Money digest: today's need-to-know financial news | 18 May 2016

It’s an oft-used phrase but the popularity of ‘the Bank of Mum and Dad’ shows no sign of waning. New research shows that one third of parents have been under financial pressure as a result of bailing their children out financially.

According to the information services company Experian, over half of parents surveyed said that adult children had drawn from the Bank of Mum and Dad an average of four times and to the value of £6,000 since becoming financially independent.

Meanwhile, results from a survey by YouGov, commissioned by Royal London, reveal almost five million renters in the UK have no plans in place to cover their rent if they became too ill to earn for three months or more, even though recent cuts to housing benefits could leave them at risk. This is despite the fact that more than a quarter of renters in paid employment said they knew someone who had struggled in this situation.

More than one in three renters in paid employment admit they don’t know how long they could survive, and six in ten people who had some idea said they could only survive on their savings for three months or less. Their first port of call would be to apply for state benefits, followed by reducing their household expenses and then dipping into their savings.

The Daily Mail reports that savers who earn cash bonuses from their bank accounts are being deprived of a new tax break by a tangle of red tape. Hundreds of thousands of people now use current accounts for better returns than traditional savings deals. Santander, Nationwide and TSB pay as much as 5 per cent interest — far more than you get from ISAs and fixed-rate bonds. Halifax, Barclays and Co-op Bank offer cash rewards of up to £7 a month.

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The new personal savings allowance should mean savers can now earn up to £1,000 tax-free. And banks are supposed to pay your earnings before deducting tax. But it’s emerged that these rules don’t apply to monthly rewards such as those offered by Halifax, Barclays and Co-op Bank. HM Revenue & Customs says they’re ineligible because the rewards are classed as ‘annual payments’ — which are fully taxable — rather than interest.

Average house prices across the UK have increased 5.1 times faster than average weekly earnings over the last five years, the Resolution Foundation said yesterday in response to the latest Office for National Statistics House Price Index (HPI). Resolution Foundation analysis of HPI data shows that house prices have increased by 36 per cent since April 2011, while average weekly earnings have risen by just 7 per cent in nominal terms over the same period.

This decoupling of house price and earnings growth has been even more striking in London and the South East, where house prices have increased by 57 per cent and 39 per cent respectively. While average weekly earnings have increased by 5 per cent across the South East, they have actually fallen very slightly in London – reflecting both reductions in bonuses at the top of the earnings distribution and strong employment growth in lower paying roles.

In other news, careers education given to pupils in secondary school can be linked to higher earnings in adult life, according to researchers. A study published in the Journal of Education and Work suggests that better-informed teenagers are likely to make more advantageous career choices.

It measures the earnings benefit as an extra £2,000 per year for every six careers sessions when aged 14 to 15. Researchers used the British Cohort Study tracking 17,000 people. The research, commissioned by the Education and Employers charity, found that once other factors were taken into account, such as exam results and economic background, there were higher earnings for those who had received sustained careers advice in school. SSE, one of the big six energy suppliers, has lost 370,000 customers over the past 12 months but still managed to keep its retail operating profits steady at £455 million. Overall group profits before tax and after adjustments were down by 3.3 per cent to £1.5 million due to lower gas prices, mild weather and price controls in the distribution side of the business. But the company still raised its annual dividend by 1.1 per cent to 89.4p. SSE said the retail arm has been bolstered by growth in business customers but it had suffered from cutting gas prices to domestic customers earlier this year, its third such reduction in 12 months. Finally, a poll by Saga Travel Insurance has found that the over 50s are keen explorers and as well as going on long holidays to far off destinations, many want to visit cities with half saying they will go on at least one city break this year. On average, people spend £400 on flights and accommodation and take £300 worth of spending money for three day breaks However, the poll of almost 9,000 over 50s shows that many are not content with exploring just one new city a year. Keen to spread their wings and absorb new cultures, one in six people say they will go on two city breaks in 2016, while one in ten will go on three short breaks by the time the year is out. The over 50s don’t appear to be opting for cheap hotels or budget airlines when they go on a city break as they spend around £400 on flights and accommodation per person, and 1 in 14 estimate that they spend more than £700 on a luxury weekend away.