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There have been many changes announced this year that come into force in 2022. Here are some to watch:
1. Interest rate meeting
Interest rates went up as 2021 came to an end. But while mortgage and credit card rates are likely to rise in the wake of any Bank of England rise, the impact on savings will be far less striking. It has been predicted that a number of banks may not pass rates on at all, whereas some may only pass on a fraction of the rise.
Another rise is expected in early 2022. Although an exact timetable hasn’t been decided yet, rates are likely to be higher by the end of 2022 than they are now.
2.New energy price cap
Energy regulator Ofgem is set to announce a new energy price cap in February 2022, to be introduced on 1 April. This increase is likely to reflect higher wholesale prices and may result in annual bills rising by hundreds of pounds. The current cap is £1,277.
3. Inflation expected to peak
The early forecasts predicted inflation would peak in April, with the assumption that warmer weather would impact on demand for energy, and that by then some of the supply chain problems would have eased. It is still too soon to tell whether this will be enough to stop inflation, however.
4. Higher national insurance contributions
There will be a UK-wide increase of 1.25% in national insurance contributions and dividends tax in April. Known as the health and social care levy, it will be introduced initially to help reduce the NHS backlog and, in the longer term, to fund social care. Prime Minister Boris Johnson said that this levy will “share the cost as fairly as possible between people and businesses”.
5. State pensions rise 3.1% with the double lock
For one year, the government will break the earnings link in the state pensions triple lock to avoid reflecting a pandemic-related bounce-back in earnings of an expected 8% to 8.5%.
6. Flat fee charges banned on small workplace pensions
Many savers pay a percentage fee, but those with small pension pots whose provider charges a flat fee can see the entire value of their pension eroded. The regulatory tweak will help avoid this possibility by banning flat fees on qualifying pension pots worth less than £100.
7. Pension Wise nudge
From June, people first accessing their retirement income will be offered an appointment with government guidance service Pension Wise. It is hoped that this will give people vital independent support when they're considering the best way to take income from their pension.
These are just a few of the changes happening this year. What do you think will impact on the pensions industry the most?