Tag Archives: Personal Finance

Hourly Minimum Wage to Increase by 20p

The National Minimum Wage is to increase by 20p per hour, the government announced recently. The rise will take effect from October, and will boost the minimum hourly rate that businesses can pay employees to £6.70 from the current level of £6.50. Prime Minister David Cameron claimed that this increase would provide minimum wage workers with “more financial security.”

Younger workers, who are subject to different rates, will also see an increase in the National Minimum Wage from October. Workers aged 18-29 will see minimum wage rise by 17p, taking the rate up to £5.30 from its current level of £5.13. 16-17 year olds will receive an 8p increase, from £3.79 at present to £3.87 after October. Overall, these increases represent a rise of roughly 3% for minimum wage workers in both the 18-20 and 21+ age categories, and 2% for those aged 16 and 17.

The biggest boost is being received by apprentices. This group is also subject to a separate minimum wage rate. Specifically, the minimum wage for apprentices is significantly lower. This fact is designed to reflect the fact they are receiving training and a qualification as well as monetary compensation for their work, but has nonetheless been criticised by many as too low to be liveable.

Currently, apprentices are subject to a minimum wage rate if £2.73 per hour, assuming they are in the first year of their apprenticeship or are under the age of 19. This will rise by 53p to £3.30 an hour from October. This is an increase of 20%, meaning that apprentices are receiving a proportionally much larger boost than those who are subject to other minimum wage rates.

The increases that have been announced for minimum wage rates are essentially in line with recommendations that have been made by the Low Pay Commission. The one area in which the government deviates from these recommendations is in the increase for apprentices. Where the Low Pay Commission recommended an increase of only 7p per hour, the government decided to introduce the significantly larger 57p increase to the minimum hourly rate.

The increase of 3% to be introduced for adult workers, meanwhile, is being hailed as the biggest minimum wage rise for seven years in real terms. Nonetheless, not all quarters are enthusiastic, with some believing that the increase should have been greater. Unions believe the rise will not be sufficient to tackle “in-work poverty,” while Labour points to the way that inflation has “eroded” the value of the minimum wage in recent years.

The Benefits of Starting a Pension as Young as Possible

When a person is in their twenties, paying money into a pension fund is often seen as a waste of money and completely unnecessary. On top of that millions of young Britons in the 20 – 29 age group seem to know very little about this very important aspect of financial planning – planning for retirement. A recent poll conducted by ICM for financial services company MRM found that 33 per cent of young people know how to say ‘How old are you?’ in French, while only 10 per cent know the meaning of the word ‘annuity’.

It is probably safe to assume that most of these young individuals also do not know or understand the concept of time value of money. They are simply not aware that if one starts investing £150 per month at the age of 25 this could grow to £395 000 by retirement age (with a yearly growth rate of 7 per cent).  Starting only five years later, at 30, will bring down this amount by £125 000 to only £270 000. And starting another five years later will reduce the balance of the fund to £183 000 by retirement time.

The earlier one starts a pension the more tax breaks can be enjoyed over the lifetime of the pension plan. Depending on how much the taxpayer earns, as much as 45 per cent of the amount invested could be deducted from income tax. That means the individual could end up paying only 55 per cent of the monthly amount invested in the fund out of his or her own pocket.

Another reason to start early is that people nowadays are living longer, which means they need more money to fund their retirement than years ago.  Twenty per cent of people living today are projected to live until they are a hundred or even older.

Contractors are often guilty of neglecting their retirement planning until it’s too late. If he or she works for a large company, they will usually have a pension plan, but contractors absolutely have to make contributions to private pension plans to save for their retirement.

An umbrella company could take care of this very important aspect for contractors. The company handles all payroll functions, including paying over pension fund contributions to the contractor’s chosen pension fund. These contributions are usually structured as an employer’s contribution and paid over directly, making it easy and affordable for a contractor to have a pension fund of his or her own.

This is why it is highly beneficial for contractors to make use of an umbrella company such as www.crystalumbrella.com. Depending on the individual’s tax rate, he or she could end up spending only £51.46 for every £100 contributed to an approved pension fund. This is partly because the contribution is tax deductible, but also because it is exempt from employees and employers National Insurance deductions.

When choosing an umbrella company, it is very important to make sure that the company allows an employee to transfer his or her pension fund to another employer should the need arise in future.

Options When it Comes to Debt Management

People who want to clear the debt that they have accumulated have a number of different options. Each set of circumstances is individual and the method you use to reduce your debt will depend on how much money you owe and the income that you have available.

For some people, it can be as simple as learning to budget more strictly and following the mantra of spending less than you earn. If you find that you are just falling short of your payments each month, look at where you can make some savings on regular expenses, such as utility bills, grocery bills and consider switching your mortgage if you can find a better deal with another provider.

It may be that you have more serious debts to contend with and that budgeting alone won’t be enough to clear them. In the UK debt help comes in a variety of forms, depending on the level of debt you are faced with. There are many different debt management companies and financial charities that you can contact for an initial consultation.

Common debt solutions include:

Debt management plan

This is where you agree a monthly repayment for all your creditors, but it goes to the debt management company which then redistributes it on your behalf. A debt management plan can help in terms of administration for multiple debts and the debt management company may be able to negotiate a lower interest rate for you.

Debt consolidation loan

An alternative to a debt management plan is to take out a new loan to cover your existing unsecured debts. You then have one single payment to make each month, and debt consolidation loans usually have a lower rate of interest than credit or store card bills. You need to be strong-willed enough not to be tempted to start spending on credit cards, etc, until your debt consolidation loan is paid off, otherwise you could end up back in the same position you started in.

IVA

In the UK, people with debts greater than £10,000 owing to three or more creditors can enter into an Individual Voluntary Arrangement (IVA) which is a legal agreement drawn up between the person owing money and their creditors and passed by the court. Creditors aren’t obliged to agree to this, but usually do as it strengthens their chances of recuperating their money. When people seek bankruptcy advice, they will often be informed about taking out an IVA instead. IVAs can be a better option than declaring bankruptcy as your assets will not be put at risk.

These are just some of the options available to someone in debt, but before going ahead with any of the debt management solutions offered by third parties, you should seek independent financial advice.

Disability Living Allowance: Making an Effective Claim

A Disability Living Allowance (DLA) is a benefit provided by most countries and governments for disabled children or adults to aid them with additional expenses caused by their physical incapability. If someone in the family has a physical or mental disability and these individuals require help in doing basic functions, you can make them a claim for DLA. Here’s a comprehensive guide.

1. Finding a Claim Form

Most DLA forms are available from most local benefit offices in your area. You can ask local charity groups and local government units to find the local benefit offices. Remember that you only have 6 weeks to return the form from the date you requested the form.  For the United Kingdom,  The Guardian has a unique and easier way to make a DLA application that serves as your form for application.

2. Filing the Claim Form

The DLA claim form might be quite intimidating, but it is really quite simple. First, be sure to know why you are filling in the form. You can ask the help of other people who have requested a form. Also, since you have 6 weeks to return the form, you can keep a diary of the problems and the care you provide for the individual and indicate these in the form. Be sure that you have a backup copy of the form as well.

3. The Mobility Component

Most DLA claim forms have this item. Ask yourself or the person you are applying for the following questions:

-Distance the person can walk before they are in extreme discomfort, need rest, reasons for stopping.

-How long they need to rest before continuing

-How they feel while walking

-How long it takes to cover the distance

-What aids they use in walking

4. Care Component

The DLA form’s care component asks you about details regarding how external aid from another person can make things easier for you or the person you’re applying for perform basic tasks, such as getting out of bed, showering, eating, what they feel when they wake up or during a specific time of the day, if they find trouble clothing themselves and other details.

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Financial Tips Essential for 2012

A new year is a new leaf, and this year is quite different than the last. In the middle of the year, it is advised that you observe these particular financial tips. While many home values are lower than their loan values, lending policies are still intact and haven’t budged much. Ensure that you implement these rules in your spending so as to help you get through a year with your finances intact.

1. Cut Your Debt

If you’ve been spending so much on your credit card or financing spending, yet you’re contending with your income and leaving yourself with virtually nothing every month, make an end goal for yourself. Figure out a plan that could help you pay off all your debt in one or two years. Cut back on new purchases and only keep the financing you have today. Also, don’t overuse your credit cards.

2. Banking

Bank charges and other service fees might seem fair for the first year or so, but if you assess that the fees and other services are quite too much for your budget, shift to a new bank account right away. You don’t need to spend more for unnecessary services you don’t actually need. The same goes for credit cards.

3. Use Cash, Not Credit

If you’ve ever played in a casino, you’ll understand that playing by chips is different from playing with cash. The same idea goes for using credit and cash. Use and withdraw cash often. Don’t swipe your debit and credit card. Start your week with a set amount of spending cash and don’t overspend.

4. Assess Your Credit Per Year

You’re entitled to receive a free credit report from most credit evaluating institutions in the country. Try to get your own evaluation to give you a heads-up of your current credit and fiscal progress.  In this way, you can plan out your financial strategy for the following year.

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