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lettuce pray for our personal finances

Prime Minister Liz Truss didn’t outlast the Daily Star’s Lettuce, but her short tenure and enduring legacy shredded our personal financial prospects.

If you didn’t see the viral “Liz vs Lettuce” Video live stream, it’s a tabloid stunt interrogation and which one expires first. Disco lights were added following her resignation on thursday.

After a week of tax, pension and energy policies being thrown into a political salad spinner, what will the next phase of this economic experiment mean for our money?

Whoever takes her place next week, the answer is higher taxes.

Prime Minister Jeremy Hunt must find £40 billion in savings.An extraordinary series of tax U-turns he announced Monday — many of which labor policy — just get him there.

Promising “nothing to consider,” he’s working hard to ensure that the Halloween medium-term financial plan doesn’t include the kind of surprise that some pundits expect. half of the required savings This is due to the tax increase.

His dismantling of Trasonomics ended plans for a 19 pence basic tax rate, a corporate tax cut and a tax cut on dividends.

‘Stealth Tax’ extended Frozen Income Tax Threshold It looks like a no-brainer. While the Truss proudly ‘delivered’ a national insurance premium hike, Nimesh Shah, Chief Executive Officer of Brick Rosenberg, announced a 3.25% increase next April for taxpayers with high and additional tax rates. I think it’s possible to revive the tax rate.

“It’s too late to stop it this time, but someone making £160,000 will still be around £1,100 better next year with the Knicks comeback,” he said. So we have to find a way to pay for it.”

In any case, the dividend tax rate will rise by 1.25 percentage points next April. In addition, the corporate tax hike will hurt directors of limited companies that pay in installments.

It’s also not welcome news for investors holding stocks other than the popular tax wrapper. Income investors saw UK bank shares fall this week amid rumors of a crash. A “windfall tax” on profits — Hunt was unable to restore the cap on bankers’ bonuses.

Bankers should not get too excited. Another U-turn is still possible by October 31st.

Pensioners aren’t relying on Truss’ dying week pledge. respect the triple lock as inflation sharply increased past 10 percent. This will require around £9.5bn of funding and from next April (assuming no U-turns occur) the total state pension will be over £10,000.

Pensioners are a group of voters the Conservatives cannot afford to disrupt, but there have been no promises of higher benefits. With food price inflation rising by 15%, this runs counter to the minister’s repeated assurances to “protect the most vulnerable” amid soaring prices.

The plan to lift the energy price guarantee next April was the right one. argued for a long time This costly assistance should never have extended to the wealthy. But it’s not just the beneficiaries who suffer.

£4,000 in utility bills combined with rent and mortgage payments could leave millions of full-time workers in a very vulnerable financial position, but where does the Treasury cut-off point fall? I don’t know yet.

Hunt’s series of U-turn tax cut losses, for the most part, make no sense at all. Mortgage rates are skyrocketing, and people are in a pinch financially.

If you work in an office, it should be clear who is the winner and who is the loser among your colleagues.

Them Fixed rate deal roll-off It would be difficult to get much better than 6% with the new 5-year revision. On a £250,000 mortgage, the ‘payment shock’ could be £500-600 a month, with nearly 2 million adjustments ending next year.

By the time the next election begins, residential accident You have to fight negative stocks. Falling prices lower the loan-to-value ratio, making it even more expensive for borrowers to re-mortgage.

UK gilt yields (and swap rates used to price mortgage rates) have drifted in the right direction, at least with Monday’s Trasonomics killing. Slightly relieved The era of cheap mortgages will end when gilt rates stabilize in the coming weeks.

Financial markets were stable following the prime minister’s resignation. While waiting for the next leader to appear, there’s something to check here.

The Gilt movement also poses a silent threat to those with defined contribution pensions.

Defined benefit (final salary) pension plans have become a hot topic thanks to risky derivative-linked hedging, but the reality is that well-funded plans are at risk of not paying pensioners. very few.

However, it would be prudent for anyone using DC’s workplace system to check for nulliparous exposure and potentially add a few years to their expected retirement age.

FPP Chartered Financial Planner David Hearne said: “That means they may be at risk of becoming a ‘lifestyle’ from 40.”

The lifestyle — the gradual shift from stocks to gold coins and cash as retirement approaches — is a legacy from a time when every pensioner had to buy an annuity. Gilt was seen as a safe haven, but as well as missing out on potential stock returns, it also risks capital losses.

Another thing to watch out for is cash. Everyone needs emergency funds because the uncertainty is so high. However, the general rule of saving three to six months’ worth of living expenses also needs to be adjusted for inflation. With difficult times ahead, you may need more cash than you think.

The good news is that many new savings deals are happening ahead of the rate hike expected in November.

Barclays customers with up to £5,000 in shelters can earn 5% interest on the new Rainy Day Saver (must participate in the cost-neutral Blue Rewards scheme if the account has two direct debits). I have).

Nat West, Lloyds and Yorkshire Bank all offer 5% to regular monthly savers (equivalent to a 3.2% spread over the year).

Lower than inflation, but potentially better than a mortgage.

If you’re looking to pay a lump sum before a fixed rate deal ends, this could be one way to get interest rate arbitrage before our PM turns into a pumpkin.

Claer Barrett is the FT’s Consumer Editor. claer.barrett@ft.com; twitter @Claerb; Instagram @Claerb

https://www.ft.com/content/dc018d6d-6fa9-4af6-9737-94cbc4161f2b lettuce pray for our personal finances

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