Last year was a strange one for household finances: although savings rates dropped to new lows and many people saw their incomes decline, significant sums of cash were also accrued by those who were willing to continue working. Home prices soared and large deposit borrowers were able to get very favorable mortgages, but lender caution resulted in the withdrawal of 95 percent home loans and new 90 percent restrictions So, in 2021, what are the best and worst things that could happen to our personal finances? Current accountsLast year saw a ban on unnecessary overdraft fees, two cuts to the prime rate of the Bank of England and the effect of the coronavirus, which meant that some banks withdrew accounts, according to financial information website Moneyfacts, while others stopped providing cash bonuses to new customers. As low interest rates have harmed its lending earnings, HSBC has already warned it could consider a fee on its regular checking account. ‘Consumers actually have a choice between a bundled account that is an account that comes with other services and a simple account that only charges a fee if credit is overdrawn or payments are skipped,’ says Rachel Springall from Moneyfacts. Providers could apply fees to their banking deals or boost fees on their most common accounts this year, and we could see benefits capped or cut.
Revolut unveiled a subscription package last month for £ 2.99 a month, including robbery and injury insurance and £ 1,000 a year shopping cover. Best case scenario: a switching battle between banks for the money of new customers; more premiums are added to get people to move. Worst case scenario: further cuts in benefits and more fees. Savings accountsAfter one of the worst years in the history of savings rates, it is difficult to see how things could get any worse, while further cuts in accounts could result from a negative Bank of England prime rate.
Yields are at historically low levels, and there is no indication that any change will take place in 2021. Hopefully, the most lucrative interest rates would be provided by challenger banks and any new brands seeking to enter the market.
Savers should benefit from any government measures, such as the Lifetime Isa or Aid to Save, but also take advantage of the Isa allowance, Springall recommends. The government sets tax-free savings allowances and Springall says it can decide to revisit the incentives on offer.
She continues, “Savers would be well advised to keep an eye on the top interest rate tables and switch to ensure that they get the best possible return on their hard-earned money, whether the market is stagnant or deteriorating.” Best case: interest rates rise; new government programs are introduced to benefit savers; new challenger banks enter the market and attempt to gain deposits. Worst case: more interest rate cuts; cuts to savers’ tax-free initiatives. Pensions As the stock market has dropped, not all pensions have suffered. For nearly 10 million people, corporate pensions, Nest, increased more than 10% The reduction in tax relief for high earners would offset consistent retirement savings, which may lead to people transferring their money into other types of savings, such as Isas. It will be a big step forward in a world where any move that discourages people from saving for the long term will be a significant step forward.