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No time like the present to teach children money management skills

These are unprecedented times in which to bring up children and one of the vital lessons we can pass on to them is to teach them how to understand and manage money. Without a real appreciation of how to handle finance, so many adults end up in debt – often because no one ever taught them how to manage money when they were young. 

We are all bombarded with slick advertising for ‘must have’ products or experiences that are backed up by ever increasing access to easy credit or ‘buy now, pay later’ schemes, tempting us into instant gratification. It is therefore vital to give our children a grounding in personal finance to help them appreciate how money can work for them, rather than against them.

Show them by example – when you take them shopping, show them how much you spend on food and that money is a tool and enables you to purchase items. Explain that having £10 in your hand does not mean you can buy something worth £10.01.

Do they know where money comes from? – explaining the concept of working for pay should be emphasised from an early age.

A piggybank – start the savings habit early. Cash might be going out of fashion, but making the connection to value is helped immeasurably by understanding coins and notes and what they represent.

Pocket money – in exchange for chores done around the house, pocket money is a good practical demonstration of the connection between work and reward.

Saving – insist that a percentage of their pocket money goes into savings; perhaps a piggybank for the very young or helping older children to open a savings account either online or via an app or passbook, in which they can see their money grow.

If children want to buy a specific item or service, or set a savings goal, this can help them learn how to budget and to understand that saving, rather than just instant acquisition via the Bank of Mum and Dad, fosters independence and recognition that saving leads to better outcomes.

As children move into their teen years there is now a range of debit cards linked to apps

which can also help them to see what they are buying, how much they spend and how much they have left. Spending limits can be applied by parents, but spending limits are not a substitute for parental guidance from an early age.

The world is becoming an increasingly difficult place to navigate, especially for the young. So, a basic grounding in managing money can be one of the best gifts you give to youngsters.

Older relatives can qualify for a free TV licence if they qualify for Pension Credit

Much has been written about the BBC’s decision to halt the right to a free TV licence for the over 75’s and the general outcry that has arisen since it was introduced in August 2020. Clearly it has been seen as a divisive move and has undoubtedly had an impact on pensioners already struggling on fixed incomes.

The current licence costs £159 per annum and the fee must be paid by anyone watching live terrestrial television such as BBC, ITV and Channel 4. Those watching digital channels exclusively do not have to pay.

However, it is reckoned that 1.5 million over 75’s are still eligible to pay nothing. To see whether this applies to anyone in your family, families should check with the Department of Work & Pensions to see if older relatives are receiving Pension Credit. If they are, then the licence is free.

Pension Credit provides extra money to help with living costs for anyone over state pension age and can also help with housing costs. Separate from the state pension, anyone living in England, Scotland and Wales are eligible to apply, and the criteria for receipt of Pension Credit depends on income and savings. There are no automatic payments, eligible pensioners or their families must apply on their behalf to see if they qualify.

You will need :-

  • The individual’s national insurance number.
  • Information about income, savings and investments.
  • Bank account details.

Applications can be made online (https://www.gov.uk/pension-credit/how-to-claim) if the person is already claiming the state pension, by phone, or by paper application, but the earliest an application for pension credit can be made is four months before reaching state pension age.

Pension Credit can top up weekly income to £177.10 for single people, and joint weekly income to £270.30 for married or co-habiting couples.

This could be an opportunity to help older relatives approaching or already in retirement to top up their income with Pension Credit, with the added bonus of a free TV license for the over 75’s who qualify.

Going green – a worthy goal, but can we afford it yet?

We have all read the headlines about efforts to save the planet and reduce our carbon footprint and the government is looking at ways that will result in significant changes to the way we live. Domestically, the banning of gas boilers in all new build homes will come into effect from 2025. Replacing a gas boiler like for like will be banned after 2030, but the timescale has still not been decided. At the same time, the internal combustion engine (ICE) is due to be pensioned off by 2035.

The move to reduce emissions is without doubt an essential goal, but what are the alternative sources to heat homes and provide personal transport, and are they viable?

As far as heating options are concerned, replacements for gas boilers depend currently on heat pump technology becoming cost comparable with gas boilers. At the moment, government subsidies would have to be high to level the cost playing field before the gas boiler ban takes effect. The other alternative is to substitute hydrogen for gas as the fuel of choice for boilers, but doubts remain as to the compatibility with existing boiler technology, the ability to produce sufficient supplies, and whether the production of hydrogen would not in itself be the cause of significant pollution.

On the car front manufacturers have stepped up, and the development of battery powered vehicles has accelerated to a point where a strong argument can be made that electric cars already represent a viable case for replacing those powered by petrol and diesel. Yet as it stands, while the range of the new breed of electric vehicles is now quite respectable – c.200/300 miles on a full charge – charging station capacity across the country is still inadequate. Other issues include how those living in flats and busy suburban streets with no off-road parking will be able to recharge their cars without turning pavements into no go zones full of cables. Current costs of electric car purchase make adoption an expensive proposition relative to the cost of an ICE powered vehicle, although cost parity will become more of a reality as the technology becomes mainstream.

Hydrogen, as an alternative to battery power, is currently a long way behind even the existing battery powered infrastructure. But the biggest challenge to large scale battery powered adoption is the National Grid’s capacity to meet the needs of a population wanting to recharge increasingly large numbers of electric vehicles.

Currently it would seem that early adoption of gas boiler alternatives and electric vehicles will continue to be the province of those who can afford to switch early. There is still time for costs to fall and the necessary infrastructure to be put in place but, in the meantime and for many of us, a watch and wait policy would seem to be the best approach.

Energy crisis – how it affects you and your family

We take for granted that the lights will always come on when we press a switch and that the central heating will work as summer gives way to the colder days of autumn. However, those certainties seem a little less so in the wake of the news of wholesale price surges in energy costs.

At the heart of the issue is not a shortage, but a lack of gas being produced in sufficient volumes, unexpected extra demand as the country gets back to work after the pandemic, and the shortage of storage capacity. With demand across the world increasing and production not yet back at pre-pandemic levels, inevitably prices have rocketed.

Wholesale prices have increased by approximately 250% since the start of the year and that has caused a ripple effect as many energy firms have had to pay the higher price because they did not buy enough gas at lower prices before prices went up. For many of their customers who are on fixed rate tariffs or where the cost of wholesale gas is exceeding the government controlled price cap, this means that inevitably those firms will cease trading.

The past eight weeks have seen a number of smaller energy companies go bust and Ofgem, the energy regulator, has ensured that customers of failed energy companies have been moved to larger suppliers. However, there is no guarantee that the tariffs offered by replacement suppliers will mirror what consumers had with their old supplier.

Unless consumers are on a fixed tariff the price they pay will increase and at the end of any fixed price tariff they will find it difficult to avoid a large increase in cost. In addition this is likely to have a knock on effect on electricity costs, as much electricity is generated by plants powered by gas.

At the time of writing, there is no clear indication when prices will stabilise and start to fall. In the meantime, the government is working with suppliers and Ofgem to ensure that customers whose suppliers go bust are placed with an alternative supplier.

What can householders do?

  • If your supplier goes into administration, don’t panic. A new supplier will take over your account.
  • If you have not got a fixed price tariff, your exposure to higher costs is limited by the ‘energy price cap’ set by Ofgem in consultation with the government. However, the energy price cap rose to £1,138 from 1 April – a £96 rise for “medium” energy users. From 1 October, another 12 per cent increase will come into effect, with the cap rising to £1309. This will affect around 11 million households.
  • Consumers can still switch suppliers but the number of alternative sources is now quite limited and it is likely that lower fixed price tariffs and cheaper deals will not be available for some time.
  • The important thing is to stay calm and not to do anything in haste. Price rises are inevitable in the short term, however it is likely that as the supply side is scaled up, prices will fall. We just cannot predict when.
  • For people experiencing payment difficulties, there is help available. The Warm Home Discount – https://www.gov.uk/the-warm-home-discount-scheme is there for those that qualify from 18th October, as well as winter fuel payments for those on the state pension or in receipt of another social security benefit.
  • If you are in any doubt, contact your supplier who will be able to talk you through available options.

Haggle for cheaper breakdown cover

When was the last time you went into a shop and instead of looking at the price tag for an item or service and just paying up, you asked for a lower price?

The art of ‘haggling’ where a negotiation takes place between buyer and seller to arrive at a mutually acceptable price is a skill which has been allowed to wane. There are many reasons. Some of us don’t have the time to argue and many of us are too embarrassed or just fear having our offer rejected. Internet shopping also gives us little or no chance to ask for a discount. Have you ever tried to talk to a human being at Amazon, for example?

Yet, while there is plenty of encouragement to find the cheapest deals, the prices are set by the sellers. How much of a better deal could you get if you just asked for a lower price?

This is particularly pertinent to the charging for car breakdown cover. In a previous newsletter, we talked about new legislation to stop insurers from funding massive first year discounts on car and home insurance from existing customers paying premiums which escalate every year. The new law did not include breakdown cover where the evidence of existing customers subsidising premiums for new customers is very clear.

The majority of car owners have private breakdown cover. Currently you can pay a minimum of £95.00 for vehicle recovery and any amount from £180 for motorway roadside assistance and recovery. We all know that having private breakdown cover provides peace of mind, but are you aware of whether your current provider is increasing your premium while enticing new customers with a much lower price for exactly the same cover?

When you receive your next renewal letter and are unhappy with the cost, pick up the phone and either ask why your premium is so high, or say that you are looking at alternative quotes from competitor providers.

In many cases, your existing provider will offera new lower quote which could save you a considerable amount of money. If everyone queried their renewal quotes, premiums would tumble across the board. Until the law catches up and includes breakdown cover along with the car and home insurance to stop the exploitation of existing customers, it is up to us to haggle!

Energy Rating

Home energy saving tips

WHAT YOU CAN DO

With the government committed to reducing greenhouse gases, particularly CO2, what can we do individually or as family units to ‘do our bit’?

Heating and other activities in domestic homes are responsible for 15 per cent of greenhouse gas emissions in the UK, so let’s look at what measures we could take to make our homes more efficient and potentially save on our energy bills.

Insulation
Poor insulation leads to 45 per cent of heat loss. Cavity wall insulation stores heat within inner walls, while loft insulation sits between the joists in the roof space. Also consider floor insulation too.

Costs vary depending on house size, but budget for £500 to £1,000. Consumer body Which? and the Energy Saving Trust calculate you could pay for it with reduced energy bills after five years.

Solar Power
Solar panels convert sunlight into electricity and can be a way of reducing your electricity bills by selling electricity generated by your panels to the National Grid under the Smart Export Guarantee tariffs scheme. 

Depending on the size of your roof and the number of panels you have, prices can start from £5,000 for a three bedroom house. However, effective capture of solar energy depends on the weather and the siting of the panels. The best position is on a south facing roof. Therefore, it can take anywhere between ten and twenty years to recoup initial costs in electricity bill savings, at existing rates.

Double Glazing
Double or triple glazing will help cut energy bills but, without blinds and particularly if the windows are south facing, double glazing can magnify the effect of sunshine and cause overheating. 

Double glazing a typical three bedroom home is likely to cost between £5,000 – £7,000.

Low energy lighting
According to research from the Energy Saving Trust, if all 28 million homes in Britain switched to 100% LED bulbs, we could save 1.7 million tonnes of CO2 emissions annually. Replacing every bulb in a typical house with LED lights could cut carbon dioxide emissions by 75 per cent.

A traditional halogen bulb lasts around two years or 2000 hours, based on three hours’ daily use. An LED under similar conditions lasts 10,000 hours upwards, for 10 years or longer. You can save £2 to £3 per year for every traditional halogen bulb you switch to a similarly bright LED bulb.

Upgrading a boiler
Modern gas boilers can save you money, particularly if you have an older model, as well as reduce the amount of CO2 emitted. Upgrading to a new modern combi boiler is likely to save you between 20-35% on your gas bills. The older the boiler, the less efficient it will be, so a new one can start to instantly repay your costs by reducing heating costs immediately.

‘A’ rated boilers including installation can start from £1,000-£2,000.

Housing

Abolition of ground rents moves a step closer but only on new property

Currently a Leasehold Reform Bill is being debated in parliament that will abolish ground rents charged on all new build property.

Not to be confused with standard monthly rent paid to the owner of the property, ground rent is a rental charge attached to the ground on which the property sits. It is paid annually or half yearly, and failure to pay can result in the freeholder seeking to obtain possession.

The Leasehold Reform (Ground Rent) Bill will put an end to ground rents for new, qualifying, long residential leasehold properties in England and Wales. This is part of the most significant changes to property law in a generation.

It will be the first of two part legislation to reform the leasehold system. This Bill will mean that if any ground rent is demanded as part of a new residential long lease, it cannot be for more than one peppercorn per year (notional value) meaning that future leaseholders will not be faced with financial demands for ground rent. The Bill also bans freeholders from charging administration fees for collecting a peppercorn rent. Fines of up to £5,000 will be levied on freeholders that charge ground rent in contravention of the Bill. 

Some leaseholders have experienced ground rents doubling every ten years on top of their mortgage and any service charges, with no prospect of ever selling the property on. Their only way out has been to buy the freehold, only to discover this is yet another area targeted by the profiteers.

Developers, including some household names, have been selling newly built flats (and houses) as leasehold, creating high annual ground rents and including provisions in leases for the rent to be increased – sometimes doubled – after a certain period of time.  A number of buyers of this type of property have, quite often, been told by the builder that they would be given the opportunity to buy the freehold at a later time before the builder developing the site, only to find that, when they try to buy the freehold, the builder has already sold it to an investment company. Critics of the bill are rightly complaining that it does not go far enough, because existing leaseholders are not included in the new Bill as it is currently structured.

Garden Room

Garden Rooms – what you need to know

Many of us have sheds in our gardens. Some were probably inherited when we moved house and are versatile enough to be a gardener’s store, a hobby sanctuary or just a place to keep bicycles and other items that won’t fit anywhere else.

However, there has been a rise in the number of structures for our outdoor spaces, which provide for less utilitarian purposes. Garden rooms provide an extra space which, when kitted out properly, can become a home office or a second room for relaxation.

After the initial enthusiasm to adopt a garden room and extend the versatility and usefulness of your property, there are several things to consider.

Most garden rooms don’t require planning permission. Being classed as outbuildings, you are permitted to build one as long as you comply with certain rules.

Permitted development rights
Most properties have this automatically. However, if the property is in a National Park, a World Heritage Site or a conservation area, it could be in a designated area where development of a property or the erection of outbuildings are not permitted, or require separate permission. It is a good idea to check with your local planning office. Maisonettes and flats don’t have permitted development rights because of the communal aspect. The rules are the same whether you live in England, Northern Ireland, Scotland or Wales.

Planning rules
Under permitted development, there are rules to follow:-

  • The garden room must not be at the front of the house
  • The total area of all external structures including sheds, extensions and outbuildings must not exceed 50% of the outside area surrounding the house
  • The room or cabin must be single storey and less than three metres in height. The eaves must be no more than 2.5 metres above ground level.
  • The room must not be for self-contained living accommodation
  • The room must not have a balcony, veranda or raised platform.


Garden rooms as offices
Using a garden room as an office also presents no issues, provided it is for incidental use for working alone at a computer, for example.

However, being mindful of changing the character of a neighbourhood, councils will not approve garden offices where business meetings or appointments will be hosted.

Retrospective planning permission can be applied for, but councils can order the removal of a garden office if the rules are not met.

In summary, garden rooms rarely require planning permission, provided the basic rules on size and usage are observed. However, if in doubt, check with your local authority.

Stamp Duty

What comes after the Stamp Duty holiday?

(The figures given are for England & N. Ireland only. In Scotland and Wales, the figures may vary)

The stamp duty (SDLT) holiday, introduced in July 2020, was designed to stimulate the housing market by cancelling or reducing stamp duty payments on house purchases during the holiday period when the nil band for residential properties was increased from £125,000 to £500,000.

The holiday was extended from its original end date of 31st March and officially ended on 30th June. Rather then reimpose the full tariff straight away from July 1st, the Treasury has reduced the impact of an immediate return to the standard tariff by reducing the nil band from £500,000 to £250,000 and then from 1st October, reducing it further back to its pre- holiday level of £125,000.

From 1 July, stamp duty will only be applicable above £250,000 at the following rates:

  • £0-£250,000 = 0%
  • £250,001-£925,000 = 5%
  • £925,001-£1,500,000 = 10%
  • £1,500,000+ = 12%

From 1 October 2021, rates are due to return to normal. That means the point you to start paying stamp duty will revert back to £125,001:

  • £0-£125,000 = 0%
  • £125,001-£250,000 = 2%
  • £250,001-£925,000 = 5%
  • £925,000-£1,500,000 = 10%
  • £1,500,000+ = 12%

The stamp duty holiday has certainly been a huge incentive for buyers. For some it meant saving as much as £15000. It also proved to be attractive for BTL landlords even though they were still having to pay the usual 3% surcharge which also applies to all second home buyers.

The main driver for the jump in house buying, apart from the stamp duty holiday, has been the pent up demand caused by lockdowns and the desire of urban dwellers to seek more space after experiencing the day to day claustrophobia of being cooped up in confined spaces with little or no access to open air spaces.

One side effect of the rush to buy has been to accelerate the rise in house prices as the supply of property could not keep up with the demand. Subsequently, UK house prices rose on an average by 13.4% in the year to June, according to the Nationwide Building Society. In popular areas such as Cornwall, the average increase was up by 15.5 per cent between March 2020 and 2021.

Since the wind down of the stamp duty holiday started on the 1st July, indications suggest that demand will begin to fall and prices start to stabilise.

Planning

New web apps to simplify planning applications to build extensions

For some time, the rules on planning have been difficult to interpret, particularly for homeowners planning one off building extensions for extra accommodation or new kitchens. It has led to confusion and, in some cases, added cost for homeowners as many home improvements, such as kitchen extensions and loft conversions, do not need full planning permission. Lack of clear information has seen invalid applications submitted for what are called ‘permitted developments’ rejected with the subsequent wasting of time and money.

In response, the Ministry of Housing, Communities & Local Government has developed two new apps, which are currently being tested in three areas. The first one is designed to help guide homeowners, while the second will also help developers and architects by speeding up and simplifying the application process. In addition, it will help council planning officials manage permitted development applications – tracking progress and putting the information they need to make decisions in a user-friendly format. It puts the focus on data rather than documents, helping planners make decisions much more quickly and efficiently.

The new app for homeowners uses simple language and diagrams to help navigate the system. It asks a series of questions and determines whether the plans meet local and national requirements. Users can then apply within the app for the certificate they need to show their plans are permitted development, allowing building to go ahead.

According to the Ministry, it is a first step towards replacing the current, outdated, paper based system with a fully digital process, which does away with 100 page PDFs and having to find information manually.

Assuming the trials are successful, apps will (presumably) then be made available for all smartphone operating systems.

For the many people who have been put off by the complexities of form filling as well of those who have lost money in fruitless attempts to apply, these new apps could hold the key to a simpler, stress free method of planning application.

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