Will savings and annuity rates ever recover? Do car insurance premiums have further to fall? We look at the financial prospects for the next 12 months.
What does 2014 hold for your finances? Is Britain’s economy finally going to get back on track – and does that mean you and your family will be better off?
The past 12 months have seen some good and bad news. Economic data suggests the UK may well have turned a corner and put the recession behind us.
Meanwhile, rates on mortgages and other forms of credit have fallen to record lows, while car insurance prices have dropped following the huge increases experienced at the end of the last decade.
But savers have still had to contend with woeful returns.
And rates on annuities, which are used to convert pension savings into retirement income, have barely recovered from 2012’s lows.
So how do things look for the coming 12 months?
The latest edition of the Confused.com / Towers Watson Car Insurance Price Index showed that typical annual motor premiums had fallen by around a quarter since their 2011 high point.
This was thought to be the result of a fall in the costs associated with personal-injury claims following accidents, as well as a rise in the number of telematics-based policies.
Also in 2013, changes to EU rules on how insurance could be sold to men and women had a significant impact.
Providers can no longer charge different rates according to gender.
This meant that premiums for men, which had traditionally been higher, fell while women’s rates rose on the whole.
'Prices may continue to fall'
Gemma Stanbury, head of car insurance at Confused.com, says there are unlikely to be further changes due to gender.
"We think that the new rules are now fully reflected in premiums, so women’s prices should not rise further in relation to men’s," she says.
Prices across the board may continue to fall in the first half of 2014, Stanbury adds, before rising in the last few months of the year.
"Insurance prices can be cyclical, and we have seen rates falling for a while now," she explains.
"But at some point next year we expect premiums to start increasing again."
Prices for home cover are expected to remain flat in 2014, according to Gareth Lane, Confused.com’s head of home insurance, provided we don’t suffer too harsh a winter.
"Expensive weather-related claims have continually pushed up premiums for buildings insurance, and the weather this winter will also determine the premium levels into 2014," he says.
"But so far 2013 has looked relatively benign in terms of major weather events."
Lane does warn that a new agreement to help homeowners in flood-prone areas get insurance will see a small levy added to all policies.
"This could push premiums up a little bit throughout next year, particularly for buildings insurance," he adds.
Rates on savings accounts and ISAs in 2013 have fallen to their lowest ever levels.
This has been down to the low Bank of England base rate, which has been 0.5 per cent since 2009.
And more recently also due to the government lending extra money to banks provided they pass it on to consumers and businesses in the form of mortgages and loans.
This has meant that banks no longer needed savers’ cash to make loans, and rates on savings accounts have been cut as a result.
But the government has just announced it will stop lending this extra money for mortgages, which could result in higher savings rates – as well as more expensive home loans – next year.
Annuities, which help savers turn their pension pots into a guaranteed retirement income, have suffered from very low rates recently.
This is because they normally follow interest rates in the wider economy.
It is hard to say whether the situation will improve next year.
But Kate Rose, head of annuities at Confused.com, says that people coming up to retirement can act to make sure they get the best rate possible.
'Number shopping around increasing'
This means getting quotes for annuities from as wide a range of companies as possible.
"I can only see the number of people shopping around increasing next year as more people become aware of the options available to them," she says.
"Likewise those approaching retirement are more IT savvy and au fait with shopping around for financial products on comparisons sites than perhaps in the past."
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