What 2016 could mean for your finances
Published 17 January 2016 by Kyri Levendi
We’re taking you through what 2016 could have in store for you financially.
With the start of another year and the expense of Christmas behind you (or maybe not, if you’ve still got some bills to pay off), you’re likely to be looking for a fresh start for the year ahead. If you’re hoping that 2016 is the year that you finally get your finances in order, we’re going to run you through what the upcoming year could have in store for you.
In 2015, property prices increased by an average of 4.5% (twice as fast as wages were growing). For 2016, many are predicting a rather similar outcome, with some experts forecasting an increase of between 3% and 6%. Others, such as the Centre for Economics and Business Research, suggest that prices will actually fall instead.
A contributing factor to the housing market is the base rate set by the Bank of England and whether this is likely to increase from its record low of 0.5%. Some economists are forecasting that this will rise towards the middle of the year but as no one knows for sure, nothing can be certain.
In 2016, the way that your savings are protected will change due to updates in policy to the Financial Services Compensation Scheme. Any money that you hold in a bank, building society or credit union is protected by the Financial Services Compensation Scheme. For the last five years, the highest amount that you could claim back if your financial institution stopped trading or was declared in default was £85,000. As of January 1st, this amount is to drop to £75,000 per person (if you have a joint account, you’ll be able to reclaim up to £150,000 of your savings in total) and per institution.
This won’t affect you too much if you have less than £75,000 saved up but if you have more than this, you might want to look into distributing your savings into a number of different accounts to ensure they stay protected.
You can find out more about these changes and how they could affect you in our guide.
From 6th April onwards, the State Pension is changing, so if you reach the State Pension age on or after this date you’ll receive your payments as part of the new system. The new State Pension will be based on your National Insurance record, and will be worth £155.65 a week initially.
The introduction of this new single-tier, flat-rate State Pension will replace the basic and additional pensions for people reaching the State Pension age from April 2016. If you’re already receiving your pension however, you will continue to do so under the current rules. It was announced in the 2015 Autumn Statement that the current basic State Pension will increase by £3.35 a week to £119.30 from April onwards, giving it a boost of £174.20 a year.
Although George Osborne announced that plans to cut Tax Credits would no longer be going ahead, there are other changes to benefits that you should be aware of.
A proposed benefit cap is set to be introduced in October for families who are not eligible for working tax credit. If you live in London, this will mean that the amount of benefits you’ll be able to claim will be limited to £23,000 a year or £20,000 for the rest of the country.
Housing benefit will be frozen from April until 2020 for private renters as well.