We will know on Wednesday whether the Bank of England is winning its battle to tame inflation – when the figures for August are published.
All the mood music suggests it has more hard work to do with inflation likely to top July’s rate of 6.8 per cent. If so, this will probably result in yet another interest rate rise being ordered a day later by the Bank’s Monetary Policy Committee – the 15th since December 2021, with the new rate set at 5.5 per cent.
One area of our financial lives where inflation remains very much untamed is in the home and motor insurance markets.
Pulling a fast one: Older drivers face huge premium increases more suited to Steve McQueen in the film Bullitt
Some of the premium increases being demanded by insurers when policyholders’ cover comes up for renewal are off the scale – and in most (not all) cases, it is the elderly who are being hit with the most savage hikes.
In the past few days, I have spoken to numerous car owners and homeowners who have received such renewal notices. All are either 80 years of age or over.
For example, Jim Moir, an 80- year-old retired technical services manager for a brewery company, renewed his car insurance last November with Saga for just under £313.
Reassuringly, the premium was fixed for the next three years. ‘I was so happy,’ says Jim, a widower from Dundee.
‘I have home insurance with Saga and a relationship with the company going back 18 years.’ Earlier this month, he changed his car from a three-year-old Mazda3 GT Sport to a brand new Mazda3 Takumi – almost identical cars.
He contacted Saga, only to be told he would have to take out new cover, costing £1,150 – nearly four times the previous price.
He was perplexed. ‘Apart from the car and myself being one year older, nothing has changed since November,’ he says. ‘I still drive no more than 5,000 miles a year and I have 20 years of no-claims bonus under my belt.’
Complaining got him nowhere – and he is now insuring with another leading brand for £648 (for one year, not three).
There are other examples. Dave Thomas, an 83-year-old retired bank manager, sought new cover for his Mercedes Benz GLE in July this year after his existing insurer said it would not be offering him the chance to renew. Why? The value of his car, he was told, and his age. He has now found cover elsewhere for £3,500. ‘It’s not just the Mayor of London taking car owners to the cleaners,’ he says, ‘It’s insurers as well.’
David Gorman, from County Down in Northern Ireland, was told last month that the cost of his home insurance would be rising from £298 to £1,239, fixed for three years.
‘In more than 50 years of having home cover, I have never made a claim,’ he says. David is 81. Age is one of the factors that insurers use to assess risk and price cover, so companies are not falling foul of age discrimination rules.
But is a driver just one year older really deserving of an increase more suited to a reckless boy racer? Insurers’ treatment of many elderly customers is nothing short of shameful.
Long march to banking mobile
A big thank you to the bank branch employee who contacted me last week, appalled at the way she and her colleagues are being bullied into steering customers away from using counter services.
Although she would not reveal the name of her bank or branch (for obvious reasons), everything she said rings true: tills being decommissioned; customers encouraged to use ATMs, deposit machines or ring a phone number to get a query answered; and staff reprimanded if they do not toe the line.
‘This new policy is hard to accept, especially given that most customers are elderly,’ she adds.
Sadly, high street banking, as we know it, is drawing to an end. More than 1,100 bank branches have shut (or put on notice of closure) since last year – and plenty more will be put on death row.
As a result, banks are shedding staff (Barclays has just announced plans to axe 450) and shredding customer passbooks (Lloyds).
While banking hubs, which all bank customers can use, will fill some of the gaps left by closures, we are being pushed into a world where mobile phone banking rules.
Stealth taxes on savers are here to stay
Under this Government, the annual tax-free capital gains allowance has been slashed – from £12,300 to £6,000, and to £3,000 from next April
Stealth taxes lie at the heart of this Government’s strategy to put the country’s finances back on an even keel.
Some argue they are necessary while others (with justification) believe they are underhand.
My view – and that of many readers – is that they are not becoming of a political party that has always rewarded those who are thrifty and prudent. They also fly in the face of some of the policies the Government is keen to pursue.
For example, the Government wants us to save more and support home businesses by investing in the UK stock market.
Yet, it is taxing capital gains and dividends as if John McDonnell (Shadow Chancellor of the Exchequer from 2015 to 2020) was in charge of the country’s finances, not Jeremy Hunt.
Under this Government, the annual tax-free capital gains allowance has been slashed – from £12,300 to £6,000, and to £3,000 from next April. Alongside this, the annual tax-free dividend allowance is down from £2,000 last year to £1,000 – and will be shaved to £500 come April.
Its treatment of cash savers is no better. By refusing to increase the annual tax-free savings allowance (£1,000 for basic rate taxpayers, £500 for higher rate), it has sucked many savers into paying tax on their cash balances for the first time.
Last year, 1.7million paid tax on savings interest – this year, the figure is more likely to be 2.7million.
Wealth & Personal Finance is campaigning vigorously for the current allowances to be doubled.
Meanwhile, the furore surrounding the affordability of the state pension triple lock downplays the fact that 650,000 pensioners will be forced into paying income tax next year when their pension rises – taking their income above the personal allowance of £12,570. This allowance, frozen since 2021, will stay at £12,570 until 2028.
Last week, one reader told me he was shocked that the greater taxation of savings and investments had become accepted policy across the two main political parties.
He is now paying tax on his dividends and savings, in the process undermining his retirement planning. He did not mince his words: ‘Why does nobody care about the unfairness of this massive expansion of taxing basic rate taxpayers who put money aside for their future? Is there nothing anyone can do to change this godawful hard-Left mindset that has infected all our politicians and the Treasury?’ The answer, Michael, is a big fat no.
Sadly, I don’t see any U-turns on the horizon. Stealth taxes are here for the foreseeable future. The only way to mitigate them is to utilise your £20,000 annual Isa allowance to build your very own tax-free fortress.
Save money make money
