Financial changes planned for 2013
The cost of rail season tickets, which are controlled by the government, have gone up by 4.2% on average this month. This means commuters are having to fork out £300 more for their annual tickets - a hike of nearly twice the rate of the retail prices index measure of inflation, at a time when the average salary increase is just 1.9%, according to the TUC.
Some passengers will see their ticket price soar above the average rise. For example, those travelling between Canterbury and London will see their fares increase by 5.9% to £4,860.
More workers will be swept into pension schemes from this month, as medium sized companies - those employing between 4,000 and 49,999 workers - join the government's auto-enrolment programme. Smaller companies - with between 500 and 3,999 employees - will follow suit in July.
Employees and employers will initially be required to pay 1% of salary into the scheme, but these amounts will be increased to 3 and 4% respectively from October 2018.
If you change jobs, while you will be automatically enrolled into your new employer's scheme, you will be able totransfer your old scheme into it should you wish.
While you are able to opt out of the scheme, your employer will automatically enrol you back into it every three years.
Life insurance and critical illness insurance premiums are expected to rise by 10% as a result of most life insurers being required to pay more tax, according to the Actuarial Profession. It's all to do with providers no longer being allowed to offset the costs of their life insurance business, from the profits made on their investments.
The effect of the rule change is also likely to wipe out any gains insurers make following the introduction of the European Gender Directive last month (December), which means men and women have to be treated the same when it comes to setting insurance premiums, regardless of risk.
This will likely increase the price women pay for their car, life and critical illness insurance. Meanwhile, men will likely get a lower annuity rate.
Most working-age benefits are set to rise by 1% from April 2013 for the next three years. Jobseeker's Allowance, Employment and Support Allowance and Income Support will be increased by 1% for the next three years. However the capped rise is less than the current rate of inflation, which is 2.7% (consumer prices index).
Meanwhile, from this month, families with one person earning more than £50,000 will see their Child Benefit cut or scrapped altogether. Child Benefit will also be frozen in April 2013, but will rise by 1% in 2014/15 and 2015/16. The Child Tax Credit will also rise by only 1% for the next three years - well below inflation.
However, benefits for carers and the disabled, including disability elements of tax credits, will continue to increased in line with inflation.
Generally thought of as being interchangeable with life assurance, but isn’t. Life insurance insures you for a specific period of time, at a premium fixed by your age, health and the amount the life is insured for. If you die while the policy is in force, the insurance company pays the claim. However, if you survive to the end of the term or cease paying the premiums, the policy is finished and has no remaining value whatsoever as it only has any value if you have a claim. For this reason, life insurance is much cheaper than life assurance (also called whole of life).
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
Child tax credit
A scheme started in 2003 that sought to replace a raft of other tax credits and benefits, the payout depends on the number of dependant children in a family, and its level of income. The amount of credit is reduced as income increases. It is payable to the main carer of a child, usually the mother, and is available whether or not the recipient is working.
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.
Critical illness insurance
This cover pays out a tax-free lump sum if you become seriously ill. All policies should cover seven core conditions: cancer, coronary artery bypass, heart attack, kidney failure, major organ transplant, multiple sclerosis and stroke. You must normally survive at least one month after becoming critically ill, before the policy will pay out. Payouts are determined by premiums and premiums are determined by the severity of your illness, the less severe the lower the premiums.