Inflation’s still high, and Inheritance Tax rules for pensions are potentially changing. Here’s what it all means for the Police Family.
It’s no secret that our finances have a big impact on our frame of mind. Whether you’re feeling confident, cautious or somewhere in between, how we handle our money and how it’s working for us can shape everything — from our sleep to our future plans.
Inflation and interest rates: what to expect
One thing sure to affect our financial mood is inflation, which climbed to 3.5% in April — the highest it’s been for over a year.
Still, most experts believe the current inflation bump will pass. The jump was mostly driven by the scheduled rise in utility bills (water, energy, broadband), which took effect in April — a one-off adjustment rather than a sign of ongoing pressure. Travel and food costs also edged higher.
The Bank of England expects a peak of 3.7% over the summer, falling to the long-term target of 2% by year-end.
This matters because inflation influences interest rates — and these, in turn, affect returns on cash savings. For a while, two rate cuts were likely this year (from the current 4.25%). But now, many are betting on just one. We’ll know more after the Bank’s next decision on Thursday 19 June.
So, if you’re sitting on cash savings, this is a helpful nudge to consider how you can make your money work harder. Stocks and Shares ISAs, like ours, aim to deliver growth over the medium to long term and are designed to carefully manage risk at the same time. With interest rates expected to fall further and the potential for better returns than cash, this could be a smart time to act.
Energy and fuel costs: a bit of relief
There’s some good news on the horizon for household budgets. From 1 July, the energy price cap will fall by 7%. Even more encouraging is the possibility that the Winter Fuel Payment could be reintroduced for more people. During Prime Minister’s Questions last week, Keir Starmer suggested the benefit might return in some form.
Inheritance tax: what’s changing — and what isn’t
HMRC collected £780 million in Inheritance Tax (IHT) in April alone — and with thresholds frozen, more estates are caught each year.
Proposed changes to IHT rules, which will take effect from April 2027 if passed, will see certain private pensions included in the value of an estate for Inheritance Tax purposes. This change means that some people who previously believed their pension savings were outside the scope of IHT may now find they are liable.
The good news? Most Police pensions won’t be affected. These typically stop upon the later death of the Officer or their spouse or civil partner, meaning there is no capital sum to form part of the estate.
But for those with additional private pensions, these may now be counted.
Inheritance Tax is complicated, and we always recommend seeking professional advice if you want to understand your personal situation better.
Gifting: time to act?
Whether IHT-driven, or for other reasons, we’re seeing more interest in making gifts while still alive.
If you’ve done your bit, built your pot and have enough to keep you comfortable, maybe it’s time to share it with loved ones.
You can currently gift up to £3,000 each tax year (with the option to carry forward any unused allowance for one year), plus £250 to any number of individuals, and larger tax-free gifts for weddings. These amounts won’t count toward your estate and don’t need to be declared. Over time, this can really add up — and potentially reduce a future Inheritance Tax bill significantly.
If you’re thinking of helping the next generation, now could be a good time to consider opening a Junior ISA for your children or contributing to a Lifetime ISA in their name if they are 18 or over and have opened one.
It’s a practical way to give them a financial head start — with all the tax-free growth benefits that ISAs offer, and the reassurance that the money is managed by a provider trusted by generations of the Police Family.
You can read more about gifting in our recent article in the NARPO magazine: Saving and gifting to your family tax-efficiently.
Final word
Whatever your money mood right now — cautious or curious — we’re here to help you make the most of what you’ve earned. And if you’ve got questions or want to talk options, we’re only a phone call away.
Call us on 01689 891454. Lines are open Mon-Thurs 8:30-17:00 and Fri 8:30-16:30.
