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Pension fund recovery slows – how will this impact your retirement?
Derin Clark

Derin Clark

Online Reporter
Published: 27/10/2020

Although pension funds are starting to recover, new data shows that between July and September the recovery fell significantly compared to the previous three months, putting into doubt how quickly pension funds will recover and when older workers will be able to retire.

Data due to be published in the Moneyfacts UK Personal Pension Trends Treasury Report found that between July and September (Q3 2020), average pension funds returned just 1.7%, which is significantly lower than the increase of 13.3% between April and June (Q2 2020). As a result of the lower growth, average pension funds are still 2.6% lower than at the start of the year.

Commenting on this data, Richard Eagling, head of pensions at Moneyfacts, said: “The performance of pension funds weakened noticeably during Q3 2020 meaning that pension returns remain in negative territory for 2020. Once again, these figures highlight the challenges that individuals face in being able to fund a comfortable retirement.”

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Six steps to organise your finances during financial planning week 2020

Today marks the start of the Chartered Institute for Securities and Investment’s (CISI’s) Financial Planning Week. The week, organised by the CISI and for the first time ever supported by its trade body rival The Personal Finance Society (PFS), aims to help improve consumers’ confidence and understanding of finances.
This includes helping more consumers to plan their finances and to make sure their life goals are supported with a financial plan to achieve these. A good financial plan can include a review of your pension arrangements, making sure your family is protected if your income reduces, a review of your savings and investments and the cost of your borrowing.


The CISI is offering all consumers a free one-hour personal financial planning session worth up to £500 during Financial Planning Week. The PFS is offering support through its pro-bono programmes, which includes 100 financial advisers offering free guidance to Armed Forces personnel. Consumers can also find financial advisers by using services such as unbiased.com and vouchedfor.co.uk.
The Coronavirus pandemic has affected nearly everybody’s day-to-day finances and the Money Wellness Index from first direct found more than half of adults (54%) now want to become more financially resilient. This is on top of 9 million UK consumers that identify as having low financial capability (study: Financial Conduct Authority) and just over a quarter of respondents to a CISI study stating they were not confident about their financial situation.

Rachel Springall, finance expert at Moneyfacts.co.uk, said:
“The impact of the Coronavirus pandemic on consumers and businesses may well have prompted them to take a step back to reassess their financial health and there is no time like the present to take advantage of free financial planning sessions through CISI during Financial Planning Week. If consumers would prefer to do the groundwork themselves or are wondering how to keep up a regular check on their financial health, then it is worth spending some time to seek out ways to do so.”
Consumers worried about their finances or lacking in confidence can take control by following a series of steps to manage their money and debts today and for the future.

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Is now a good time to remortgage your equity release?

Over the past four years the average equity release has fallen by 1.14% so that it is now on average cheaper to take out an equity release than it was in 2016. While this is good news for those currently considering releasing equity from their home, for those who took out an equity release plan some years ago it may be disappointing reading. Fortunately, there is the possibility of remortgaging equity release, which could result in a lower, cheaper rate. Below we take a look at whether now is a good time to remortgage your equity release.

Since 2016 the average equity release rate has fallen from 5.35% to stand at 4.21% today. As the below table shows, average equity release rates have been falling consistently year-on-year over the past four years. In addition to this, as we reported earlier this week, research from Key Partnership found that competition within the equity release market is increasing and this year has seen a new equity release product being launched every 28 hours.

 

Average equity release rates
  September 2016 September 2017 September 2018 September 2019 September 2020
Lifetime equity release combined (fixed and variable) 5.35% 5.22% 5.10% 4.89% 4.21%

 

The fall in rates combined with the increase in equity release competition means that those looking to remortgage equity release now are likely to get a better deal than if they did so just a few years ago. This could also mean that, depending on the rate of their initial equity release, they could be able to get a remortgage equity release deal that results in paying a lower rate. Additionally, with new products entering the market offering enhanced product features, those with an equity release could find that there are now more options that suit their personal circumstances than when they initially took out equity release.

Saying this, there are many factors to consider, and costs to be included, when looking to remortgage an equity release. For example, those with an equity release deal could find that they have to pay a significant amount of money to exit their existing deal and remortgage with a new equity release – the cost of this could outweigh the lower rates being offered on the new equity release deal.

Despite the numerous benefits equity release can offer it is important that independent financial advice is sought to ensure the costs and implications are understood fully. In addition to this, speaking to an equity release adviser may be a good option to help those looking to remortgage equity release to find the right deal for their circumstances.

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Annuity rates have fallen by over £1,000 in the last decade

Workers nearing retirement and looking for the income security provided by an annuity will be disappointed by our research which found that average annual annuity income has fallen by over £1,000 over the last decade.

“Those looking for a guaranteed income during their retirement may be considering an annuity, but over the years this market has contracted significantly and there are only a few providers left in the open market annuity area,” explains Rachel Springall, finance expert at Moneyfacts.co.uk. “As it stands, an annuity for a single life male aged 65 who has a £50,000 lump sum and takes out a level without guarantee annuity (standard or enhanced included) will receive an annual annuity income of £2,295 on average paid monthly in advance, but this is £1,080 less than the same time ten years ago.

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Should you release equity from your home to pay for your grandchild’s house deposit?

As house prices continue to rise, combined with the withdrawal of many first-time buyer deals from the mortgage market, it is currently a very challenging environment for those looking to take their first step onto the property ladder. Grandparents with grandchildren struggling to get the deposit needed to secure a mortgage on their first home may be tempted to help out by releasing equity from their own home to pay towards the deposit.

Here we take a look at whether grandparents should consider releasing equity from their home to help pay for their grandchild’s house deposit.

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Recent News

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Equity release rates are now lower than at the start of 2020

3rd September 2020

The average rate for equity release dropped to 4.21% on 3 September 2020, only fractionally above the lowest ever average rate seen since 2007, at 4.13% in March 2020. Those wanting to release cash tax-free from their home to help fund retirement or for home improvements can now do so at competitive rates.

The average rate for equity release dropped to 4.21% on 3 September 2020, only fractionally above the lowest ever average rate seen since 2007, at 4.13% in Marc

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Launch of new Equity Release service for Moneyfacts.co.uk

1st September 2020

Visitors to Moneyfacts.co.uk that want to know more about equity release can now access the skilled and experienced advisers at HUB Financial Solutions, in an agreement announced today by the two companies.

Visitors to Moneyfacts.co.uk that want to know more about equity release can now access the skilled and experienced advisers at HUB Financial Solutions, in an a

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Should you take pension drawdown if you’re over 50 and made redundant?

26th August 2020

During the spring lockdown, it was the oldest and the youngest workers who were most likely to be furloughed

During the spring lockdown, it was the oldest and the youngest workers who were most likely to be furloughed

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Over £30 million lost through pension scams

26th August 2020

Pension savers are being warned to watch out for scams as over £30 million has been lost to pension scammers in just three years

Pension savers are being warned to watch out for scams as over £30 million has been lost to pension scammers in just three years

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Most Popular Retirement News

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Invest in property or a pension - which is best to boost your retirement?

6th August 2020

The numbers of people searching for buy-to-let in the UK has seen an increase of more than 2.5 times from the end of March to mid-July, according to Google trends data.

The numbers of people searching for buy-to-let in the UK has seen an increase of more than 2.5 times from the end of March to mid-July, according to Google tren

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Retiring in the city could cost £21,000/year

3rd March 2017

Most people look forward to the day they can hang up their work clothes and start enjoying retirement, yet worryingly few consider the cost involved. Where you decide to retire can have a significant impact on the amount of money you’ll need, too.

Most people look forward to the day they can hang up their work clothes and start enjoying retirement, yet worryingly few consider the cost involved. Where...

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Cambridge brings new product to the retirement mortgage market

19th July 2019

Cambridge Building Society has launched its first retirement interest-only (RIO) mortgage .

Cambridge Building Society has launched its first retirement interest-only (RIO) mortgage .

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Tax-free allowances, limits and tax relief for 2020/21

3rd April 2020

We explain the key changes in tax allowances and limits. Read now to get our free guide to Taxfacts 2020/21.

We explain the key changes in tax allowances and limits. Read now to get our free guide to Taxfacts 2020/21.

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