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Saving has just got a little sexier!

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With an ever ageing population being kept healthier for longer, our hard-earned cash has to stretch further than it did when our parents were young.

I am 50 this year and my average life expectancy is another 33 years, taking me to 83, according to the Office for National Statistics.

If I stay healthy, lay off the wine and keep fit then all the signs are that I could easily make it well into my 90s.

Assuming that I do not want to work for the rest of my life though, there needs to be some focus on making provision for the future right now.

The Government is acutely aware of this problem and doesn’t want us all to rely on the state, which cannot afford to support us anyway.

This is most likely why the recent budget launched a plethora of savings initiatives to encourage us all to think about saving for our futures.

Starting at the very beginning, we have Junior ISAs and Child Trust Funds. The budget confirmed that Child Trust Funds can now be transferred into Junior ISAs.

Although both tax free with the same annual limit of £4,080 each, the new rule offers the option for either, which previously was not available as a child could not have a Junior ISA if they benefited from a Child Trust Fund already.

So from an early age the Government is encouraging families to save for their children. To encourage this in a tax efficient environment with Junior ISAs, which can be transferred to adult ISAs at the age of 18, is a good start on the road to saving for the future.

My view is that financial education in schools is severely lacking and is fundamental to building a future.
A basic understanding of keeping a budget and saving and investing would place school leavers in a much better position to survive in the adult world.

By investing and saving young, even if parents or grandparents pay in, it provides children with an understanding of what investing means, how funds are made up and they can watch their investments grow over what may be many years.

The Government will be introducing ‘Save to Buy’ ISAs this autumn which strives to help first time buyers get onto the property ladder.

The maximum which can be paid in is £200 per month (with a £1,000 additional allowance for the first payment).

The Government will add a bonus when the property purchase proceeds of 25 per cent with a maximum of £3,000.

In order to achieve the maximum bonus it will take five years at £200 per month which will total £12,000 in savings.

This is to be encouraged and is a small step in the right direction as we all know that saving for a deposit will be extremely difficult especially with the tightening of mortgage lending and higher property prices.

The property purchase price will be limited to £450,000 in London and £250,000 outside of London.

The finer detail is to be confirmed but never the less it will encourage saving.

Also to be introduced with effect from 5 April 2016 is a £1,000 tax free savings allowance for basic rate taxpayers and £500 for high rate taxpayers.

This is based on interest from bank and building society deposits which will now be paid gross.

Based on an interest rate of 1.35 per cent per annum gross, an investor would need to have a cash deposit of just over £74,000 to gain the maximum £1,000 tax free interest and for a couple to gain £1,000 each that would mean a deposit of £148,000 – so quite a bit of cash before the maximum is achieved.

Still, it is an incentive to save and will mean that in these low interest rate times most savers will not pay tax on their interest generated from cash deposits.

You might say that these are reasonably small measures but they are a step in the right direction and with the new more ‘flexible’ pensions allowing us control of when and how we withdraw our pension pots the Government is beginning to focus on providing the structures to encourage us to save for the long term which they ultimately hope will take the pressure off the state.

For more information contact louise.oliver@piercefield.co.uk tel: 0845 2578749 www.piercefieldoliver.com

Piercefield Oliver is a trading name of Piercefield Asset Management Ltd, which is authorised and regulated by the Financial Conduct Authority.

This article is not intended to provide specific advice to individuals and is generic in nature.

The post Saving has just got a little sexier! appeared first on Piercefield Oliver | Financial Adviser.


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