Upcoming changes to state pension in 2022
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2022 brings with it a lot of planned financial changes and Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, broke down the initial elements to keep on top of. Despite facing a difficult and costly Christmas period, Britons will not find much respite in the early months of the new year.
Ms Coles commented: “2022 is a year of change, but not in a good way. Most of the financial developments in the pipeline will leave us worse off by the time we struggle to the end of 2022. The tax rises announced around the Budget will kick in, along with higher prices for everything from energy bills to rail fares and pub prices.
“It’s not all bad news though. Buried among the price rises are a few more positive changes, including the end of the loyalty penalty for insurance customers, lower water bills, and easing the admin burden for families of those who pass away.
“Unfortunately, for most of us, the bad outweighs the good, so we need to plan ahead and be prepared for the worst 2022 can throw at us.”
Ms Coles went on to examine what financial changes should be focused on in the early months of this year.
Unfortunately ongoing supply chain issues may continue to be a problem, for both businesses and consumers. This month, full UK customs declarations are required on goods coming from the EU.
Ms Coles explained this will mean an “awful lot more paperwork” for hauliers and more checks at ports. This could lead to more bottlenecks, and supply chain problems, which is “going to make it even trickier for shops to keep the shelves full” in the coming weeks.
Fortunately, the remainder of expected changes this month should benefit consumers. January should usher in the end of the loyalty penalty for home and motor insurance consumers.
Ms Coles continued: “From this point, when you’re sent a renewal quote, your insurance company will have to offer you the same deal that they would give to new customers. This will effectively kill off the practice of ‘price walking’, where you’re offered a cheap deal to tempt you in, and then every year your renewal gets more and more expensive.
“It’s good news for those who stick with one provider, but it’s likely to mean the end of very cheap deals for those who are prepared to keep switching.”
Inheritance tax reporting rules are also changing. A tweak to the rules will mean there’s less paperwork for thousands of people with no inheritance tax to pay, because it broadens the rules for people who don’t have to submit full accounts to HMRC when going through probate. This should spare 230,000 people the “extra stress” each year.
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Next month could also bring with more substantial changes. The next Bank of England Base Rate review will take place on February 3.
In December, the Bank of England raised rates from 0.1 to 0.25 percent. While many noted this was a modest raise, some experts warned it showed where the central banks’ intentions lie.
Ms Coles said the markets are expecting further increases in early 2022 and the likelihood is rates are likely to end this higher than what they were at the end of 2021. Mortgage and savings rates were already inching higher towards the end of 2021 as the markets started pre-emptively pricing in a rise but Ms Coles warned savers are unlikely to benefit from this.
She said: “While mortgage and credit card rates are likely to rise in the wake of any Bank of England rise, the impact on savings will be far less striking. There’s a good chance a number of banks won’t pass rates on at all, while others will only pass on a fraction of the rise, and even then, they could delay it for weeks.
“In this environment, it’s always tempting to become a wait-and-see saver, putting off fixing a savings rate until rates are higher. However, the uncertain timing of any rise means that if you put off a switch, and wait it out in a dismal high street savings account paying 0.01 percent, you’ll miss the opportunity for a better rate in the interim.”
Additionally, Ofgem will be announcing its new energy price cap in February, which will then be introduced on April 1. Ms Coles argued the announcement “isn’t going to be pretty” as it is going to reflect far higher wholesale prices, plus the cost of the industry picking up the pieces after energy company failures.
Unfortunately, this will likely result in annual bills rising by hundreds of pounds.
She continued: “At this point Ofgem may also announce the results of its consultation into how the cap operates.
“This is likely to change the rules to allow energy companies to bump up prices when wholesale prices go through the roof. The idea is to try to prevent more energy company collapses at times of runaway energy prices.
These energy issues will prove to be especially problematic as additional research showed many families would have needed to borrow just to cope with the winter months.
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