ISAs Future and Later Life Mortgages

This BBC podcast is supported by ads outside the UK. You just realised your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy. Just use Indeed. Stop struggling to get your job posts seen on other job sites. With Indeed Sponsored Jobs, your post jumps to the top of the page for your relevant candidates, so you can reach the people you want faster.

According to Indeed data, sponsored jobs posted directly on Indeed have 45% more applications than non-sponsored jobs. Don't wait any longer. Speed up your hiring right now with Indeed. And listeners of this show will get a $75 sponsored job credit to get your jobs more visibility at indeed.com slash P O D K A T Z 13. Just go to indeed.com slash P O D.

K-A-T-Z 13 right now. And support our show by saying you heard about Indeed on this podcast. Terms and conditions apply. Hiring, Indeed, is all you need. A Vivint home is a smarter home. Vivint lets you keep an eye on your kids from anywhere, so it's a smarter way to care.

Because Vivint adjusts your thermostat when it knows you're out, it's a smarter way to save. When Vivint guards your packages from Prowlers, it's a smarter way to protect. And when you can lock the doors and dim the lights for movie night with a single tap, Well, that's a smarter way to live. To get the smarter home system that just gets you, go to Vivint.com or call 1-855-4-VIVINT. Live intelligently.

BBC Sounds. Music, radio, podcasts. Hello, welcome to this Moneybox podcast. Long delays for some people who paid money to fill gaps in their national insurance records but find their state pension has not yet been increased. companies banned from sending out bills for water used more than 12 months ago, as energy suppliers are. And why are a growing number of people over 55 taking out new mortgages? But first, is the £20,000 a year limit for putting...

money into a cash ISA about to be cut. It's been at that level since 2017 and people put money into these individual savings accounts or ISAs because the interest earned is tax-free and between us we have nearly three hundred billion in cash ISIS. But there's been strong lobbying from the investment industry recently to change the rules to encourage people to invest rather than save. And that's fuelled speculation that the Chancellor, Rachel Reeves, would cut that.

£20,000 a year cash limit, perhaps, to just £4,000. That's less than it's been since 2009. Well, in a statement to Moneybox, the Chancellor said that while it's important to encourage people to save, she wants to create what she calls... more of a culture in the UK of retail investing. Perhaps harking back to the share-owning democracy of the previous Iron Lady, Margaret Thatcher. And she might do that, perhaps, by encouraging people to use their tax-free ISA allowance to invest in the economy.

rather than squirrel it away in savings accounts. Well, listeners Teresa and Graham told us they're worried about these rumours. I've been putting money away in ISIS now for, I would say, at least...

10 years. We put it in there and then we can forget all about it, just in a safe place. And the biggest thing is we're not paying tax on it. It's the first time I've ever contacted a program. I just felt that It would help other people as well who probably are in the same position as me, not wanting to switch from a cashier to stocks and shares one because we're elderly and we only want to tie up our money.

for one year at a time in a fixed rate and also because I don't understand stocks and shares and I don't really feel that I want to start now. I was perturbed by a newspaper headline that the Chancellor is considering reducing the ISA allowance to £4,000. Rachel Reeves, in the autumn statement, froze the limit until April 2030. Surely... There should be no change but a few months later hitting those building a retirement fund. What do the ISA providers think?

I really hope this gets knocked on the head. Well, they're not the only ones concerned. Recently, the chief executive of the Building Societies Association wrote to the Chancellor asking her to ignore calls to put curbs on cash ISA savings.

Let's talk now to Andrew Gall from the Building Societies Association, where he's Head of Savings and Economics. Andrew Gall, ISAs have been a great success, haven't they? Hundreds of billions of pounds in them. But is the balance between cash and shares wrong? We would say it's in the right place and it should be maintained. And one of the reasons Cash Ice has been so popular is that they offer something for everybody. So whether it's the rainy day savings or for the deposit for a house.

when you need to know the money will be there when you need it or for people in retirement who don't want to be exposed to the stock market. So there's lots of reasons why people value cash ices and there's 18 million off them. They also form a really important part of funding loans that go to the UK economy already. So they do support growth through banks and building societies. Yes, but the average balance in a cash ISA is what, about 30?

£13,400, and that's the total in there. Reducing it from £20,000 a year to £4,000 isn't going to affect many people, is it? Because most people, putting £4,000 in would be a bit of a dream. As I was saying, there's different purposes that people use cash aces for. And for those reasons, such as saving for the house or a wedding or when you're in retirement and have larger sums or want to protect your money from the stock market.

cash rises have been really useful and our research shows that 90% of cash rises savers don't want to take risk with their money and we think that rather than restricting consumers choice it would be better to inform and educate savers about the pros and cons of investments and ensuring they understand the risks involved to encourage if you did want to encourage investment

but to keep the limits where they are. Now, building societies are known for cash savings, obviously, and they don't often sell investment ISAs. Are you just trying to... promote them and protect yourselves rather than your customers. No, they're a really important part of the savings landscape. I think, as you said, they've been around since 1999 and are well established and they form an important part of the savings market in the UK.

the money saved in cash isis is not just sitting in a vault it's used by building societies and by banks to fund loans to households and businesses and for building societies it's used to support mortgage lending especially to first-time buyers and so

If there is a big reduction in the ISA limit, it could make loans more expensive and harder to come by. And we know the government wants to support home ownership with its goal to build 1.5 million new homes. Yes, it does. It also wants to support business though, doesn't it?

And it wants people to invest in shares because they're invested in companies and business and growth. Cash savings to some people seem a bit like dead money. And of course, the Chancellor wants us to be more like America, where people are more invested in shares than cash. Yes, we know from the figures from the Investment Association that...

just moving from cash to stocks and shares wouldn't necessarily lead to an investment in the UK. Just 11.5% of funds are invested in UK equities at the moment. Just requiring a shift from cash to stocks and shares doesn't necessarily mean that UK growth would be supported. So it might all go abroad. I mean, do you think cost plays a part? The Treasury estimates this year ISA tax relief would cost... £9.4 billion.

I'm sure that is part of the calculations as well. But that money goes to consumers and they can use that to spend in the economy and help to boost the economy that way. And just briefly tell us if there are changes, they could be announced on the 26th. of March, what I call not a budget, though it practically is one I think, would change happen at once or would it happen from the start of the tax year, the 6th of April, very briefly?

We think it would be complicated and difficult to introduce as quickly for the 6th of April. So we think it would take some time and there would even be some consultation, hopefully, and some impact assessment to show that how the... growth in the economy will be affected by this change. Andrew Gawle of the Building Societies Association. Thanks.

Now, some listeners have been experiencing delays after trying to boost their state pension by filling old gaps in their national insurance record. We recommended doing that a few weeks ago because at the moment a window is wide open for people under pension age and those already...

on the new state pension to fill gaps in their record as far back as 2006. But in less than a month, that wide window will be a very narrow one, only allowing people to go back six years. Already, the government says 68,000 people... have topped up more than 200,000 years of gaps online. And earlier this week, it did make a small concession. That wide window will still close on April 5th, but people who at least take the first step by then will be able to sneak back.

and fill those old gaps. Now more on that in a moment. But although the process works well for many, others are telling us that they've paid their money and then waited weeks, even months, with no change to their state pension. Pauline is already claiming her state pension. Back in December, she hoped to boost it by filling some missing national insurance contribution years. They seemed to update their records quite quickly. It showed that the gaps had been filled in.

And as far as I know, it then gets sent over to the pension service. And I've heard nothing since. So I'm now 11 weeks when I paid HMRC and I still haven't heard anything. I did phone the pension service a couple of weeks ago and he said, oh, well, it might be another four weeks, but who knows? My pension should be due to go up by £31 a week. That's not an inconsiderable sum.

And obviously that will go up again with the percentage increase in April. But it's the whole rigmarole of paying and then the delays. And the two systems, Pension Service and HMRC, are just not joined up, it seems to me, and they need to be. Well, we contacted HMRC and the Department for Work and Pensions about Pauline's pension and a few days later she received a letter from the Pension Service confirming...

her new state pension amount. Hers wasn't the only case the department quickly sorted out when we contacted them, and the government told us that high volumes mean people may not receive confirmation until after the April 5th deadline, and cases do take between five days and eight days. eight weeks depending on how they pay and how complex their case is. Listening to all that is Sir Steve Webb. He was Pensions Minister until 2015 and is now a partner with pension consultants Lane Clark Peacock.

So Steve, Pauline is one of the few listeners we've heard from who've paid to fill their gaps but are waiting. Is there a problem with delays that you're aware of? Very much so. There are two steps to the process. One is you pay the money and HMRC update your national insurance record. And I've been hearing cases of people waiting weeks or months to see a change in the national insurance record. And then the second step is HMRC. So notify.

the Department of Work and Pensions, that your NI record has changed. And DWP then recalculate your pension or your forecast. And again, we hear sometimes of long delays on that as well. And so sometimes people are chasing the wrong bit of the system. So DWP only act when the NI records change.

So if the NI record hasn't changed, it's HMRC you have to chase. Yes, and Pauline talks about a rigmarole and says that two different departments involved, as you've just confirmed, and they don't communicate well now. It's a while since you were pensions minister, but is that a problem?

It is. I mean, in a rational system, you'd have one person handling this once, taking the NI, amending the record, and then updating the pension forecast as well. But sadly, HMRC comes under the Treasury, Pension Service comes under DWP, different departments.

different ministers and this is how it's been for decades and you know they've obviously decided it's too much trouble to change it yes and if people do suffer these delays i mean like pauline and some others we've heard of will everything be backdated they're not actually going to lose any money, are they?

That's right. So as long as the money has been received by the government, then when they finally get around to updating everything, you should get the money back to when it was in the system, not when they get around to doing the calculations. So obviously you've handed the money over, you're losing the interest.

on that you've got the frustration but in principle you will eventually get the money back had it been done instantaneously. Yeah still frustrating though if you've paid three or four thousand pounds and you've got a pension it's not going up. Now just remind us because this It can be complicated. Who might have gaps they need to fill and how do they know if it's worth even filling them? Because some are not worth filling, are they?

That's right. I mean, some obvious examples are people who retired early. So perhaps you drew a public service pension at 60, don't get your state pension until 66 or 67. So you've got years of gap there. And if you're short of a full new pension, that...

might be one group who can fill those years or perhaps you are self-employed had erratic income in your professional career so there were years when you didn't make enough money and pay an eye so you can go back and fill those gaps so there are various reasons you can have gaps but you do have to

check that it improves your situation. It might seem perverse that you could pay a year's NI and it make no difference, but that is a feature of the system. So you should never just send them a check. You should always check either on the HMRC app or by phoning up the future pension centre.

Yes, because you need 35 years. And of course, most people work for a lot more than that. So some of them don't really count. And you mentioned an app and you mentioned the HMRC website. Can it all be done online? And what is this app? that you can do it with. One relatively recent improvement is that before things change, you had to phone the DWP, speak to someone at the Future Pension Centre, talk it all through with them, then phone HMRC for an 18-digit code, then you could pay the money.

And now they've created an HMRC app you can have on your phone or you can access it through gov.uk. And you can see on there which years are gaps, how much they'll cost to fill, what it will do to your pension, and you can pay through that process. So if that works for you.

that's great that's streamlined um if you can't use the app and it doesn't apply to everybody so self-employed for example you probably do still need to speak to somebody and obviously the deadline's approaching yes and i mentioned that it's in the past it's been extended

few times when it did get very busy. No sign of that happening. But as I said, there was a softening of the deadline with what the DWP calls a new online tool. So you can make the top up even after the deadline as long as you've done something first. that you have to do.

So the crucial thing is that the Future Pension Centre on their website on gov.uk, the contact Future Pension Centre, it actually says there, look, we've got lots of people calling. You may struggle to get through. Request a call back. And you click on the link.

in your details and submit it and then you should get a confirmation that you're due a call back which which will almost certainly be after the 5th of April but provided you've gone through that process and they suggest you take a photo of the screen to prove you've done it then when eventually they call you back in April May June

You can then make the payment and that still counts, even though you're past the deadline. Right. So as long as you make that, you go online and you ask for a call back, you've done it. But they say, take a photo of the screen and it could be as long as June. But anyway, it will happen and it will be back.

dated so steve webb of lane cark peacock thanks and as he said you can find out more gov.uk and search future pensions center could be well worthwhile now as we've reported on moneybox recently

Electricity and gas suppliers are not allowed to send out a first bill for energy used more than 12 months ago. If they do, the bill doesn't have to be paid, though many of you have told us they're still doing it. But what about other utilities? Many listeners have been asking us this. Hi Moneybox, my name's Steve Mackinder from Norfolk. After listening to a recent Moneybox featuring the phenomenon of energy companies backbilling, I wondered if it was illegal for water companies to backbill too.

Many thanks. Well, Dan Whitworth has been leading our coverage on backbilling and, Dan, are water suppliers also covered by these backbilling rules? Well, the very short answer, Paul, is no. I've contacted the water regulator, that's off-watch, to find out the exact rules. The longest water suppliers can backdate bills is six years, so that's the same as it normally is for any debt. Well, that's a very short and clear answer, but returning to energy bills, Dan...

Steve says back bills are illegal. Are they? So energy-backed bills are in breach of the regulator Ofgem's licence conditions if they're sent out after 12 months. And Ofgem can impose financial penalties on companies that engage in this practice. But it isn't a criminal offence, no.

Secretary of State for Energy, Ed Miliband, did call it unlawful. And there's more on the energy-backed billing story coming up. Yes, as we reported, Ed Miliband has written to Ofgem demanding action and its chief executive and a government minister... will be quizzed by an influential committee of MPs in just a couple of weeks. We will, of course, bring you a special report from that meeting.

Thanks, Dan. Interesting times. And if you get a new bill for energy, not water, but energy, used more than 12 months ago, don't pay it. Contact your supplier, that's very important, and tell them it breaches licence condition. 21BA. And you want it cancelled. Those are the magic words. And if that doesn't work, complain to the Energy Ombudsman.

More than 35,000 people aged 55 or more took out new mortgages in the last three months of the year, borrowing a total of £5.6 billion. And those new figures were released by UK Finances recently. and show an increase of nearly 30% in the same period in 2023. Now, why are so many older people borrowing so much when there's not so much time to pay it back? Dan Whitworth's been delving into the numbers of this too. Dan.

Well, these figures, Paul, are made up entirely of people who are 55 or over, and the vast majority of these new loans are what most people would consider to be, quote, normal mortgages. They're just taken out by older people. One of the reasons behind that big increase you mentioned...

is the fact that late last year, interest rates started heading down. So borrowing started, albeit slowly, to get cheaper. Now, one of the people getting a new, later-life mortgage is Kerry. He's 68 and is still working as a barrister. But initially... struggled to find a lender after his 20-year interest-only mortgage came to an end recently. Realistically, I suspect in 10 years' time the house will be too big for my needs.

I won't be able to maintain the garden and the upkeep on the house, my wife likewise. And so we will have to downsize. In the 20 or so years we've lived there, the value of the property is... appreciated considerably so that in 10 years time were we to sell there will be ample equity to enable us to downsize and pay off the mortgage.

Because Kerry's still working and hopes to do so for several years, yet meeting the payments of his new 10-year interest-only mortgage should be fine. Someone else I've spoken to is Karen, who's 66, who, along with her 80-year-old husband, has just signed on for a... 40-year fixed repayment mortgage on a new bungalow. Now, the mortgage is for £150,000, nearly £50,000 of which is providing a financial cushion for them as they get older.

We know exactly what we've got to pay out each month. We know we're set for the rest of our lives, that we haven't got to worry about any more borrowing. And we know that the property will care for and the family, when we eventually do go. will pay off the mortgage that's left and they will be able to do with the money whatever they like

Everyone would expect the time you get to my age, 66, as you say, the mortgage will be paid off. But with the current climate and how electricity is going up and all the utilities are going up, then having a mortgage like this, you've actually got that bit of extra. in your bank to say if i get into trouble here it is

Karen, ending Dan's report. Well, with me in the London studio is Louise Stevens, a later life mortgage specialist at the brokerage firm Coraco. Louise Stevens, how can you get a 40-year mortgage when you're 66 and your husband's 80 and you'll never pay? Good question. So generally pension, so pension income, you know, in Karen's respect, it's pension income. Lenders will also...

lend, you know, for working income now. They've extended the age for working income. And what about paying it off though? Because, you know... But the best will in the world, 66, you're probably not going to live 40 years. If you're 80, you're certainly not going to live 40 years. When is it paid off? The mortgage will be paid off when the person passes away.

you know, that you don't, it's not a condition of the mortgage to have, you know, life insurance. You know, we do recommend that people, you know, seek that, but it would just be paid when, you know, when you pass away and, you know, if you...

Well, we suggest that you speak to your beneficiaries as well to ensure that they're aware you have a mortgage. Yeah, it could be a bit of a shock. Of course, I always say to people, you don't have to do that. It's your money. You can do what you like. But it would be a bit of a shock if you hadn't told them.

mortgage to pay off the house when you finally die. And this £50,000 extra, was that because they borrowed more than they needed to buy the house so they still had some equity left and they could keep that and use it to do the things they needed to do in old age? Yes. So they needed work done to the property, you know, make reasonable adjustments to the property and home improvements, energy efficient home improvements as well to bring down, you know, the cost of living.

the mortgage is affordable and, you know, that's within their payments. You know, you can borrow what you need to do that. Yes. So that's a useful cushion, as Karen said. What problems, though, do people bring to you? You get these customers. What problems do they bring that a later life mortgage solves?

One of the biggest problems at the moment are people coming up to the end of their interest-only mortgages. Well, like Kerry, in fact. Exactly, yeah. The peak of that is actually 2032, so we're seeing an increasing number of people coming to the end. to their interest-owning mortgages. You know, if you can't pay those, you know, you need a solution.

Extending the mortgage term, you know, that's one of those. Yes, because, of course, with an interest-only mortgage, you've been paying the interest, but you haven't paid anything off the capital. So at 60 or 70, you might have a big debt you have to pay. But you can re-borrow at that age. because that used to be difficult, didn't it?

Yeah. And, you know, the earlier you speak to an advisor about that, the better. You know, if you're coming up to the end of your mortgage term, you know, even five years and you know that you aren't going to pay that, speak to an advisor early because there's so many. solutions now. You know, there's so many things that you can do to make a plan and there's so many options. So the mortgage market's really changed, hasn't it, for these people, older people. Is there a downside though?

At that age, are you going to be paying higher interest rates than younger people? Not necessarily. So there are many high street lenders now who have also looked at the fact that more people are working longer now. If you are in a manual role, as an example, they now lend, they've extended out the...

the working age. So you're not necessarily compromising on the interest rate, no. And just briefly, listeners out there, I'm sure, are thinking, gosh, I didn't know that later life mortgages were even possible. If they want to consider one, very briefly, what should they do? Speak to an advisor, get a second opinion and just speak to an advisor early. It's never too soon to get advice.

Louis Stevens from Corico, thanks very much. Of course, the Moneybox podcast is devoted not just to later life listening, but young listening, even midlife crisis listening. And you can stay ahead by listening to the show. first as it goes out live on BBC Radio 4 at midday on Saturdays. Or subscribe, of course, to this podcast and never miss a show.

And if you wonder how listeners get on the show, well, they usually email us with their financial hopes, fears, worries, comments. You can also send us a message or a voice note on WhatsApp. We read and listen to them all. And I have to say, emails have been very busy with people. I don't think any of you are in favour of the cashiser limit being cut and people also complaining that it's very hard to work out if you're going to get a full pen.

or not and we've even had one from William just come in on later life mortgages so keep them coming moneybox.bbc.co.uk as I said now in this podcast the reporter was Dan Whitworth researchers Emma Devlin and Joe Krasner studio manager Pat Our editor is Jess Quayle. I'm Paul Lewis and this was a BBC News Money and Work production for BBC Sounds. And now, can I recommend this? I've really enjoyed it. I'm Helena Bonham Carter and for BBC Radio 4.

I'm back with a brand new series of history's secret heroes. And he tells her that she will be sent to France as a secret agent. She will work undercover. And if she's caught, she's going to be shot. Join me for more stories of unsung heroes, acts of resistance, deception and courage from World War II. Subscribe to History's Secret Heroes on BBC Sounds.

At the BBC, we go further so you see clearer. Through frontline reporting, global stories and local insights, we bring you closer to the world's news as it happens. And it starts with a subscription to BBC.com. from the BBC. Find out more at bbc.com. A Vivint home is a smarter home. Vivint lets you keep an eye on your kids from anywhere, so it's a smarter way to care. Because Vivint adjusts your thermostat when it knows you're out, it's a smarter way to save.

When Vivint guards your packages from Prowlers, it's a smarter way to protect. And when you can lock the doors and dim the lights for movie night with a single tap, well, that's a smarter way to live. To get the smarter home system that just gets you, go to Vivint.com or call 1-855-4-VIVINT. Live intelligently.