‘Sour loans’ set Natwest on red alert
TAXPAYER-BACKED Natwest has sunk back into the red due to the coronavirus pandemic, chief executive Alison Rose is expected to say at its results on Friday.
The bank, formerly known as Royal Bank of Scotland, is likely to report a net loss of £748.7million for 2020, compared to a profit of £3.1billion the previous year. Natwest is thought to have set aside more than £3.5billion to cover loans going sour due to the pandemic, pushing it into the red.
The bank is still 61.9 per cent owned by the Government and it needed nine years and radical restructuring before it became profitable again in 2017.
Barclays reports its results on Thursday and analysts believe it will say that its 2020 net profits more than halved to £1.2billion, due to it having to take coronavirus impairment charges of more than £4.3billion.
Although the performance of its UK retail and commercial banking arm struggled due to the pandemic, surging markets helped its investment banking division make up for it.
Nearly £73billion has been lent by banks under Government pandemic loans schemes so far and many are coming up for renewal later this year. As the banks issued five years’-worth of loans within months, financial crime detection group Quantexa says a number of those may be fraudulent.
Founder Vishal Marria said that fraud is the “elephant in the room” and that the number of “suspicious transactions” it has detected for its banking clients has increased by 25 per cent.
FLOWERS, candlelit dinners and romantic gestures are all very well, but thisvalentine’s Day take to time to show you really care about your partner, by sitting down and sorting out your finances together.
While money may not be the sexiest subject, having an honest, open conversation today could save you both a lot of heartache later.
You cannot put a price on love, but with a little planning you can make it more cost-effective, or reduce the pain if it all breaks down.
JOINT AFFAIR
Six in 10 couples leave financial planning to one partner, typically the man, but Hargreaves Lansdown’s personal finance analyst Sarah Coles said this is a risky strategy: “If they pass away or you split up, you may suddenly have to get to grips with tricky financial issues at what is already a difficult time.”
The other danger is that the partner in charge tends to look at things their way, sidelining their other half.this does not mean you should pool all your funds and make every decision together. Coles said: “Nobody wants to feel they need permission to spend their own money.”
Every couple has to make their own decisions on how closely to link their finances, but being completely separate can be unfair if one partner earns a lot more than the other. “A reasonable compromise is to have separate accounts but a joint account for bills and regular expenses, so you make sure everything is split fairly.”
CREDIT DUE
Most couples who buy a home will have a joint mortgage, but should be careful about sharing responsibility for other borrowings, such as credit cards, loans and overdrafts.
If one partner is a spendthrift and runs up serious debts, the other could be on the hook for paying them off.
Justin Basini, chief executive credit agency Clearscore, said: “As soon as your finances begin to intertwine, say, through a joint account or loan, you become financially associated and they can impact your credit score.”
If applying for credit, whether a mortgage, loan or credit card, new couples need to be open about their financial history.the Mortgageadvice Bureau’s head of lending, said: “It is better to know in advance than get rejected because of a black mark on your credit scores, which the other did not know about.”
Will Lenehan, financial expert at low-cost financial advice platform Openmoney, said that talking about bills or debt can feel quite “heavy”, so set money goals that feel positive too: “Look for something you could both save towards, like paying off a credit card or a post-lockdown weekend away.”
If you reckon you are better with money than your partner, try not to use judgemental language. “Keep to the facts and explain what their spending habits mean for your own finances, and theirs.”
Inform credit agencies Equifax, Experian and Transunion if you separate from a partner, so you will no longer be affected by their financial decisions.
Becky O’connor, head of pensions and savings at Interactive Investor, said couples also need to talk about pensions: “Otherwise you could have problems in retirement, if one person’s pot falls short and they find themselves financially dependent.”
Pensions also become a live issue if you divorce. “Most couples wrongly focus on splitting the family home, and overlook pensions, which may be worth just as much.”
Couples should also come together to beat the taxman, by making the most of their various tax allowances.
Spouses and civil partners can save up to £250 a year using the marriage allowance, if one pays income tax at the basic rate and the other earns less than the current personal allowance of £12,500, and pays no income tax. The lower earner generates the saving by transferring £1,250 of their allowance to their partner. Successionwealth financial planner Mark Rogers said married couples and civil partners should also use their personal savings allowances and dividend tax allowances to reduce any tax bill if they earn interest from cash or dividends from shares held outside of a tax-free Isa.
They should also use their capital gains tax (CGT) allowances when selling assets such as investment property or non-isa shares. Rogers said: “Using both allowances is sensible planning. The annual CGT exemption is £12,300 each, which is a big tax break.”
Joint tax planning can also help couples generate maximum tax relief on their pension contributions, and reduce future inheritance tax bills through careful gifting.
‘Look for something you could both save towards, like paying off a credit card or a weekend away’
TALK IT OUT
Even the happiest relationship does not last forever, death makes sure of that, and Coles said couples need to discuss the worst: “You need to consider life insurance and guardianship of any children, draw up a will to divide your estate and nominate each other as workplace pension beneficiaries.”
Laura Laidlaw, head of customer savings at Standard Life, said conversations about money can be difficult, even for the closest couples.
“Some try to change the subject or put it off until another time, but as with everything else in relationships, honesty is the best policy.”
IF YOU want to take maximum control over your retirement planning, a self-invested personal pension plan, or Sipp, might be for you.
A Sipp is a do-it-yourself pension, which gives you full power over where you invest your money.
A wide range of online platforms offer online Sipps, including AJ Bell, Bestinvest, Freetrade, Hargreaves Lansdown, Interactive Investor, Legal & General and Pensionbee.
Competition has driven down charges but like any financial product, Sipps may not be right for everybody.
So compare what the different platforms offer and decide whether you need financial advice as well.
An estimated 2.5 million people have a Sipp and they could become even more popular, as a way of consolidating workplace pensions.
Dan Lane, senior analyst at Freetrade, said that younger workers could have up to 14 different pension plans by the time they retire: “Transferring them all into a Sipp could organise your finances and reduce fees.”
You should think carefully before transferring a company pension into a Sipp, and consider taking financial advice. He added: “Some workplace pensions, especially defined benefit final salary schemes, may offer irreplaceable benefits such as a guaranteed income.”
You can typically set up a Sipp online, and then fund it by bank transfer or by switching over existing pensions. “Ask whether your chosen provider will help you chase down old pension pots and
clarify any missing details,” Lane added. With a Sipp, you have absolute power over where you save, in contrast to most company and personal pension schemes, which employ managers to run your money for you.
You can choose from thousands of stocks and funds, as well as cash, bonds, gold or commercial property.
This means they work best for those with larger pots who are comfortable making their own investment decisions. As with other personal pensions, you can claim tax relief on contributions equivalent to your annual salary, up to a maximum £40,000 a year.
When you make contributions into a Sipp or other pension, HM Revenue and Customs automatically applies basic rate tax relief at 20 per cent.
THE Interactive Investor head of pensions and savings Becky O’connor said higher and additional rate taxpayers can reclaim a further 20 or 25 per cent relief on their self-assessment tax return.
“A 40 per cent taxpayer who paid £1,600 into their pension will automatically receive £400 as basic rate tax relief, lifting their total contribution to £2,000,” said O’connor.
“They would then claim a further £400 through their tax return, making £800 in total,” she added.
As retirement looms you can make withdrawals from say age 55, through drawdown.these will be added to your income for that year and may be subject to income tax.
You can pass Sipps to your loved ones free of inheritance tax and income tax, if you die before the age of 75.
If you die after that age, your beneficiaries may be liable to pay income tax on anything they draw from the pension.
Tom Selby, financial analyst at AJ Bell, said a Junior Sipp can get your children off to a great start in life.
“You can invest up to £2,880 a year, with basic rate tax relief topping this up to £3,600,” said Selby.