Shocks, Squid Game and Britney Spears: nine big finance moments of 2021
15th December 2021 12:02
by Katie Binns from interactive investor
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At the end of a hugely eventful 12 months, Katie Binns reviews the year and picks out some defining highlights.
Coronavirus continued to dominate the financial landscape in 2021, but there were some surprises: Netflix show Squid Games and Britney Spears got us talking about finances for radically different reasons.
Inflation rises
We’ve had time this year to become accustomed to soaring living costs as inflation has slowly increased, hitting 3.2% in August before rising to 4.2% in October and then 5.1% in December. “Budgeting will need to be turbo-charged for those with little disposable income," says Becky O'Connor, head of pensions & savings at interactive investor. "If you can afford it, investing in the stock market via ISAs is worth considering. And it’s important that pension investments beat inflation over the long term too, so consider reviewing the return on your pension funds and the risk profile of the investments in it,” she adds.
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The cost of energy hits a high
Many of us reached for jumpers, blankets and hot water bottles when gas prices rose by 70% in September due to a squeeze on supplies. A combination of unusual factors meant little could be done: there have been lower gas storage stocks than normal, following a short summer, lower wind turbine output, a drop in supplies from Russia, and a fire killing a cable bringing electricity into the UK from France.
Experts say gas prices are likely to remain exceptionally high until next summer, as the annual energy price cap set by regulator Ofgem could actually rise by a further £280 when it is reviewed in April 2022.
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Triple lock suspension shock
The triple lock formula, used since 2010 to calculate how much the state pension rises each year (the highest of inflation, average wage growth or 2.5%), was suspended in September for the 2022/23 tax year, to prevent a “perverse” increase of 8.8% in line with wage increases following the end of lockdown. Cue 12 million pensioners feeling hard done by.
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A new social care tax
The way we pay for later-life care costs was put under the spotlight by the announcement that from April 2022 national insurance contributions will increase by 1.25%. It means people will pay national insurance at a rate of 13.25%. If you’re a basic rate taxpayer (under the 20% income tax bracket) this means you’ll pay tax at a rate of 33.25%.
From April 2023, national insurance will return to its current rate, with the extra tax collected in the form of a new Health and Social Care levy and, in an unprecedented move, payable by working pensioners.
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Mortgage deals fall below 1%
In May, homebuyers started being offered mortgages with interest rates below 1% for the first time in almost four years. A particular high was Platform’s two-year fixed rate at 0.79%, according to data analyst Moneyfacts.
The golden era was over quickly, however. By November, lenders had started to pull some of their best deals at short notice and homeowners were scrambling to secure a bargain. There are still some deals for those with large deposits: Progressive Building Society currently has a discounted variable rate at 0.51%.
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Covid support ends
October 1 saw the end of the government’s furlough scheme and other pandemic support such as the self-employment support scheme and the stamp duty holiday, which saved buyers as much as £15,000. Fear around job losses seems to be unfounded as the record number of job vacancies continues.
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Netflix got us talking about debt
Squid Game, Netflix's critically acclaimed South Korean drama, got us talking about debt at a time when credit card use is up. Meanwhile, research by Citizens Advice shows that one in 10 people using ‘buy now pay later’ schemes had been contacted by debt collectors after falling behind on payments, with the proportion rising to one in eight for those under 34.
The show’s main character is a gambler who reminds us how vulnerable those with this kind of addiction are. A government report that coincided with the show revealed the harms associated with gambling costs the UK at least £1.3 billion a year.
New investors in crypto amid all-time highs and lows
Serious FOMO (fear of missing out) was revealed to be partly behind the increase in crypto investor numbers: 2.3 million UK adults are estimated to own cryptocurrency, up more than a fifth on a year ago when the figure was 1.9 million. Research from the FCA found that 18% responded with: “I don’t want to miss out on buying cryptocurrencies,” when asked the main reason for putting money into bitcoin and other products.
Bitcoin was as volatile as ever, hitting new record highs throughout the year before reaching an all-time high price of $68,521 on 5 November; since then it has fallen back.
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Britney gets her financial freedom back
Revelations about the court-appointed guardianship that pop star Britney Spears (pictured above) lived under, and the control it gave her father over intimate details of her life and her finances for 13 years, shocked the world. The singer's lawyer has accused him of financial misconduct and "reaping millions of dollars from his daughter's estate".
For example, while she was earning millions from her Las Vegas residency, the singer was given an allowance of $2,000 per week, while her father's salary as conservator was $16,000 per month, plus money for expenses and a percentage of various deals signed for his daughter. She was not allowed to carry her credit card; instead it was held by her security team.
“It’s been a long time since I’ve owned my money,” said Spears. “All I want is to own my money.” Millions around the world cheered in November when a judge finally freed her from the conservatorship.
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