Cost-of-living crisis scams – how to spot the latest tricks from fraudsters
Financial scams are more prevalent than ever, and scammers are finding evermore ingenious ways to part you or your loved ones from your money. The cost-of-living crisis has provided fraudsters with yet another way to try and swindle you.
And banks, which are now bound by a code of conduct for victims of scams, are becoming more unreliable than ever when it comes to handling those cases, according to an investigation by consumer group Which?.
While in many cases banks are now obliged to reimburse you for loss of money thanks to fraudsters, the process is by no means easy, and it can take a lot of time to recover stolen funds.
It’s therefore essential to know how to protect yourself in the first place, and to recognise some of the latest ways in which they try to fool us.
- Cost-of-living crisis scammers
This is a new type of scam which will often come through a text message, email or phone call. One of the biggest tools scammers have, is to weaponise anything that is being whipped up as something to be worried about in the media.
At the moment the scammers’ zeitgeist is the cost-of-living crisis. With Chancellor Rishi Sunak promising thousands more in support for vulnerable households, scammers will no doubt be trying to get in touch with people to steal their bank account details while purporting to be from the Government, your local council, bank, or any other institutions.
But the truth is that these cost-of-living payments are being made automatically, and in many cases you don’t need to make contact with any authority. Certainly, none will be in direct contact with you about it, so just ignore any supposed outreach!
For the recent £150 energy relief payments, if you haven’t had it yet, try giving your local council a ring, or look on their website for new information.
- Advance fee fraud
Another recent rising scam, which Lloyds Bank has warned it has seen a 90% rise in instances of, is advance fee fraud.
This is again likely coloured by scammer references to cost-of-living crisis help, or at least easy credit in the face of rising bills.
Advance fee fraud leads people to enter their contact details on websites which appear legitimate when looking to take out a loan or a credit card. The website will then ask for an ‘advance’ payment – which you will never see again.
Liz Ziegler, director of fraud and financial crime at Lloyds Bank, comments: “Organised crime gangs will ruthlessly exploit any change in consumer behaviour. We saw that during the pandemic with the surge in purchase scams as certain goods became scarce and more people shopped online.
“The important thing to remember is that a genuine loan company will never ask for an upfront payment before releasing the funds. If you’re concerned in any way about your finances there are lots of organisations that can help, and it always makes sense to speak to your bank first.”
Key here to spotting the signs of a scam is strange looking URLs in your internet browser, spelling mistakes or poor-quality logos on websites. Unfortunately, these scammers do often just mimic the official websites of normal financial firms, so being highly vigilant if you’re looking to take on any new debt is essential.
- Bank account bait-and-switch
Another rising bank scam, reported by many of the major banks, is a so-called ‘bait-and-switch’ scam.
Instead of trying to directly swindle you, the scammer will get in touch pretending to be from your bank to say your account or other financial details have been compromised. They will encourage you to move your funds into a family member’s or friend’s account ‘for safe keeping.’
Your money is safe at this point but the next bit of the scam – the ‘switch’ – will see the scammer get back in touch to say your new, safe, account is ready for you. At this point they get you to move funds and if successful, will have control of your money.
The really important thing to remember with this one is that a bank will never get in touch with you in this way. If a bank does contact you, it will be through official channels such as your app or by letter.
The first thing to do if you do have someone contact you is to cease the exchange politely then search out the correct details for your provider and contact them directly to confirm what the situation might be.
Families face inheritance tax bill shock thanks to house price boom
Home-owning families are facing surging inheritance tax (IHT) bills as house prices continue to rise precipitously, new data from Wealth Club shows.
Analysis from the firm shows that the average IHT bill will likely exceed £266,000 in the 2022/2023 financial year. This is thanks to fast-rising property prices in the past two years and represents a 27% increase on pre-pandemic levels.
House prices have risen spectacularly during the pandemic, with prices up 10% in 2021 alone, according to the Office for National Statistics (ONS). House prices are now slowing, according to Zoopla, but still rising around 8.4% year-on-year in March.
The simple fact is homeowners are increasingly falling into the IHT trap, thanks simply to having invested in buying their own home. IHT receipts for the Government have increased every year in the last decade and are up by 57% since 2012/2013.
What to do about IHT
Although there is essentially an unavoidable aspect to paying IHT and associated levies, there are mitigations that can be made to lessen the tax burden on your estate.
The nil rate band for IHT stands at £325,000 and hasn’t changed since 2011. There is also a residence nil-rate band of up to £175,000 over the initial £325,000.
If you’re married these rates can essentially be combined, meaning a married couple can pass on a property worth up to £1 million effectively – or a property worth £350,000 and other assets worth £650,000.
But the reason why more estates fall into paying IHT every year is because these nil-rate bands have been frozen for over a decade. As assets you won increase in value, the likelihood of breaching the band gets closer.
Preparing for IHT takes good wealth planning, well in advance.
Gifting is a really good way to do this as you’re not liable to pay any IHT if you live seven years after a gift, and you can give up to £3,000 in gifts each tax year without incurring any liabilities no matter how long you live after. You can also make any gift ‘out of income’ as long as it doesn’t materially affect your regular earnings from a salary or investments.
There is also a small gifts allowance whereby you can give £250 to as many people as you like in a tax year without any liability. If you have a child getting married you can gift them £5,000, or for a grandchild – £2,500.
But even earlier preparations than this can be made. Pensions for example are exempt from IHT, so holding a good deal of your wealth inside a pension can be very efficient for tax purposes. This is a really important consideration when you’re still in the accumulation phase of your wealth journey, making balancing the amount you are saving into an ISA or pension critical. However, those with substantial pension assets must be aware of the Lifetime Allowance which is a separate tax charge which can become payable on death.
Another method is taking out a life insurance policy which is written into trust, thus not forming a part of your estate. HMRC treats premiums as a lifetime gift, but if they’re below the annual £3,000 exemption or the gifts are out of normal income exemption, then they are considered tax free.
There are other, perhaps more complex ways to mitigate a large IHT bill. If you would like to discuss your options, or for anything else relating to wealth planning, don’t hesitate to get in touch with your financial adviser.
Rishi Sunak launches another round of help for the cost-of-living crisis
Chancellor Rishi Sunak has announced a fresh round of financial help for households facing ever-mounting living costs as inflation rises.
Sunak announced a raft of measures to help raise money and doled much of it out to households in varying amounts. It comes in the wake of an announcement a few days before from energy regulator, Ofgem, that the cap on average energy bills could rise to £2,800 per annum in the Autumn.
The package of measures has drawn criticisms at both ends with the Labour Party accusing the Chancellor of not doing enough for households, while economists have been questioning the wisdom of pouring more money into households’ pockets while inflation soars, and the Bank of England raises rates to attempt to slow spending.
But not all households are receiving equivalent amounts. So, what do the measures contain?
(Not a) windfall tax
The main tax-raising measure that the Chancellor has announced in order to fund measures for households is by taxing oil & gas and energy firms for the extraordinary profits they’ve received as a result of high energy prices.
The tax has been dubbed a ‘windfall tax’ in the media, but in practice is going by another name. Firms such as BP, Shell and British Gas owner Centrica will see a temporary 25% “Energy Profits Levy” imposed on their profits. This will increase their overall tax rate to 65% of profits, a combination of corporation tax and other levies they already pay.
The Chancellor says the measure will raise around £5 billion in the first year, but firms will be able to offset 91p for every £1 of their obligations if they invest in the UK’s energy infrastructure, a significant incentive.
Help for households
At the other end of the announcement – Sunak has announced significant help for households to pay for rising bills.
The core of this plan is a £400 grant which every household will receive in the Autumn. This replaces a previously launched £200 loan which was set to be paid back through higher energy bills in the future.
The grant will be paid out automatically to customers who use direct debit or credit payments for their energy bills. Households with prepaid or voucher-aid meters will have it applied to their meter automatically too.
Beyond this, around eight million households which currently receive means-tested benefits will get £650 cost-of-living payments, payable in two instalments in July and the Autumn. Those eligible will get the money automatically and needn’t apply.
Pensioners will also receive a £350 one-off payment, paid automatically. The disabled will also get another £150 one-off payment. Again, neither have to be applied for and will be funded through existing systems.
In total, the package of measures is expected to cost £15 billion – some way higher than what is being raised from the so-called windfall tax. The Government plans to fund the rest of the package through borrowing, but says it is doing so while maintaining fiscal responsibility.
NS&I to hike premium bond rates, but is it the place to put your cash?
With interest rates rising, NS&I has increased the rate on its premium bond prizes.
The rate on premium bond prizes is now equivalent to 1.4%, up from 1%, as of 1 June. With this the number of £100,000 prizes has increased from six to 10, while the number of £50,000 prizes has increased from 11 to 19.
As for the £1 million monthly winners, there will continue to be only two per month.
NS&I premium bonds work on a lottery basis, but with the likelihood of smaller prizes being much higher, the effective rate of return for your money is 1.4% per year – although this is still not guaranteed as it continues to function as a prize draw.
Premium bond or cash savings?
The question now is whether Premium Bonds, which are extremely popular, are worth putting money into or not.
There are two parts to this answer.
Firstly, ask – what is the money for? If you need it in the short term or if it is a rainy-day fund, then it should be kept in cash. You can cash in your premium bonds at any time, meaning they essentially function like an easy-access savings account (albeit without a guaranteed rate).
While you may scoop a £1 million prize, the odds of this are extremely low. You are, generally speaking, better off saving any short-term cash holdings into an actual easy-access savings account.
At the time of writing the best rates on offer come from Virgin Money club M Saver, offering 1.56% or the Chase Saver Account offering 1.5%. Both are easy-access so you can take your money out at any time.
The second part of the answer comes when considering longer-term saving. If the money you are putting away is for the long term, then realistically it needs to be saved through a tax-efficient vehicle such as an ISA or pension, and invested in assets such as stocks, bonds or other investments.
With inflation riding around 8% currently, saving into cash accounts over the long term is not only ineffective, but also actively reduces the value of your wealth. While the stock market has suffered turbulence in 2022, and is never guaranteed to perform, over time it still beats cash equivalents with ease.
Ultimately what matters then is having a cash fund which you can turn to for short-term needs – be that for a rainy day or to use for expenditure in the near future. But anything saved for the future should be invested.
When it comes to premium bonds, it might be a nice idea to hold a few just in case of that big win – but really the vast majority of your money should be elsewhere.
The World In A Week - Jubilee celebrations, but will markets have anything to celebrate?
Written by Richard Warne.
Economic fine-tuning is difficult. Markets continue to hope that central bankers will weave a path in terms of controlling inflation, while not having to aggressively increase interest rates, thereby potentially leading to a steady glide path for economies. Of late, there have been many commentators shouting about hard landings and heightened recessionary fears. So far this year, these fears have dominated markets and returns for both equities and bonds have been challenging.
The prevailing question now seems to be “are we there yet”? Have we reached the other side of the market reset? As we sit today sentiment seems very negative, but have these recessionary fears been baked into markets? The Fed in the US has made it abundantly clear that curtailing inflation is their number one goal, but it appears that markets have moved on to absorb expectations for several further rate hikes. This is probably best highlighted by the fact that the yield on the 10-year US treasuries has settled below 3% for some time.
Eurozone inflation came into focus last week, with the Consumer Price Index (CPI) prints being higher than was forecast. Germany’s year-on-year inflation was the highest with a 7.9% increase. The focus here is not on quantitative tightening, as Christine Lagarde, President of the ECB, has already provided colour on this, but whether the first-rate hike will be 50bps. Futures markets are certainly starting to price in this possibility.
Looking ahead, much of this may become a sort of “waiting game” until we see the next meaningful event. The next CPI print in the US is only a week away, with the June Federal Open Market Committee (FOMC) only a few days later. Potentially, a general lapse in headlines might allow for markets to settle into a more subdued pattern. For a data-dependent Fed that everyone has their eyes on, these economic data prints are more important than ever.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 6th June 2022.
© 2022 YOU Asset Management. All rights reserved.
The World In A Week - The Bottom of the Bear?
Written by Cormac Nevin.
After quite a challenging year to date for both equity and fixed income assets, last week saw a strong risk rally. The S&P 500 Index of US Equities led the charge and rallied +5.3% in GBP terms. Global, Continental European and UK Equities also had a good week, while the riskiest forms of fixed income such as high yield bonds also rallied. High-quality global bonds, as measured by the Bloomberg Global Aggregate Index GBP Hedged, also rallied slightly last week.
This is interesting as it illustrates the continuations of a phenomenon that we have witnessed this year as the performance of equities and high-quality treasury bonds have started to move in the same direction as inflation, and higher interest rates prove to be a challenging environment for both. The MSCI All Country World Index of global equities is now down -6.4% for the year in GBP terms while the Bloomberg Global Aggregate Index GBP Hedged is also down -7.3% for the year. Naïve allocations to treasuries and equities have formed the basis of traditional multi-asset investment over the last three decades, and a reversal of the negative correlation between the two variables could have interesting ramifications.
Many of our portfolio components such as specialist global value equities, Chinese government bonds and Absolute Return strategies have generated positive absolute returns this year as equity and fixed income markets fell. Once again this illustrates the importance of a diversified portfolio which goes beyond traditional stocks & bonds, particularly in the changing macroeconomic landscape we currently face.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 30th May 2022.
© 2022 YOU Asset Management. All rights reserved.
One in four savers worried they won’t have enough in retirement – but how much is enough?
One in four savers worry they won’t have enough money to retire on, new data from the Pensions and Lifetime Savings Association shows.
The research, which canvassed people saving into workplace pensions, shows that there is considerable uncertainty over whether workers can put enough away amid issues such as the rising cost of living.
The current minimum contribution into a workplace pension is set at 8% – 5% from the employee’s earnings and 3% from the employer. This, many pensions experts argue, is a good start but ultimately inadequate when it comes to long-term saving for retirement.
But defining how much is ‘enough’ is tricky, because it is very dependent on individual circumstances.
Here are some of the key considerations to make.
How long do you plan to work?
Thinking about your working life is a key aspect here because your job is generally speaking going to be the number one way in which you accrue savings for retirement.
It is a very personal consideration, especially depending on what type of career you have. Professions such as trades (builders, plumbers, electricians, engineers) tend to be more physical and you may find your physical condition can’t keep up once you get older.
Likewise people who work a relatively comfortable desk job could conceivably keep going for longer. And with the increase in flexible and remote working, there’s less pressure to commute.
Another important consideration is how much you actually like working. Some people work until late in life simply because they love their job and find it rewarding enough to keep going. Others can’t wait for the day to hang up their boots and relax!
Alternatively, you might be considering decreasing your hours, but continuing to do some work to keep money coming in.
All that is to say, if you foresee circumstances in which you’ll want to retire sooner rather than later, then you need to make sure you’re contributing as much as you can as quickly as you can, to give your wealth time to grow in line with your goals.
Of course, you may be planning on working for longer, but this doesn’t mean you can just forget about pushing hard on the savings front.
What assets do you have?
Your asset mix will have a really important impact upon how much income you can earn in retirement.
It is very normal for people’s most valuable asset to be their home. But tying up all your wealth in property can become an issue once you’re looking to retire and generate an income.
Unless you’re willing to sell and downsize to generate cash, your house is a highly illiquid asset that isn’t easy to capitalise on.
The exception to this is if you have become a buy-to-let landlord and intend to use income from that in retirement. But of course, you’ll want to consider whether you want to be a landlord at all as you retire.
There is also a consideration for asset mix in investments as you approach retirement. Although there’s no hard and fast rule, broadly speaking as you close in on retirement age more of your wealth should move from faster-growing stocks to more stable bonds and other yield-paying investments such as income funds.
What do you see yourself doing in retirement?
This is again a very personal consideration. Many people are content to potter in the garden, nurture grandkids and play bowls at the local club.
But retirement is no longer a moment to necessarily have to slow down with your life! It is quite possible to take those trips of a lifetime, to buy the car you’ve dreamed of owning, or to buy that house by the beach.
The difference between the former and the latter is cost. Taking it easy is fairly cheap, seeing the world costs money! Both are laudable aims but how much you need to save to meet those goals is crucial to have in mind.
There is also another really important and often-overlooked consideration here. Spending in retirement tends to follow a U pattern. When you first retire you spend quite a lot (getting that new car), then as you settle down, it reduces.
But finally as you enter your latter years, your costs will start to increase again. This comes in the form of basic things like help in the garden, DIY around the house or other basic tasks. But it also comes down to a more serious consideration – care.
The sad truth is as we get old, we need more help from others to live our lives comfortably and with dignity. Care is one of the biggest underfunded social issues in the UK at the moment, so paying for it in later life must not be forgotten.
If you’d like to discuss your retirement planning and savings goals, or anything else raised in this article, don’t hesitate to get in touch.
Private trustees run risk of falling foul of new HMRC rules
Private trustees – so called ‘mum and dad’ trustees – are being warned to register with HMRC ahead of rules changes set to take effect on 1 September this year.
The ruling affects all trusts, but concerns are rising that those created by families, for a myriad of reasons, could be more likely to fall foul of the new rules.
While exact figures are difficult to obtain, around one million trusts are thought to be required to register.
The changes are being implemented by the Government in order to fight money laundering.
What are trusts?
Trusts are a legal structure designed to remove an individual or organisation from ownership of specific assets.
When it comes to private trusts, typically these are created by parents or grandparents to hold assets such as stocks for children or grandchildren who are, not as of yet, able to make their own financial decisions.
Trusts are also commonly used as a part of estate and inheritance planning, combined with life assurance policies. They can be used to provide financially for children or vulnerable adults, pay school fees or protect assets against divorce or bankruptcy.
I am a trustee – what do I need to do?
While the legitimacy and status of these trusts is not at risk, HMRC now wants all trustees to register their trusts with the tax collector by 1 September. All trustees are responsible for signing up to the register.
Trustees can register their trusts on the Government website. While HMRC says there will not be any financial penalties for not registering at this stage, it says trustees will begin to receive official requests to register if not done by 1 September.
There are exclusions for some trusts from these rules, however. This includes trusts for pensions, bank accounts held on behalf of minors, non-taxable charitable trusts and life insurance trusts that only pay out due to death, serious illness or disability.
Trusts which hold investments for minors are not exempt, however.
The process itself runs to around 100 pages of administration to register depending on the trust. Information required includes details about trustees, beneficiaries and settlors. This includes basic information such as passport details, addresses and National Insurance numbers.
Registering a trust can however be tricky, especially for those not well-versed with the process and rules.
Particular problems arise where for instance a trust has been in existence since 6 October 2020, when the new registration regime began, but has already been wound up. Although such a trust no longer ‘exists,’ HMRC still requires the former trustees to register.
Broadly speaking then it is a good idea to speak to professional financial, tax or legal advisers for help, especially if the trustee is unclear on any aspect of the process.
It is essential to register as soon as possible, especially in consideration of financial advice. Unregistered trusts will be barred from receiving financial advice, tax planning, legal advice or accountancy help from the date of the deadline.
If you have a trust you would like to discuss, or for any other issues or concerns raised in this article, don’t hesitate to get in touch.
Have you had your £150 Council Tax rebate? If not, here’s what to do
Households in Council Tax band A-D are expecting a £150 Council Tax rebate from the Government, as the cost-of-living crisis deepens.
But the actual deployment of the rebate is done on a council-by-council basis – leaving some households in the lurch waiting for the extra cash.
The cash is being given out in the main due to soaring energy prices, which have reached astronomic levels thanks to a mixture of increasing demand and reduced supplies.
The war between Ukraine and Russia has made the situation much worse, but is not in fact the only reason why gas prices are so high.
The energy price cap was hiked sharply at the beginning of April – an increase of £694 from £1,277 to £1,971.
However, this does not mean your bills will be exactly £1,971 for the year – the price cap is worked out per unit of energy used, which means you could still pay more – or less – depending on your household usage.
Why a £150 Council Tax rebate?
The Government has not been hugely forthcoming with help for households despite the severity of the cost-of-living crisis, with particular pressure on energy prices for families.
This is because it is concerned if it helps too much, this will undo the work of the Bank of England which is raising interest rates to dampen consumer demand and bring inflation back down.
Chancellor Rishi Sunak announced the rebate ahead of the Spring Statement. Paying it via the council tax system is seen as the easiest way to distribute cash to households. In practice this hasn’t been quite as simple – but there really is no specifically designed mechanism to give households money.
The money is not a loan, nor does it have to be repaid at any time.
How to get the £150
The cash is set to be paid to anyone living in a band A-D property. If you are unsure what band your home is in, the first thing to do is check your most recent Council Tax statement or annual statement. Alternatively, you can look up your band on the Government website.
If you have yet to receive the money but are eligible, do you pay by direct debit? The Government says deployment of the rebate will be fastest via direct debit, as this is the easiest way for it to send the cash out.
If you do pay by direct debit, but haven’t received the rebate yet, then the first place to look is your local council’s website. By now it should have clear information on there over when that money is due to be paid and how.
Anecdotally, many councils seem to be lining up payments for mid-May, so it might be a case of just waiting for now. If you do pay by direct debit but receive nothing by June, it would be wise to investigate if there is a reason why.
If you don’t pay by direct debit, then the process of getting the rebate is more complicated. Again, check the local council’s website where it should provide instructions on how to apply or register for the cash. However, not all councils are so organised, so a phone call could be necessary.
However, many councils are saying they are overwhelmed by phone calls about the rebate at the moment, so you may have to be patient for now.
Be wary of anyone who calls you out of the blue about the rebate as your council won’t try and contact you proactively. It is most likely that any sort of unsolicited contact about it will be scammers attempting to grift your financial details.
However, some councils are writing to households that don’t pay by direct debit, so you might get a letter in the post about how to receive your rebate.
The World In A Week - Data is driving the decisions
Written by Millan Chauhan.
Last week saw Boris Johnson win the vote of confidence from the Conservative MPs, claiming a 59% majority. Despite the majority, this was less than his predecessor Theresa May, who claimed a 63% margin before resigning months later amid the Brexit negotiations deadlock. Johnson’s handling of the COVID-19 pandemic and actions during national lockdowns has put into question his leadership, all of which instigated the vote of confidence last Monday.
Elsewhere, global markets continue to price in new releases of economic data with the US headline Consumer Price Index (CPI) at 8.6% at the end of May 2022. Core CPI (that excludes food and energy) rose 6.0% a year ago. If we take a more intrinsic look at headline inflation figures, this has largely been driven by Oil prices soaring by 48.7% which has impacted the prices of other areas such as Airline fares and Transportation which have risen 37.8% and 19.4% respectively. The acceleration of headline inflation keeps the pressure on the Federal Reserve who are set to meet over the next two days (14th – 15th June). Current rates in the US are at 1% with a further 0.50% rate rise expected to be announced this week.
Elsewhere, the Bank of England Monetary Policy Committee is set to meet on Thursday and expected to raise interest rates by 0.25%, with UK CPI at 9.0% at the end of April 2022. Central banks continue to contend with several macroeconomic factors, including the effect of rate rises on the economy. The UK economy contracted by -0.3% month-over-month in April 2022. Ultimately, Central banks face a balancing act between how quickly existing rate rises can slow down inflation and not materially stall economic growth.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
The information contained in this document is not to be regarded as an offer to buy or sell, or the solicitation of any offer to buy or sell, any investments or products.
The content of this document is for information only. It is advisable that you discuss your personal financial circumstances with a financial adviser before undertaking any investments.
All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 13th June 2022.
© 2022 YOU Asset Management. All rights reserved.