.

Maureen welcomes the increase in the annual Isa allowance as the couple puts a strong emphasis on saving using these plans.

Maureen says: 'Phil is a few years older than me and he's starting to think about retirement. We don't have a lot in pensions but we like Isas as an alternative as they are more flexible.

'It's a shame the Government wasn't more ambitious by increasing the annual limit.

'But I'm glad it didn't announce an overall cap on total Isa investments as was suggested a couple of weeks ago.

'I am also pleased about the removal of stamp duty on UK-based exchange-traded funds, which will make buying them cheaper.

'Our Isa manager Nutmeg makes use of them a great deal. It would be great if they could extend that stamp duty break to shares and unit trusts as well. When we have funds available we try to make full use of our Isa allowance by using a stocks and shares Isa. A cash Isa wouldn't even cross my mind for consideration.'

Millions of young people will have to wait until they are 70 to draw their state pension under new rules confirmed in the Autumn Statement.

The unsustainable cost of the country's pensions bill - a result of us living longer on average - means those born in the early 1990s will have to work at least 50 years to earn a state pension.

The current retirement age is 65 for men but this will rise to 66 for men and women by 2020; 67 by 2028; 68 in the 2030s; 69 in the 2040s; and 70 by 2050.

The calculations have been made in such a way that the elderly retiring in the future will receive the state pension for a similar proportion of their lives as those drawing it today. David Smith, wealth management director at pensions adviser BestInvest, says: 'Anyone looking to retire prior to the state pension age needs to review their pension provision - and quickly. The costs of delaying decisions could be financially disastrous.

'A single man looking to retire today on his 55th birthday would need a pension pot of pounds sterling 1.25 million to provide an index-linked pension of pounds sterling 25,000 a year.'

Malcolm McLean, consultant at pension specialist Barnett Waddingham, says: 'These changes are most likely to be of greatest concern for people in their late 40s who will now have only a relatively short time to plan for their later state pension age.'

Ian Naismith, pensions expert at Scottish Widows, says: 'The announcement must be tempered by the fact that we will increasingly see a trend towards 'phased retirement', perhaps through working reduced hours, or shedding responsibilities and moving to a job with less stress or less manual effort.

'This, combined with additional income sources such as Isas or equity release from housing, could play a vital role in plugging short-term or long-term income gaps.'

Meanwhile, for those eligible for the state pension now, the basic weekly payment will go up in April next year to pounds sterling 113.10.

Would-be pensioners fearing a shortfall in their state pension due to missed National Insurance contributions will be given the chance to make lump-sum voluntary contributions from October 2015.

These new contributions let those who reach the state pension age before an enhanced pension is introduced in April 2016 pay more to get a better deal.

It will target those who have struggled to build up a full entitlement during their working lives - including stay-at-home mums and those who have already retired.

(c)2013 Daily Mail (London, )

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(c) Financial Mail on Sunday, London

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