Published: 10 November 2021. Written by: Kim Jarvis, Technical Consultant at Vitality.
The government recently set out the Autumn Budget and Spending Review, where the Chancellor of the Exchequer, Rishi Sunak outlined the government’s plans around taxes.
We spoke to an Independent Financial Adviser about the recent budget and asked her how people could be affected and what they should look out for.
This year’s Budget was an interesting one, setting out how the government would support businesses and public services and help them recover from the impact of the pandemic. People often think the budget doesn’t affect them, but everyone is affected. Some people may end up with more money, some with less, so it’s important to take a closer look at our finances.
Here are the five things for us all to think about after the budget:
Wages and earnings
The government announced an increase to the rate of national insurance for most of us, whilst also increasing the national living wage to £9.50 from April next year, and cutting the universal credit taper.
It’s important to consider how these changes will affect you and the amount of money your family unit takes home and has available to spend each month. If your take home pay will be higher, you should think about how you save that money. If your take home pay will be lower than before, you should think about the ways you could lower your regular outgoings or see how you can make your money work harder by investing.
The government recently removed the £20 uplift available to people claiming benefits, but at the same time has promised a percentage increase to some benefits. If you were unable to work due to injury or sickness, you might have to rely on these benefits to meet your outgoings, so now is a good time to think about whether Income Protection and Serious Illness Cover could provide you with an extra layer of protection. Your financial adviser can advise on the right policy for you depending on your circumstances and monthly financial outgoings.
The Chancellor warned that inflation was likely to rise in the coming year, meaning the things we buy are likely to get more expensive and any cash savings are eroded in real terms. For example, if you have £1000 in a savings account and inflation is 4%, then next year you will only be able to buy £960 worth of ‘stuff’ with it.
Having cash savings provides a useful safety net in case or emergency and allow you to meet any short-term spending needs, but for anything else, it is worth considering where investments could give you the best chance of beating inflation and seeing real growth in your savings.
Whilst not announced in the Budget, the government recently confirmed that the state pension would increase by 3.1% from April 2022, but there are many factors, such as your NI record, that can affect the pension you will get from the State when you retire.
You may be a long way out from taking your pension, but the earlier you start planning for retirement the easier it is. Most people look to make provisions to supplement any State pension to ensure they can have a comfortable standard of living when they stop working. Thinking about what you would like to do in your retirement and the money you will likely need is key to living a happy retirement.
The pandemic has affected the NHS in numerous ways, and the Chancellor confirmed additional funding for it in the budget. Whilst this is great news, we can expect the NHS to continue to show signs of strain in coming years. Now might be a good time to talk to your financial adviser about whether health insurance is right for you which could pay for private treatment if you were to need it.
The Budget is a great opportunity to health check your finances and consider how what is happening across the country and economy may affect them now and in the longer term. There are many different financial and protection products available to you to help you plan and prepare for the future, and getting professional financial advise can be helpful in choosing between them and understanding the options available to you.
Are you thinking about taking a re-look at your finances? If you feel you’re in a rut then here are 7 ways to help you take another look at your finances and spending.