TOP STORY: INFLATION CREEPS DOWN – WHAT DOES IT MEAN FOR YOU?

Inflation (CPI – the most commonly-used measure) fell slightly from 3.8% to 3.6% in the year to October, according to the ONS.

It’s remained stuck at 3.8% for the past three months, so a dip is good news, as it means price increases are slowing down – but it’s still way above the Bank of England’s 2% target for inflation.

However, a drop in the rate could be what’s needed to convince the Bank to cut its base rate at its next decision in December, and that has an impact on your finances.

The base rate is used to control inflation and the economy – raising it makes saving more attractive and can lower inflation, while cutting it can make spending (mortgages, loans) more attractive, which stimulates the economy and can increase inflation.

What does this mean for me?

Homeowners / homebuyers: If you’re looking for a mortgage, it’s probably best to hang on as rate cuts could be on their way (although some lenders are already lowering rates, probably in anticipation of upcoming Bank of England cuts). 

Savers: If you’re a saver, keep checking you’re getting the best interest rate possible. And fix your rate if that works for your life and financial goals (i.e. you don’t need to get access to that money for emergencies). 

By fixing, you could lock in better rates before they start to fall. If you don’t want to be locked into a fixed rate, then there are still some excellent variable rates on offer. 

You can find our Best Cash ISA recommendations here and our Best Cash Savings Accounts recommendations here.

INVESTING INSIDERS LAUNCHES FREE PLATFORM MATCHING QUIZ

There are a lot of ‘best of’ lists out there, but in reality, different investors benefit from different platforms.

So, we’ve been scratching our heads, trying to figure out how to match everyone with the best platform for them and their needs – almost like a dating service.

So, regardless of whether you’re a cost cutter, or a stock picker, or a first timer, we’ve put together a quick quiz – it takes just one minute to complete – that lets you know what sort of investor you are, and which platform will best meet your needs.

You can take our quiz on our Best Stocks and Shares ISA page to find out what kind of investor YOU are and which platform might be best for you.

CHRISTMAS TREATS: PENSION CONSULTATION AND TARGETED SUPPORT RULES

The finance regulator, the FCA, is set to publish a widely-anticipated consultation ‘clarifying its expectations on pension transfers and consolidation’ during the week commencing 15th December, Investing Insiders understands. Happy Christmas!

In the consultation, we’re expecting to see how the regulator intends to deal with pension transfer incentives – where you get a cash bonus for switching pension providers. 

We think these are great for engaging people with their pensions, at a time when millions of people are under-saving for retirement.

But the watchdog recently expressed concern that some people may be switching their pensions solely on the basis of the cashback deal, without looking at the rest of the benefits of their pension.

It will also look at the wider pension transfers and consolidation market and will maybe introduce new rules to help it work better. 

The consultation is due to drop at the same time as the final rules around ‘targeted support’, a new type of group financial advice that pension and investment providers will be able to offer to customers. 

For example, they will be able to recommend that you should increase your pension contributions, based on how much other people in a similar situation to you are saving.

While it’s no perfect fix and isn’t comparable to full financial advice, the finance industry and government are hopeful it will help millions of people make better decisions.

We’ll be keeping an eye on these developments and will update you on what they mean and any changes that will impact you – find out here or via our live news page.

FSCS LIMIT TO RISE TO £120K FROM DECEMBER – WHAT DOES IT MEAN FOR YOU?

The amount of money held with a bank that is covered by the Financial Services Compensation Scheme (FSCS) is increasing by £35,000 next month, rising from £85k to £120k.

The FSCS is a sort of lifeboat fund that protects money you hold with financial firms, like banks or savings account providers. 

It means that if the firm you hold your money with goes bust, you’ll get your cash back.

The FSCS currently covers up to £85,000 per bank – so if you held that amount across two different banks, all of your money would be protected.

The increase to the limit is great news as it has not risen since 2017, and experts say it is long overdue. When you account for inflation, £85,000 in 2017 is worth around £114,255 today.

Are there any exceptions?

Yes – you may be covered for more than this if you have a ‘temporary high balance’. This limit will also increase from £1 million to £1.4 million from December.

This is where, for example, you are selling a house or receive an inheritance and temporarily have a large amount of money in one account. It will cover the higher limit for up to six months after the money enters your account.

Your money may NOT be covered if the firm you hold your money with does not meet the requirements. For example, payment firms like Paypal are not covered – so don’t leave large balances in these accounts.

You can ask your firm or bank if it’s protected by the FSCS, or check the general guidelines.

THIS WEEK ON THE INVESTING INSIDERS PODCAST: THE PENSION CRISIS YOU CAN’T IGNORE

In this week’s episode of the Investing Insiders Podcast, we’re joined by Dr Priya Khambhaita, head of research at the Pensions Policy Institute, to discuss the harsh reality of UK pension saving and how to make sure you have enough money when it’s time to retire. 

We discuss:

  • Why millions of us need to save more into our pension
  • Is the State Pension enough to rely on in retirement?
  • How to make sure you have enough money saved for a comfortable retirement
  • How to track down any lost or forgotten pensions

Email your financial questions to us at podcast@investinginsiders.co.uk and we might answer it in a future episode!

DEAL OF THE WEEK: WIN UP TO £25K FROM CAHOOT

Cahoot is offering customers cash prizes of up to £25,000 if they hold at least £2,500 across their Cahoot accounts.

You’ll be automatically entered if you have a combined balance of over £2.5k on 30 November and/or 31 December 2025. Fixed rate bonds aren’t eligible.

The prizes are:

  • 1 x £25,000 prize
  • 5 x £2,500 prizes
  • 50 x £250 prizes

The draw ends on 31 December and winners will be drawn in January. Prizes will be paid directly into your Cahoot account.

YOUR QUESTIONS ANSWERED: BY CLARE WEST

Every week we receive questions from readers, one of which our Finance Editor, Clare West, answers here.

This week, we’re answering: “I’ve never had a pension as I’ve been self-employed for most of my working life. I want to get some savings put away now. Is a SIPP a good idea for me?”

It’s great that you’re taking a step to start saving for retirement, but I want to quickly clear up a misconception here. Being self-employed doesn’t mean that you can’t have a pension.

Anyone can set up a ‘personal pension’ and start saving into it at any time, and while you won’t benefit from employer contributions, you will get ‘pensions tax relief’ – where the government refunds income tax into your pension.

There are two kinds of personal pensions – a regular Personal Pension (PP), or a Self-Invested Personal Pension (SIPP). The latter is what you’re asking about. 

The main difference between the two is that with a regular PP, your investments are largely managed for you, while with a SIPP, you have a much wider range of investment options and are more in control of where your money goes.

So, whether a SIPP is right for you depends on how comfortable you are with managing your own investment options. 

A PP may be more suitable for beginners who want a hands-off, low-maintenance option, while a SIPP may be better for more experienced and engaged investors who want to actively manage their own portfolio. 

SIPPs can be slightly more expensive than PPs because of the added features, so make sure to check you are happy with each scheme’s charges too.

If you’ve got a question you’d like Clare to answer, send a message to: hello@investinginsiders.co.uk

Jargon Buster

  • Tax relief: Where money you would have paid in income tax is added to your pension instead.
  • Budget: An event where the chancellor announces upcoming tax and spending changes by the government.
  • ISA: A savings or investment account where any interest or returns are tax-free.
  • FSCS: A compensation scheme that protects people’s money in the event a bank or regulated finance company goes bust.