Winners And Losers Of 2012: A Financial Review

Even though 2012 had its fair share of financial blows, it was also the year when the recession officially stopped slumping and started to rebound. While the official word is that the recession that hit us like a massive earthquake back in the fall of 2008 ended, many people still face financial problems. Interest rates have not increased, but the cost of overdrafts and credit cards has. Many of those who tried to benefit from the influx of low-cost mortgages couldn’t do so because the lending restrictions were — and still are — very tough.

Considering these facts, it should not come as a surprise that many people tried to be as cautious as they could with their money and sought to save and reduce debts. 2012 has been a period of despondency overall, but it has also been a positive year for the stock market, with great returns from many small companies. Keep reading to find out who profited and who didn’t in 2012!

THE WINNERS

Bond Investors

Many feared the bond bubble would burst in 2012, yet it’s still very much alive — those who managed to stick with it, however, have been rewarded! The high risk paid off in 2012 and many fixed-interest investments provided consistent returns.

Mortgage Borrowers

The Government’s Funding for Lending scheme helped launch very cheap mortgage deals in 2012. This scheme provided a great deal: a five-year fixed-rate loan that cost 2.79pc. These loans were not available to all, though — only to those with 40pc home equity. House prices have not changed much in 2012, says Nationwide, while the Office for National Statistics and Halifax reports a small increase.

Equity investors

2012 has been a year when it paid off to take money risks — equities started and ended in force, delivering more than cash or gilts. Some of the most impressive returns were delivered by high-risk equities. Many Britain-based small and mid-cap companies outperformed their FTSE counterparts.

THE LOSERS

Pension Savers

The pension rules have been changed again in 2012 — the tax-free pension saving limit was reduced from £1.8m to £1.5m and the Chancellor publicized that it will fall again in 2014. September saw the beginning of a new law called ‘automatic enrolment’ — a new pension legislation that compels employers to enrol their employees into a pension scheme.

Banks

2012 has not been a good year for banks. In June, NatWest was hit by a massive computer failure which restricted millions of users from accessing their money. This wasn’t the only scandal: Barclays and HSBC were both fined huge sums of money and Lloyds reserved £1bn to cover the cost of payment protection insurance mis-selling.

People nearing retirement

Bad news for those nearing retirement — the annuity rates have hit their lowest this year. Billy Burrows, the founder of Better Retirement Group, estimates that the annuity rates dropped by 8pc in 2012, caused by low gilt yields.

Tax dodgers

2012’s tax changes have fuelled several protests, from the farcical pasty tax to the ‘granny tax’ which freezes the amount of income a pensioner can get without paying tax. Several big companies, including Amazon and Starbucks, were also ‘named’ for their tax avoidance arrangements.

Post provided by John at Finance-blogger.co.uk, John is a keen finance blogger, saver and investor who enjoys sharing his tips and experience with his readers. Find out more about saving, investing and financial services at his blog.