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Recently, there have been lots of government budget announcements and a number of changes made in regard to pensions. These changes come alongside discussions around potential alternations to pensions in the future. With such a raft of changes, it can be difficult to know where you stand or how exactly you’ll be affected.

At The Salary Calculator, we’ll walk you through all the information you need to understand pensions in the current financial climate in a straightforward way. We’ll cover the following:

• The triple lock and discussions around its replacement
• The increase the state pension
• The pension age increase
• Upcoming changes to tax payments for retirees

The triple lock

The triple lock was a pledge made by the Conservatives in their 2019 manifesto but was broken over the pandemic. Now, despite doubts, it has been reinstated under the new budget. It ensures that pensions increase in line with either:

• The average wage increase,
• Inflation, or
• 2.5%

As such, there will be a 10.1% increase in State Pensions from April 2023.

According to experts, the government has considered scrapping it altogether and replacing it with a new system following the next election. Some commentators have also forecast that, in the future, state pension entitlement could eventually become means-tested, a model that is currently present in Australia. A means-tested pension top-up was also proposed by former Chancellor Gordon Brown back in 2002.

This kind of means-tested pension is not without its critics, though, and with recent whisperings of this kind of model being proposed, former Pensions Minister Baroness Ros Altmann claimed it would be “disastrous.” Altmann, for example, outlined: “Without a decent basic state pension underpin for everyone, the real risk is that more pensioners will end up poor in retirement and this will damage long term growth for us all.”

The increase in the state pension

As per the triple lock, pensions will rise in line with September’s Consumer Prices Index (CPI) measure of inflation. So,

From April 2023, payments will be as follows:

• £203.85 a week, up from £185.15 for the full, new flat-rate state pension (for those who reached state pension age after April 2016).
• £156.20 a week, up from £141.85 for the full, old basic state pension (for those who reached state pension age before April 2016).

Increasing the pension age

The UK is currently in a recession, and the Treasury is frantically searching for ways to raise money. One of the proposals that would reportedly raise billions is increasing the pension age. As per current legislation, the retirement age is to rise to 67 by 2028. By 2039, this is set to increase further to 68. However, ministers are pushing to increase the pension age to 68 by up to six years earlier in 2033.

Some experts say that if this goes ahead, those who are currently in their 50s will receive £10,000 less when they retire.

New Work and Pensions Secretary Mel Stride has now confirmed that the outcome of the State Pension age review will be published before May 2023 – so a final decision is coming soon. Stride was recently grilled on potential upcoming changes to pensions in the Spring budget. When asked whether or not the portion of people’s lives spent in retirement should shrink (currently at one-third), he said he couldn’t be drawn on what his thoughts are “at this stage” and questioned whether John Cridland’s (who led a previous review of the state pension age in 2017) was right in his calculation of one-third.

WASPI – Women Against State Pension Inequality, meanwhile, has called for the government to introduce fairer policies. Jane Cowley, director of Waspi, for example, said that the government needs to “look less at average figures” and “take greater account of the lives of people in economically disadvantaged areas.” She added: “Often in these areas there is a drastically lower life expectancy and very few years spent in good health during retirement.”

Likewise, Angela Madden, chair of Waspi, said: “Ministers need to recognise that while we are living longer, people in their late 60s and early 70s tend to be in declining health.” Adding: “It isn’t right to expect everyone to work full-time till they drop.”

Upcoming changes to tax payments for retirees

According to reports, if the UK Government increases State Pensions by 10.1% next April, although 12.5 million people would see a boost, another 500,000 could be included in the “tax net.”

Former Liberal Democrat pensions minister and partner at pensions specialists LCP (Lane Clark & Peacock), Sir Steve Webb, explained that this is because of the freeze on tax thresholds, coupled with the increase in pensions.

Elaborating on this, Nimesh Shah, the chief executive of Blick Rothenberg, on the BBC Money Box podcast, called this a tax increase “by the back door.” He continued: “Everyone uses the word stealth tax increase. They didn’t want to increase the headline rate in the run-up to the next general election.” Shah said that this is an example of the fiscal drag effect: “Someone’s wages go up but they are paying more income tax because of those frozen allowances. The state pension is increasing by 10 percent which is great news but pensions are now going to get dragged into income tax.”

In his first speech as Prime Minister, Rishi Sunak said the country was “facing a profound economic crisis.” Following this, it was announced last week that the country had officially entered a recession. This means there has been a prolonged downturn in economic activity and a fall in GDP for two successive quarters.

In the wake of this news, the new Chancellor, Jeremy Hunt, warned that “decisions of eye-watering difficulty” are ahead and that the government will be asking “everyone for sacrifices.” He subsequently announced the long-awaited Autumn Budget, detailing a wide range of tax rises and spending cuts. After this announcement, the pound fell 0.9%.

At The Salary Calculator, we know that this is an incredibly challenging time for millions of people, and it’s likely that you’ll have a lot of questions about what the budget means for personal finances. So, we’ll walk you through the changes likely to impact you. This includes:

• What changes are upcoming
• When these changes will take effect
• Cost of living payments
• The impact the changes will have on take-home pay
• What’s happening with benefits
• Helpful resources to cope with the cost of living crisis

What changes are coming up?

In the Chancellor’s budget statement, he made a number of announcements in regard to National Insurance (NI), Income Tax, Pensions, and more. This included:

• That income tax personal allowance will be frozen at £12,570 until April 2028, in addition to a freeze on the Basic Rate.
• The threshold for paying the 45p rate has also been lowered to £125,140 from the existing £150,000, bringing an additional 246,000 people into the bracket. Those within the bracket will now pay an extra £580 each a year, equating to an additional £1.3 billion a year for the Treasury.
• The main NI thresholds will remain frozen until April 2028.
• The pension triple lock (frozen during the pandemic) will come in, meaning that the State Pension will increase in line with whichever of the following three is highest:

-Inflation

-The average wage increase

-2.5%

• The National Living Wage (NLW) will be increased by 9.7% from £9.50 an hour for over-23s to £10.42: an annual pay increase of over £1,600 for a full-time worker.
• Young workers and apprentices on the National Minimum Wage (NMW) rates will also see their wages slightly boosted. Those aged 21-22 will see an increase of 10.9% to £10.18 an hour, while for those aged 18-20, their wages will increase by 9.7% to £7.49 an hour. Those aged 16-17 will see their wages increase by 9.7% to £5.28 per hour, and the same for Apprentices: an increase of 9.7% to £5.28 an hour.

Speaking about the changes brought in under the budget, Hunt said the government is taking “difficult decisions on tax-free allowances.” Adding: “I am maintaining at current levels the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds for a further two years taking us to April 2028. Even after that, we will still have the most generous set of tax-free allowances of any G7 country.”

When will the changes take effect?

Although the Chancellor announced the budget on the 17th of November, the changes will take effect from April 2023, affecting around 19 million families.

Will cost of living payments continue?

The government has announced additional cost of living payments will be made throughout 2023-24. This means that:

• If your household receives means-tested benefits, you will receive an additional £900 payment.
• You will receive an additional £300 payment if you live in a pensioner household.
• If you are an individual on disability benefits, you will receive an additional £150 payment.

What impact will the changes have on take-home pay?

While there will be a continuation of cost of living payments, freezes on NI and Income Tax payments for those on lower incomes, and an increase in the NLW, according to statistics experts, the announcements from the budget statement mean that you’ll likely be worse off.

Discussing what this means in real terms, Robert Cuffe, a statistics expert at the BBC, explained that if you’re one of the lucky ones to receive a pay rise that “just about keeps pace with inflation” in April 2023, while your pay cheque will be bigger because prices have risen as much as your salary, you won’t be better off. Cuffe outlined that if you’re a basic rate taxpayer, the government will take around £300 out of your increased wages, and if you’re a higher rate taxpayer, this jumps to £670.

To better understand how the budget changes will directly affect you and your finances, head over to The Salary Calculator’s Take Home Tax Calculator.

What’s happening with benefits?

In the budget, it was outlined that benefit rates will increase in line with inflation, equating to an increase of 10.1% this year. So, for families, the benefit cap will increase from £20,000 to £22,020 (and in Greater London, £23,000 to £25,323). Meanwhile, for single adults, the benefit cap will rise from £13,400 to £14,753 (£15,410 to £16,967 in Greater London).

With regard to those on disability benefits, there is a new Disability Cost of Living Payment. So, according to the government, more than six million people across the UK on non-means-tested disability benefits will receive a £150 Disability Cost of Living Payment. Those eligible for this cost of living payment include those currently receiving:

• Disability Living Allowance
• Personal Independence Payment
• Attendance Allowance
• Scottish Disability Benefits
• Armed Forces Independence Payment
• Constant Attendance Allowance
• War Pension Mobility Supplement

Resources to help during the cost of living crisis

It’s understandable to have concerns about the cost of living crisis and personal finances, but there are some resources available to help you navigate these difficult times. We’ve shared some of these resources below:

Local government support: https://www.local.gov.uk/our-support/safer-and-more-sustainable-communities/cost-living-hub

Unbiased: https://www.unbiased.co.uk/pages/hub/cost-of-living-hub

Citizen Advice: adviceguide.org.uk

Local Energy Advice Partnership: https://applyforleap.org.uk/

Trussell Trust for UK food banks: https://www.trusselltrust.org/get-help/find-a-foodbank

The Community Fridge Network (not means-tested): https://www.hubbub.org.uk/the-community-fridge

Stonewall Housing: stonewallhousing.org

Street Link: https://www.streetlink.org.uk/

My Supermarket Compare: https://mysupermarketcompare.co.uk/

Save the Student: https://www.savethestudent.org/save-money/money-saving-resources.html

The Help-to-Buy scheme came to an end on the 31st of October, with many experts commenting that it leaves behind a “mixed legacy.” You might be curious to learn what’s next for housing schemes, considering that the housing market has been on a bit of a rollercoaster as of late.

So, at The Salary Calculator, we’ll walk you through the following:

• What the Help-to-Buy scheme offered
• When and why it is ending
• Whether there are any alternatives on offer.

The Help-to-Buy scheme

The Help-to-Buy scheme was introduced back in 2013 and offered first-time buyers (FTB) the ability to purchase a new-build property with a minimum 5% deposit. As part of the scheme, the government lent up to 20% of the purchase price – or 40% in London, which was interest-free for the first five years. Participants in the scheme would borrow the rest from a mortgage lender.

Since 2013, 350,000 buyers have used the Help-To-Buy equity loan scheme to purchase homes, and in the last quarter of 2018, it actually accounted for over 60% of all new home purchases.

According to some commentators, the scheme helped many “break free from the shackles of the rent trap and begin to build property wealth.” Likewise, for those who decided to join the scheme, there was no maximum household income cap, and people had 25 years before they needed to pay back the loan in full. However, it was not all sunshine and roses. Help-to-Buy was also only available on new-build homes, meaning that property developers have made a killing. Additionally, it wasn’t offered by all lenders, and after the initial five-year period, those on the scheme would be charged an annual fee of 1.75% on the amount of the outstanding loan, increasing each year with inflation and becoming more expensive over time, repaid in chunks of at least 10%.

When and why is it ending?

As outlined above, the Help-to-Buy scheme was not without its critics and has been criticised for inflating house prices and making housing less affordable. Over the years, the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development have highlighted these dangers. Back when the scheme was first introduced, the IMF warned that while the scheme might temporarily “boost confidence” in the housing market, in the long run, the result would ultimately be “mostly house price increases,” working against the government’s aim of stimulating activity in the housing market and boosting access to housing. Years later, in 2022, this was exactly what was found in the House of Lords (HoL) committee report, which found that the scheme was detrimental to FTB and they would have been in a better position if the scheme had never been introduced.

The government has announced that the Help-to-Buy scheme will end in March 2023 without an extension. That said, Housing secretary Robert Jenrick has said that “all options are on the table,” so an extension is not completely off the cards. For example, ​​Adam Day, estate agency growth leader at eXp, said: “With so many changes ahead for the UK Government, there is the possibility we could see a replacement scheme introduced in the coming months. Only time will tell.”

There are some key dates to bear in mind, though. The Help-to-Buy deadline for new applicants was the 31st of October, while applicants will have until March 31, 2023, to complete housing purchases through the scheme. The Help-to-Buy ISA, on the other hand, closed to new savers back in November 2019.

Is anything replacing the Help-to-Buy scheme and what are the alternatives?

As of yet, there are no plans to replace the Help-to-Buy scheme with another similar scheme; however, the Help-to-Buy ISA has already been replaced with the Lifetime ISA (LISA), which offers a similar 25% bonus on savings paid at the end of each tax year. Through the LISA, you can deposit more each year (and over a longer timeframe), meaning that the total bonus can be potentially much bigger.

If you’re looking for an alternative, it’s also worth looking into the First Homes scheme, which was launched in 2021 for FTB and key workers, with the intention of helping them onto the property ladder with a minimum 30% discount on the market price of certain new builds. To apply, you must earn less than £80,000 per year (£90,000 in London) and put down a 5% deposit. However, speaking about this option, Mark Robinson, managing director at Albion Forest Mortgages, commented: “The government has done very little to replace the Help to Buy scheme, announcing the First Homes scheme during the pandemic, but then not really supporting it further. As the First Homes scheme isn’t widely available and doesn’t appear to be changing to be more widely available, it is not really a viable replacement.”

The Deposit Unlock scheme also enables first-time buyers and existing homeowners to buy a new home with a 5% deposit. Robinson made a similar comment about the Deposit Unlock scheme, saying it didn’t offer anything new.

The shared ownership scheme can also be a way of helping first-time buyers get on the property ladder, and works by allowing buyers to secure a mortgage to buy a stake in a property. This is usually between 25% and 75%, with the buyer paying rent on the remaining share they do not own. Stamp duty is also typically deferred until the buyer is able to increase their share to 80%. Of course, there are a number of downsides that come with shared ownership too. For example:

• While only having a percentage share in the property, you are still required to pay full maintenance and repair costs,
• Increasing the stake you own in your property, or “staircasing,” can be expensive (valuation fees, legal expenses, mortgage fees, etc.),
• Due to only owning a share in the property, you’ll likely have to ask the housing provider’s permission in writing to make structural alterations to your home and redecorate.

With the cost of living crisis shooting up rent, food and fuel prices, an increasing number of people are turning to loans, credit cards, and overdrafts. Of course, a good credit score is often required to qualify for a low-interest-rate loan, so many people are now trying to determine what their credit score is and find ways to improve it. In fact, MoneySuperMarket’s data reveals that searches for ways to increase credit scores have increased by 506% in the last ten years alone.

However, despite so much hinging on a credit score, many people in the UK believe that the current system is not “fit for purpose.” Nearly 40% (39%) of people believe it’s unfair to judge a person based on financial decisions that they made up to five years ago, while 38% believe that credit scores don’t reflect their current livelihood and 34% believe that credit scores, in general, aren’t a good measure of a person’s creditworthiness. In general, credit scores can cause people a lot of concern and there are a lot of myths and misconceptions out there.

At The Salary Calculator, in this article, we’ll:

• Explain what a credit score rating is
• Dispel some of the myths that exist around credit scores
• Explore some of the ways you can improve your credit score

What is a credit score rating?

A credit score rating, at its core, is a way of measuring how much of a risk a person is when it comes to lending them money. FICO and VantageScore are the two main consumer credit scoring models, while Experian, TransUnion, and Equifax are the three national credit bureaus that offer different ratings. The former, for example, considers anything above 881 to be a good score, while the latter considers anything above 531 ‘good.’ TransUnion, on the other hand, considers scores above 720 a good rating.

A credit score rating is determined by a number of different factors, including:

• Your payment history – This means looking at whether you pay your bills on time and whether you’ve ever filed for bankruptcy. This is arguably the most important factor considered when calculating your score.
• Credit usage – This includes how much you owe in loans and how many of your accounts have balances.
• Length of your credit history – Money lenders like to see that you have a long history of paying on time.
• New credit – Applying for new credit can lead to a hard inquiry and lower the average age of your accounts.

Myths and misconceptions

When it comes to credit scores, many people are truly in the dark, and due to the myths and misconceptions floating around, just the mention of credit scores can cause people to spiral. Below we’ve compiled a list of the top myths:

Checking your credit score will negatively impact it – False

You can check your credit score as much as you like without it negatively affecting it. In fact, it can even be an indicator of financial responsibility.

Your credit score is impacted by your income – False

Your credit score is not impacted at all by your income and, in fact, only considers information found in your credit report, so, as outlined above: Your payment history, credit usage and length of your credit history. That said, if you were to lose your job or take an earnings hit, this could affect your rating indirectly in that it could detrimentally impact your ability to pay back your loans.

Paying off debt means it won’t affect your credit score – False

Unfortunately, even if you’re proactive in paying off your debt, the record of it can remain in your credit history for seven to 10 years.

My loan application will be rejected if I have a low credit score – Not always

You won’t always get a loan application rejected if you have a low credit score. However, you might be offered higher interest rates or a smaller loan.

How can you improve your credit score?

If you have a low credit score and you’re concerned that it’s going to detrimentally impact your future financial decisions, don’t worry, there are a few things that you can do to boost it.

First of all, it’s a great idea to keep up-to-date with how things are looking, so the experts suggest signing up with a tool like MoneySuperMarket’s Credit Monitor. This way, you’ll be able to check whether or not you’re veering into the red, and employ some of the below steps to steer you back on track.

Likewise, it’s important to keep your accounts up-to-date. So, if you’ve got an old bank account that hasn’t been used for years, it’ll be better for your rating if you close it. On the other hand, keeping open a bank account that you regularly use will positively impact your credit score.

Of course, paying bills on time is a big must for boosting your credit score, but be sure to check which ones count towards it – as only some of them do. And, also don’t forget to try and keep balances low on your credit cards, and try your best to pay more than the minimum required on your credit card, too.

With so much chaos in the economic landscape, the pound yo-yoing, and the cost of living at its highest point for years, if you’ve managed to squirrel away some savings, it makes sense that you’d want to ensure that you’re getting the most out of your account.

Although the rising interest rates are unwelcome for many, for savers, after historically low-interest rates, it’s not all bad news; but savers need to watch out for the best deals.

In this article, we’ll walk you through the following:

• What saving is looking like during the cost of living crisis
• The saving rates rise
• Some of the best deals out there right now

Saving during the cost of living crisis

During the cost of living crisis a significant number of people have stopped paying into a savings account. According to a recent survey conducted by the Building Societies Association (BSA), 35% of those polled have stopped saving due to the rising cost of living, with 36% now relying on their savings to pay for day-to-day costs. Moreover, before the crisis, around one in 10 UK residents had no savings at all. However, millions of pounds are still in savings accounts and if you’re keeping your head above water and managing to save, you’ll likely be looking for the right account for you to secure the best deals.

Saving accounts come in a few different forms and typically are not subject to tax until you reach a certain threshold, this is called the personal savings allowance (PSA) and is dependent on what rate of income tax you pay. Basic rate taxpayers can earn £1,000 in interest each year without having to pay tax on that interest, for higher rate taxpayers this drops to £500. A basic rate tax payer who earned £1,200 in interest in would therefore only pay tax on the £200 above their PSA, which at 20% would be just £40 of tax on £1,200 of interest.

ISAs are comparable to a regular savings account, but whatever interest you earn remains entirely tax-free. However, ISAs tend to pay a lower rate of interest. For those looking for flexibility, an easy-access savings account can be a good option, as it allows you to dip into your savings at short notice without receiving penalties; likewise, the amount of money required to open an easy savings account is usually lower than other savings accounts. Fixed-rate savings accounts or bonds, on the other hand, while less flexible, offer you a guaranteed interest rate over a set period of time and typically offer higher interest rates.

A current account can be used as a savings account, although some basic accounts don’t offer interest on your balance. When looking into using a current account as a savings account, consider the interest rates and account requirements, as some will require you to pay a certain amount of money each month. Some current accounts can see interest rates exceed 5%, but this is often subject to a maximum sum you can save before it drops again.

Saving rates reach highest levels in over a decade

Savings rates in recent months have reached their highest levels in more than a decade. However, as Anna Bowes of independent comparison service Savings Champion says, things are changing so quickly, and she warned a week ago that people were “in danger of missing the peak.” Equally, research from BSA shows that many people aren’t sure what they’re getting with a savings account in the first place, with 31% of those with savings accounts never even checking their savings account interest rate.

Recent research on savings rates found that the average easy-access rates have risen from 0.25 to 1.05%, while since March, the average one-year deal has risen from 0.92 to 3.1%. However, banks and building societies have recently been pulling their savings accounts, Santander being one of them, withdrawing its best buy easy-access saving account two weeks ahead of schedule, and replacing it with a new issue paying a lower rate of 2%.

That said, a spokesperson for the Savings Guru, said that this withdrawal was not surprising and the likes of Skipton moving up to 2.55% is good news, and indicates that the market will consolidate around 2.25 to 2.5% on easy access. Likewise, the spokesperson said that the fixed rate changes that have been seen this week are unlikely to lead to a “full-blown market correction.”

The best saving rates right now

There is a wide range of saving rate deals currently available, and some are even breaking the 5% barrier. Below, we walk through a few of them.

The Barclays Rainy Day Saver account at the time of writing, was offering 5.12% interest on balances up to £5,000, after which this decreases to 0.15%. In a year, those with £5,000 saved will earn £250. There is, however, a £5 monthly membership fee, and you have to pay at least £800 each month. It also has some good rewards for those who are already Barclays customers. The Nationwide FlexDirect Current account is offering just below this at 5% on the first £1,500 saved, with no fees.

The Aldermore 1 Year Fixed Rate Cash ISA has also been highlighted as a good go-to, with 3.65% interest and a minimum deposit of £1000, with withdrawals subject to a deduction of 90 days’ interest.

With regard to fixed rates, those who choose this kind of savings account will be unable to access their money, typically for a period of at least three years, unless they pay a penalty fee. So, this won’t be a viable option for everyone. Investec Bank plc Raisin UK – 2 Year Fixed Term Deposit is currently offering a 4.61% rate for savings between £1,000 and £85,000, but the highest rate on the market is offered by Gatehouse bank, which has a five-year deal that pays 5.1%.

For more information on the best saving rates, check out MoneyFacts or MoneySupermarket.