Tories outline plans to restore savings culture
The Conservative Party has confirmed plans to scrap rules that force people to take out an annuity before they turn 75, raise the inheritance tax and stamp duty thresholds and create a consumer protection agency.
In a document entitled A New Economic Model, shadow chancellor George Osborne puts forward eight benchmarks for Britain by which he wants a future Conservative government to be judged.
The document also outlines ways the party plans “restore our savings culture and encourage people to save more for retirement”.
Top of the list is scrapping compulsory annuitisation at age 75. The Tories have previously argued that forcing people to lock themselves into a long-term pension income could leave retirees “significantly worse off” when the financial climate is turbulent.
Another long-standing promise made by the Conservative Party is to raise the inheritance tax threshold to £1 million; Osborne’s document confirms this pledge and also promises that it will take nine out of 10 first-time buyers out of stamp duty by raising their threshold to £250,000.
These measures will be paid for by a simple flat-rate levy on all non-domiciled individuals in return for certainty over their future tax treatment.
Osborne also promises that, if elected to power in the forthcoming general election, his party would also restore the link between the state pension and average earnings, by bringing forward raising the state pension age for men to 66 within the next seven years.
A Conservative government, which would hold an “emergency Budget” within 50 days of taking office, would create a new Consumer Protection Agency, to promote responsible consumer finance. It would also look cap excessive store card interest rates and ensure consumers are given “much clearer information” on credit card bills and advertising.
Sticking to its green credentials, the party would create Britain’s first green investment bank, to back green technology start-ups. Households would also be entitled to up to £6,500 worth of energy-efficiency investments – paid for by energy providers rather than taxpayers.
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
The tax levied on the total value of your estate after you die. IHT has to be paid by the beneficiaries of your estate before they can receive any of the money from it. The money can’t be taken from the value of the estate _– it has to be paid before any money can be released. There is an IHT threshold – known as the “nil-rate band” – below which no tax is levied (£325,000 in 2011/12). Any amount above the nil-rate band is subject to tax at 40%. If your estate totals £600,000, there is no tax on the first £325,000; however your estate will pay 40% tax on the remaining £275,000, a total of £110,000. Prudent tax planning can reduce your IHT liability, so always consult a specialist solicitor.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
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.