Reasons to be cheerful in 2014
What can we look forward to in 2014?
Certainly not lower rail fares, which are set to rise on average in England by inflation from the start of the year - fares will rise slightly less in Scotland and Wales. Nor a radical cut in inflation, which most forecasters believe will remain above 2% for most of 2014, taking its toll on the value of the real money in our bank accounts.
More cheerily, a lid on household budget-busting energy price hikes should be maintained for most of the year, following assurances from some of the big energy firms that they do not anticipate applying further price rises. Let's hope they are true to their word.
And personal tax allowances – the amount we can earn before the taxman starts to take his slice – will rise to £10,000 from the beginning of the tax year starting April 6 2014. More people will be catapulted out of paying tax as a result. Hurrah!
Low interest rates should predominate in 2014 as the Bank of England, under the watchful eye of boss Mark Carney, does everything within its power to keep the economy on the path to sustained recovery.
Carney's decision in late 2013 to restrict the access of banks and building societies to cheap cash through the Funding for Lending Scheme should ensure base rate stays at 0.5% well into 2015. His move to limit the funds made available through the Funding for Lending Scheme was done to head off a house price bubble, which would put pressure on him to jack up the base rate.
Although low interest rates are frustrating for those dependent upon interest from deposit savings, the downsizing of the lending scheme may well prove productive for savers this year.
With banks and building societies unable to tap the scheme for anything other than for funds to support small businesses, they will increasingly have to turn to depositors in order to raise funds. That should, in turn, push up savings rates. Few inflation-beating accounts will be available – grab them when you can – but the lot of the deposit saver should be slightly better in 2014.
More people should save into a pension for the very first time in 2014 as yet more employers are required to auto- enrol workers into pensions. If you are auto-enrolled, don't be tempted to opt out. As well as losing out on the boost made to your own pension contribution by your employer - plus the lift of tax relief - you will be denying yourself the perfect opportunity to put down some long-term savings foundations. Embrace auto-enrolment.
At the other end of the pensions spectrum, the start of the new tax year in April 2014 will see further restrictions in the amount that can be invested inside a pension.The limit for annual contributions will fall from £50,000 to £40,000 while the amount you can shelter under a pension without incurring penalty tax charges will be reduced from £1.5 million to £1.25 million.
Although such restrictions will not be relevant to many, long-standing workers in public service (doctors, for example) could well be caught out. So, speak to a financial adviser if in doubt because in some cases, protection can be secured over and above the £1.25 million lifetime limit.
As part of new banking regulations that come into force in 2014, switching rules have already been introduced that enable customers to switch bank accounts within seven days, with assurances that if anything goes wrong they will be compensated. Hopefully, as a result of greater awareness and new players entering the market, 2014 will see more discontented customers switch bank accounts.
The new regulations will also bring about the introduction of a cap on the interest payday lenders can impose on borrowers. An overdue and most welcome move, although I wait with baited breath to discover the cap size imposed by the Financial Conduct Authority that takes over regulation of payday lenders from April. It needs to strike a balance between protecting borrowers while enabling a well-regulated payday lending industry to survive.
Happy New Year. If you can, borrow little and save a lot.
Jeff Prestridge is the personal finance editor of the Mail on Sunday. Email him at email@example.com
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).
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.