Will the first online-only savings bond mean savers miss out?

The new government-backed savings bond from National Savings & Investment (NS&I) is set to launch in April this year, offering what Chancellor Philip Hammond has described as a ‘market-leading’ interest rate of 2.2% over three years. The bond is also set to become the first savings account offered by NS&I which will only be offered online, differing from previous products which could be opened over the phone or by postal application.

However, there are concerns that the online-only status of the new savings bond may result in thousands of savers missing out. The most recent data from the Office of National Statistics suggests that 5.3 million people in the UK have never used the internet – just over one in ten (10.2%) of the whole population. The majority of these people are either elderly or disabled, prompting fears that making the new savings account only available online will cut these sectors of society off from enjoying the benefits offered.

Baroness Ros Altmann, former pensions minister, described the decision as “shocking”, especially as “many older people live alone, with no computer access”, meaning that they will have no way of setting up the new account themselves, should they wish to do so.

NS&I has defended their decision, saying that it “reflects changing customer preferences”, referring to the fact that an increasing number of people are applying for their savings accounts online. NS&I also described the move to online-only as “cost-effective”, as without the need to open and read paper applications or take applications over the phone, the state-owned savings bank will be able to save money on running costs.

Aside from the accessibility of the new account, questions have also been raised over whether it can truly be seen to offer a market leading rate. A similar account offered by Atom Bank, called a Three-Year Fixed Saver, offers the same rate of 2.2% over the same time period with a much higher maximum investment rate – £100,000 compared to NS&I’s £3,000. However, the account from Atom Bank doesn’t allow early withdrawals which the new savings bond does, subject to a penalty payment of 90 days worth of interest. So, whilst the new account does offer an attractive investment opportunity for those looking to grow their investment, it’s still worth looking around to see what’s on offer elsewhere.

When someone dies and leaves a will, an executor is usually appointed in the will to deal with the deceased person’s estate – their money, property and possessions. Before they’re able to do this however, the executor has to apply for a ‘grant of probate’. This means they are legally allowed to distribute assets from the estate as outlined in the will. Without probate, the executor has no authority over bank accounts, mortgages or other financial matters.

At the moment, the probate fee is set at a flat rate of £215 for any estate, or a lower fee of £155 for applications made by solicitors. However, from the start of May 2017, the fees are set to change and become dependent on the size of the estate. Whilst estates worth under £50,000 will no longer require a probate fee to be paid, estates worth between £50,000 and £300,000 will see the amount rise to £300.

The increase becomes much greater for estates worth above this amount, however. Estates with a value of £300,000 to £500,000 will incur a probate fee of £1,000; and estates worth between £500,000 and £1 million will incur a £4,000 fee. There will be a fee of £8,000 for estates worth £1 million to £1.6 million, rising again to £12,000 for estates valued between £1.6 million and £2 million. The highest charge will be for estates of over £2 million, where a grant of probate will cost £20,000.

The sharp increase in these charges has been met with disapproval in the legal sector, with many describing it as a new inheritance tax. One of the key criticisms is that as the assets of a will cannot be released until probate has been granted, executors may be forced to seek financial assistance in order to begin the process of dealing with the estate of the deceased.

At the moment it’s unclear whether the changes from 1st May will affect applications for probate submitted or deaths which occur after this date, resulting in calls for further details from the government. For those in the process of applying for grant of probate or who do so in the near future, the most important thing is to seek both legal and financial advice before doing so to ensure you know exactly what you will need to pay before you can begin dealing with the estate left in your charge.

One of the most significant announcements made by the Chancellor Philip Hammond in the recent Spring Budget was the change to the amount of tax-free dividends that can be received by both company directors and shareholders. From April next year, the current amount of £5,000 will decrease to just £2,000. Whilst this is set to raise an extra £930 million of revenue for the Treasury in 2021/22, making it the biggest tax earner announced in the Budget, it has been criticised for demotivating growth and investment for businesses.

The current rules were introduced in April 2016 and mean that an individual receives a tax break on the first £5,000 of annual income from dividends. Anything above that is taxed at 7.5% for basic-rate taxpayers, rising to 32.5% for those on the higher rate and 38.1% for those paying additional rates of tax.

The chancellor has described his changes as addressing the unfairness of the current dividend allowance put in place by his predecessor, George Osborne. However, as many small traders pay themselves through dividends, alongside taking a salary from their company, the move has been seen as punitive towards those who have decided to strike out on their own in business.

The reduced tax-free dividend rate is also set to impact those who have reasonably sized stocks and shares investments outside ISAs. The Treasury estimates this to be around 1.1 million investors, approximately half of all people affected, and that on average annually they will each lose around £320.

However, there is a positive note for investors thanks to the increase in the ISA allowance. From April this year, the amount is set to rise from £15,240 to £20,000, and all dividends generated within ISAs will still be tax-free. By making smart use of the new allowance, most investors will be able to avoid feeling the effect of the changes to dividend tax.