The Financial News You Need To Know with Sarah Pennells – October 2015

Sarah Pennells is a personal finance journalist and the face behind SavvyWoman.co.uk. We think she does a great job at explaining financial subjects in a very clear and accessible manner. You can find her column below where she writes about the latest financial news, and helps you get more from your money.

Students not taught about money

A new report says that students receive little or no financial education before they go to university. The research, by IFS University College, found that only a quarter of girls said they got any personal finance education in school, compared to over a third of boys. Overall, only 28% of school-age students said they had financial education at school before they started college, university or their first job.

Even so, over half (56%) say they have enough knowledge to manage their money on their own, and most think that they’ll be earning twice the national average wage by the time they’re 30.

Personal finance has been on the curriculum in England since last September, although schools elsewhere in the UK have taught it for longer.

Most students use online and mobile banking, but a quarter (25%) said they’d received phishing emails or texts – making them a target for fraudsters.

SAVVY TIP: If you’re struggling to make your money last the first term, there’s lots of help available on websites like the Money Advice Service or from student money advisers.

Price of flats on a new level

The price of flats has risen much faster than the price of houses, according to one bank. Research shows that flats are up by 60% in the last ten years compared to just 34% for the average house and only 21% for detached homes.

However, flats aren’t as popular as they were ten years ago. Now they account for 17% of all homes, compared to 20% of properties in 2005.

Flat rate state pension

It’s less than six months until the new flat rate state pension is introduced – in the biggest shake up of state pensions for a generation. At the moment, if you’ve paid enough National Insurance (NI) or been credited with NI while you were on benefits or bringing up your children, you can get a basic state pension of £115.95 a week.

If you’re employed, you may also be able to build up an additional state pension – either the state second pension and/or the state earnings related pension scheme (SERPS). But if you work for yourself you don’t get this.

Confused? That’s part of the reason why the previous government passed legislation to introduce a new ‘flat rate’ or ‘single tier’ pension. Except that it’s not flat rate..!

Here’s how the pension system will change in April:

  • The full flat rate pension will be no less than £151.25 a week. We don’t know exactly how much it will be because the rate will be set in the Autumn Statement, in December.
  • You’ll need to have 35 years of National Insurance to get the full state pension (currently you need 30 years). That’s National Insurance you’ve paid while you’ve been working, or have been credited with if you’ve been on benefits or, for example, bringing up your children.
  • It will only be paid to people who reach state pension age on or after April 6th next year. You can’t qualify for the new pension by putting off claiming your state pension either. It’s the date you’re able to get your state pension that is the key.

SAVVY TIP: Your state pension age isn’t the same as the date you retire. It’s the date you qualify for your state pension. Currently it’s 65 for men and around 62 years and 10 months for women (and rising). By October 2020 it will be 66 for both women and men.

  • If you’ve built up more of a state pension under the current system, you’ll keep it. The coalition government promised that no-one would lose out with the new system. On April 6th 2016, the state pension you’ve built up will be assessed. You’ll either keep the amount you’ve built up under the existing system, or under the new flat rate state pension (whichever is higher). Any state pension you build up after 6th April will be under the new system.
  • Some people who have paid a lower rate of National Insurance because they’ve been in their employer’s pension scheme, won’t get the full flat rate state pension, even if they have 35 years of National Insurance (I did tell you the new pension wasn’t ‘flat rate’!).
  • If you have less than ten years’ National Insurance, you won’t get the new state pension at all.

Same sex couples and pensions

A court ruling this week means that workplace pension schemes don’t have to give partners in same sex married couples and civil partnerships the same pension rights when someone dies as other married couples.

Civil partnerships became legal in December 2005 and, by law, company pension schemes only have to give limited ‘survivor’s benefits (pensions paid to the husband, wife or civil partner of someone who’s died). The pension that the civil partner of someone who died would receive can be based on the pension that’s built up after December 2005. In practice, a number of employers go further than this.

But the court ruling this week said they didn’t have to do this and that employers could pay the widow or widower in a same sex couple, or partner in a civil partnership, a much smaller pension than the surviving partner in an opposite sex marriage would get.

Sinkholes – are you covered?

Last month a huge 20 metre wide sinkhole appeared in St Albans in Hertfordshire, swallowing up parts of gardens and the residential road. It’s not the first sinkhole to appear in the UK – there was one in Manchester in August and one in Kent last year.

If you have buildings insurance, your home will be insured if it’s damaged as a result of a sinkhole. But if the sinkhole just damages your garden, but doesn’t result in any damage to the property itself, it’s unlikely your insurance will pay out. That’s because many insurers will only pay out for subsidence claims (where the ground sinks or moves) if the house is damaged at the same time.

SAVVY TIP: Check the wording of your insurance policy or ring the insurer (or broker, if you bought it through one). Some policies have a larger excess for subsidence claims, so that’s worth checking at the same time.