Way back in 1973, then Chancellor Denis Healey promised ‘to tax the rich until the pips squeak’. Now it seems those just a bit better off than average are being made to squeal as they find themselves ‘piggy in the middle’. The credit crunch and recession have affected almost everybody, but the financial structure supporting middle-class family life appears to be under sustained attack.
Times change, of course, and everyone needs to adapt, but for those in the middle a lot has been changing and rather rapidly. The long-term career with a generous pension at 60, or perhaps a successful family firm, helped to instil a feeling of financial security. The climate for middle and upper management as well as the established small business owner is now more hostile and concern about a major loss of family income is felt more widely.
Various issues threaten family budgets. Although the recent national Budget softened the original formula, child benefit will still be reduced or stopped altogether for many middle-income families. On top of that, changes to thresholds will push many other middle-earners into the 40% tax band. These things are happening against a background of high, but currently easing, inflation and ultra-low interest rates that depress income from devalued savings.
It is getting more difficult for those who want to help younger generations of the family at vital stages in their personal development. For twenty years or more, school fees have been rising, often faster than inflation, making private education less accessible for some; now university tuition fees and associated costs have turned that into a double whammy. Helping the family’s academics to avoid the drag of student debt is getting harder.
Pay rent, save deposit
Everyone hopes that youth unemployment, from which graduates are not immune, will soon start reducing. However, even those who gain a degree and land a graduate-level job face an uphill struggle when it comes to housing. Saving for a deposit whilst renting a home seems like mission impossible. A parental contribution is often the only way, but older generations have their own problems looming, with higher living costs, a rising State Pension Age and potentially huge residential care costs. Can they now spare the money to give a helping hand?
All that may sound a bit negative, but we believe that the right kind of financial planning can help to deal with the erosion of wealth and security that some families are experiencing. It can be a balancing act of sorts, but whatever your situation and whether you are concerned about retirement, inheritance tax, providing for dependants or saving tax-efficiently, quality professional advice can help you plan for the future without leaving you short today. Do get in touch to see how we can help construct a plan that puts you firmly in control.