Inflation, inheritance and the Pensioners' Revolt

For anyone who is feeling grumpy or has had a bad week, I have something for you. Just when you thought life in 2025 couldn’t get any more irritating, search up the new ‘Skyrider’ half-standing bike saddle-style airplane seat, and then imagine sitting/standing in one next to an irritating human on a hot runway, waiting for clearance in 40-degree heat. And then feel better about where you are right now!

Also feeling the heat is inflation, which stuck two fingers up at any downward trend and spiked to 3.5% in April, its highest rate for over a year. The main culprit was higher household bills as energy, media and water bills all jumped. Flights, meat and mineral water also went up in price and milk, cheese and eggs came down. So my financial advice is to drink wine and eat omelettes.

However, this increase in prices is still felt to be temporary. The Bank of England has said it expects inflation to peak at 3.7% in the summer, before falling back to its 2% target.

The impact of this on us (apart from higher costs at the tills) is of course interest rates. The consensus view was that we would see 2 further interest rate cuts this year (from the current rate of 4.25%), as economists became less worried about things over-heating. Some now think this is more likely to be just one additional cut. The next interest rate decision will be made on Thursday 19th June.

With rates looking likely to come down over the next 6 months, anyone with cash savings should be looking for deals now. Investec Save’s 90-Day Notice Saver is paying 4.64% and this rate would be locked in for up to 97 days after any interest rate change. Chip is paying 4.96% on easy access cash. And if you want a bigger name and a longer timeframe, NatWest and Virgin Money are both paying 4.31% for a one-year fix.

Another thing which is getting more and more people hot under the collar is Inheritance Tax (IHT). The full extent of the Government’s harsher rules was confirmed yesterday by news that HMRC took in £780 million in April alone from this most hated of taxes, which is estimated to hit 10% of all estates within the next 5 years.

Many of our older readers are re-thinking their pensions in light of this. Pensions used to be free from Inheritance Tax, but will be included from April 2027. We’re putting together some guides on this and will share in next week’s blog.

As for IHT, here’s a quick recap. Everyone gets £325,000 free from IHT and money left to a spouse or partner is exempt from any tax. And money from a property increases the IHT-free amount per person to £500,000 – this is because an additional £175,000 is known as the ‘residence nil-rate band’.

Here's an example. If one person dies and leaves money to their spouse, there is no tax to pay. On the death of the surviving spouse or partner, there is a maximum of £1 million, which can be passed on tax-free to the sprogs or grandkids. This is 2 x £325,000 plus 2 x £175,000, which is the allowance for the proceeds of the sale of any home. The big change for more affluent families is that pensions are now included in this calculation where they were not before.

This has prompted many who had been accumulating money in a pension to say "Stuff it!" and think about spending and also gifting.

The stock market is the best mirror of what people are thinking and doing. It’s surely no coincidence that the share price of major cruise provider Carnival was £15.10 in October last year, when the announcement was made. It hit £19 a month later in the Pensioners’ Revolt.

In other news this week, we’ve an updated piece on pensions for the self-employed who so often get sidelined or left out of the conversation. For many, concerns about costs are one deterrent to action. This week’s sponsors ii offer a DIY pension with a monthly flat fee of £5.99 for sums up to £50,000. If you want certainty and clarity about what you’d pay, you can’t get much clearer than this. Although NB: You will pay four quid to buy or sell a share or fund, so the set-up costs will be higher for the first month as you get up and running.

Have a great weekend, everyone. I have been swimming in the sea today, which is a lot warmer than it was in February! Today was the first day in 2025 that I stuck my head under water. Clears the cobwebs away!

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