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COVID Savings (and Money after the Pandemic)

What will people do with "COVID savings" after the pandemic is over?

  • Use the money for more expensive things/experiences.

    Votes: 44 52.4%
  • Keep the money as a security leeway/writte off debts.

    Votes: 39 46.4%
  • Invest the money in savings/retirement plans.

    Votes: 27 32.1%
  • Invest the money in financial products or start a small business.

    Votes: 6 7.1%

  • Total voters
    84
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ExRes

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The one that I think might be more relevant is the substantial hike in the Insurance Premium Tax rate. From 5% around a decade ago to 12% now. Lots of people buy insurances of various types and all now pay more just in tax on it.

Nothing to do with Covid of course, the GOV.UK site shows that the rate rose to 12% on 1 June 2017
 
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bramling

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That's true. I think it's a less likely scenario than exceeding the Pension Lifetime Allowance, which used to be £1.5m but was cut in stages, finally £1m in 2016/17. Whilst it was subject to inflationary increases thereafter, it hasn't been increased this latest tax year.

£1m might sound like an enormous pension but it's only enough for an income of around £28k if you take an inflation-linked annuity. Yet if you exceed it, any excess you take as a lump sum is subject to a whopping 55% tax rate (excess taken as income is subject to a 25% rate, which isn't quite as bad, but still!).

Neither of these situations are ones that many people face, however with the amount that the government has spent over the last 15 months, it's entirely foreseeable that there will be some significant tax increases across the population.

The example I gave was the thin end of what's going to be a very thick wedge. And whilst you're right this isn't necessarily something many people would experience, it's nonetheless a completely plausible hypothetical example of something *some* people will likely encounter. Then there's the freezes on allowances, again something which will affect specific people.

All this will be rather more significant if, as some predict, inflation soars. The government inflating their way out of this is one way of passing the cost onto the population indirectly.
 

Hadders

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That's true. I think it's a less likely scenario than exceeding the Pension Lifetime Allowance, which used to be £1.5m but was cut in stages, finally £1m in 2016/17. Whilst it was subject to inflationary increases thereafter, it hasn't been increased this latest tax year.

£1m might sound like an enormous pension but it's only enough for an income of around £28k if you take an inflation-linked annuity. Yet if you exceed it, any excess you take as a lump sum is subject to a whopping 55% tax rate (excess taken as income is subject to a 25% rate, which isn't quite as bad, but still!).

Neither of these situations are ones that many people face, however with the amount that the government has spent over the last 15 months, it's entirely foreseeable that there will be some significant tax increases across the population.
I agree about pensions. Someone with a pension pot of £1 million is often compared to a fat cat but that's far, far from the truth. Many people with relatively modest pensions are going to get absolutely stung by this.
 

westv

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£1m might sound like an enormous pension but it's only enough for an income of around £28k if you take an inflation-linked annuity.
Most people won't be doing that though as annuities are currently very expensive..
 

Watershed

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Most people won't be doing that though as annuities are currently very expensive..
The main alternative is pension drawdown - and the 'safe rate of withdrawal' is reckoned to be approximately 3%. So something around the 3% mark is about as much as you'll get out of your pension unless you're willing to take significant risks, or defer taking it.

I agree about pensions. Someone with a pension pot of £1 million is often compared to a fat cat but that's far, far from the truth. Many people with relatively modest pensions are going to get absolutely stung by this.
It also disproportionately affects those who have saved in defined contribution schemes - as, for Lifetime Allowance purposes, defined benefit pensions are valued at 20 times their annual payout, which implies an unrealistic 5% return (you'd never get that much from an annuity or drawdown).

This penalises those who have provided for themselves rather than relying on future generations, as with the 'Ponzi scheme' that DB schemes effectively are.
 
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david1212

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Several posts above refer to pensions and savings but not the rate of return.

While as a guide the FTSE 100 is hovering around 7000 so a recovery from 12 months ago it is ~500 below 2019 then there is inflation both 2019 - 2021 and what it might be over the next few years.

Unless locked away in a fixed account cash interest rates are at best around 0.6%. Even at the the current low inflation rate this is a loss and I will be surprised if it does not creep up now every month. I have a cash ISA that matures in the next few weeks to re-invest. My purpose for this is to cover the value of state pension between when I hope to retire and when i receive the state pension. I do not want to risk this in stocks & shares but do also have some stocks and shares investments.

I will have my annual personal pension statements soon ( I do not have a occupational / workplace pension other than second state pension ). After deducting contributions I am wondering what the gain or loss compared to 2019 will be.

Hence I'm hesitant to spend significantly on items or a holiday while on the other side of the fence unhappy about seeing in real terms investments devaluing.
 

Hadders

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The FTSE headline figure is only a small part of the factor. A good investment manager will always out perform the FTSE and you also need to factor dividends into the equation.

My stocks & shares ISA is around 8% up on where it was in 2019.
 

westv

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The main alternative is pension drawdown - and the 'safe rate of withdrawal' is reckoned to be approximately 3%. So something around the 3% mark is about as much as you'll get out of your pension unless you're willing to take significant risks, or defer taking it.
But drawdown does have advantages. The "pot" remains yours. You don't get a reduced income if you want a partner to keep the benefit. You can vary the income as required. Plus others.
 

YorkshireBear

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I'm learning some things on this thread! I should probably look at my pension all I know is I contribute more than I have to and I've set it to the sustainable and environmental based investments.

In terms of savings we have massively increased our savings with cancelled holidays and less social activity and also my wife getting pay rises just before and during covid due to people leaving and her having to step up. But due to the interest on savings and the amount we have saved we have actually started putting over payments on our mortgage instead to reduce the term and interest as a better long term option. Seen as one thing we are saving up for is moving to a bigger place out of the city it felt the right thing to do.
 

birchesgreen

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Between May and the start of this year I was on 2/3 hours so didn't save owt (though with reduced expenses was fine), since I've returned to full pay I've bought a new MacBook, a fireplace and started a new N gauge layout with a jolly little Crompton. Probably it for now though!
 

Giugiaro

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Well, I've been having a dilema over the past years, and now even more given the amount of money I've gathered in a single year:

I have a 13 year old FIAT Panda, petrol, with just 58.000km in it (36.000 miles).
While I can easily afford the new Dacia Spring (and save a lot of money from making the switch) it also doesn't feel particularly good to get rid of a car with so little mileage and no issues whatsoever.
 

VauxhallandI

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Well, I've been having a dilema over the past years, and now even more given the amount of money I've gathered in a single year:

I have a 13 year old FIAT Panda, petrol, with just 58.000km in it (36.000 miles).
While I can easily afford the new Dacia Spring (and save a lot of money from making the switch) it also doesn't feel particularly good to get rid of a car with so little mileage and no issues whatsoever.
I know what you mean but I have a car with 48,000 miles on it and I've spent more on it than all my previous bangers! (90K plus)

Any savings we have made are going into the moving house pot which could be stamp duty or lower mortgage
 

Dai Corner

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Being retired I fall into the 'no drop in income and nothing to spend it on' category. I'll be catching up with the experiences I've missed, outside the peak holiday times as far as possible.
 

ExRes

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Being retired I fall into the 'no drop in income and nothing to spend it on' category. I'll be catching up with the experiences I've missed, outside the peak holiday times as far as possible.

Same here, what money we are spending is being directed, wherever possible, at local businesses rather than the big boys even though it's costing more, local optician for example, one area we certainly won't be wasting money on though is foreign holidays involving travelling in an aluminium tube complete with recycled air
 

Arglwydd Golau

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Same here, what money we are spending is being directed, wherever possible, at local businesses rather than the big boys even though it's costing more, local optician for example, one area we certainly won't be wasting money on though is foreign holidays involving travelling in an aluminium tube complete with recycled air
Me too! It's the way to go...I help run a small local High Street shop and the support that we have had during the last year has been terrific, it seems that there are a significant number of people who are genuinely trying to help local traders
 

VauxhallandI

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Same here, what money we are spending is being directed, wherever possible, at local businesses rather than the big boys even though it's costing more, local optician for example, one area we certainly won't be wasting money on though is foreign holidays involving travelling in an aluminium tube complete with recycled air
I thought the airline industry said they had the cleanest air due to their HEPA filters etc?
 

nlogax

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I thought the airline industry said they had the cleanest air due to their HEPA filters etc?

Indeed. Plane HEPA filters are hospital grade and 99.99% effective at trapping germs. The whole 'getting sick because of recycled air' thing is a bit of an old wives' tale.

You're more likely to get something from being in direct and extended proximity to someone than you are from breathing in something expelled from a passenger ten or fifteen rows way.
 

VauxhallandI

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Indeed. Plane HEPA filters are hospital grade and 99.99% effective at trapping germs. The whole 'getting sick because of recycled air' thing is a bit of an old wives' tale.

You're more likely to get something from being in direct and extended proximity to someone than you are from breathing in something expelled from a passenger ten or fifteen rows way.
So all fine in Business class for sure 8-)
 

Watershed

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I've no doubt they would, but is that confirmed independently by the non-airline industry? I'd be more likely to believe it then
It's not really down to the airlines, it's a standard part of the HVAC system on modern aircraft. There are plenty of articles and studies about it; you're very unlikely to catch Covid (or any other disease) on a flight; if you do, it would probably be from someone sitting adjacent to you.
 

Mojo

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The concept of "accidental savers" caused by government restrictions introduced in an attempt to stop the spread of the virus seems to me a very middle class pursuit.

I can think of many working people who have seen their costs shoot up & their incomes flatline or even fall. A train I regularly catch to work (the first train of the day, leaving its origin station about 05.10) is regularly the busiest train I travel on; for much of last year this train was subject to a planned cancellation meaning that travellers would have had to have forked out for alternative transportation as the next one would get them to work too late.

There would also have been the reduction in overtime and extra payments for workers that were reduced as a result of fewer customer numbers or the reduction in activities.
 

Bantamzen

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I've no doubt they would, but is that confirmed independently by the non-airline industry? I'd be more likely to believe it then
When you say "non-airline industry", who exactly do you mean? Suppliers of said filters & software I'm sure would be able to confirm sales & maintenance of them on planes, but who else are you expected to confirm? There is a wealth of info on there on what filters are used, how they are used, how air is mixed and distributed in cabins, but for what should be obvious reasons, airlines don't allow any old Tom, Dick or Harry to wander up to commercial aircraft and poke about.
 

kristiang85

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I think I read recently that - GLOBALLY - only 44 cases of COVID have been attributed to transmission on an aircraft?
 

RuralRambler

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The concept of "accidental savers" caused by government restrictions introduced in an attempt to stop the spread of the virus seems to me a very middle class pursuit.

I can think of many working people who have seen their costs shoot up & their incomes flatline or even fall. A train I regularly catch to work (the first train of the day, leaving its origin station about 05.10) is regularly the busiest train I travel on; for much of last year this train was subject to a planned cancellation meaning that travellers would have had to have forked out for alternative transportation as the next one would get them to work too late.

There would also have been the reduction in overtime and extra payments for workers that were reduced as a result of fewer customer numbers or the reduction in activities.
Not to mention the 3 million self employed who've been excluded from the Covid support, some of whom have had to use up their savings and sell belongings just to survive and some have lost their businesses. It's certainly not everyone who'se managed to increase their savings over the past year.
 

ExRes

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When you say "non-airline industry", who exactly do you mean? Suppliers of said filters & software I'm sure would be able to confirm sales & maintenance of them on planes, but who else are you expected to confirm? There is a wealth of info on there on what filters are used, how they are used, how air is mixed and distributed in cabins, but for what should be obvious reasons, airlines don't allow any old Tom, Dick or Harry to wander up to commercial aircraft and poke about.

I would assume, and hope, that the aircraft manufacturers and equipment suppliers have some sort of standards imposed on them by, for want of a better description, 'Health and Safety' that they are held to, I'm sure even the most macho of passengers would have some concerns if not and were placing their entire trust in the likes of Boeing and their suppliers .......
 

Bantamzen

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I would assume, and hope, that the aircraft manufacturers and equipment suppliers have some sort of standards imposed on them by, for want of a better description, 'Health and Safety' that they are held to, I'm sure even the most macho of passengers would have some concerns if not and were placing their entire trust in the likes of Boeing and their suppliers .......
We are drifting off-topic here, but I'm unsure what standards are set but its likely to be high given the potential for airlines to get a lot of bad publicity for poorly performing ones (above and beyond the usual social media old wives tales). Also modern aircraft cabins fully replace the air around 20 times per hour, and that cabin air enters and the ceilings and is removed at floor level giving a generally top-down airflow.
 

Giugiaro

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Not to mention the 3 million self employed who've been excluded from the Covid support, some of whom have had to use up their savings and sell belongings just to survive and some have lost their businesses. It's certainly not everyone who'se managed to increase their savings over the past year.
I hardly believe folks like me, who actually got savings in excess during the pandemic, will make a noticeable difference on the economy afterwards.
This without counting the possibility of those savings not even getting injected back in the economy, as this thread's poll seems to suggest.

Unfortunately a lot more people have been negatively affected by the viral crisis, and won't be able to do much afterwards.
If we go with recent trends like in post-Troika Portugal, people will eventually hold on to whatever money they can save as a result of an ever increasing scepticism over the actual stability of the economy, no matter their income.
It also doesn't help that lifelong investments like housing have become prohibitively expensive, to the point where a simple flat with no bedrooms can cost over €100k.
 

greyman42

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The FTSE headline figure is only a small part of the factor. A good investment manager will always out perform the FTSE and you also need to factor dividends into the equation.

My stocks & shares ISA is around 8% up on where it was in 2019.
You are correct. The FTSE is top heavy with mining and oil companies. Anyone who was able to invest through a good financial adviser will have done very well over the last 12 months. I achieved 23%.
 

westv

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You are correct. The FTSE is top heavy with mining and oil companies. Anyone who was able to invest through a good financial adviser will have done very well over the last 12 months. I achieved 23%.
Don't forget 12 months ago the FTSE was starting to climb out of a 32% drop.

I hardly believe folks like me, who actually got savings in excess during the pandemic, will make a noticeable difference on the economy afterwards.
This without counting the possibility of those savings not even getting injected back in the economy, as this thread's poll seems to suggest.
The BBC website was reporting earlier today that the economy was expected to grow at its fastest rate for 70% years.
 

Crossover

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In all honesty I was pleased the sensor issue was found, as MPG has shot up, the car is running better, and with that issue it possibly wasn’t doing the car much good. However sitting around not doing much doesn’t necessarily mean nothing deteriorates on cars, in fact I’d suspect the opposite.
I would agree. When a vehicle doesn't move much, things tend to degrade that otherwise may not have done
 
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