While retirement certainly brings about its share of unknowns, perhaps the most daunting prospect associated with this stage of life is the potential to run out of money (retirement income). That fear is so widespread, in fact, that 60% of baby boomers are more worried about depleting their nest eggs prematurely than actually dying. Since pensions freedoms approximately 700,000 people have removed their savings and invested them into some sort of income drawdown product.
The complexities of navigating the multiple risks (longevity, interest rate, behavioural, market to name just a few) and doing it tax efficiently make it doubly worrying that a third of that 700,000 invested their funds without seeking advice first (retirement income).
Gender pay gap
So first, interesting (and sad) to report that only half of those UK companies required to submit data on their gender data on gender specific pay have done so with under a week until the deadline. But more than that, there have been entries with zeros in all fields or submission of mathematically impossible gaps. The Guardian picked up the phone to some of the offenders who either declined to comment or claimed ‘error’. All rather schoolkid. FYI the data submitted so far indicates a median pay gap of 9.7 percent, which compares to an ONS gap of 18.4 percent gap for full and part-time workers.
A combination of aggressive reductions in the lifetime allowance (LTA), as well as restrictions on the pension annual allowance – such as the tapered allowance for high earners – has had a positive impact fuelling interest in VCTs as an alternative option for tax-efficient investing. According to HM Revenue & Customs‘ VCT statistics, 2016 to 2017 tax year saw £570m invested in VCTs. This was an increase on 2015 to 2016 – and was the highest amount invested in one year since the heady pre-financial crisis days of 2005 to 2006. Of note – though figures are not yet available – 2017 to 2018 looks to be on course to overtake 2016 to 2017.
Britain a nation of borrowers
A decade of ultra-low interest rates has made Britain a nation of borrowers rather than savers, official figures showed last week. The Office for National Statistics said households became net borrowers in 2017 for the first time since records began in 1987 as spending exceeded incomes. Households spent £14.4billion more than they earned last year, the statistics agency said. Households also borrowed £4.6billion more than they saved. The report also showed saving levels fell to their lowest since at least 1963 as families failed to set money aside for the future.
The lipstick effect – warning signs for the economy?
If you want to know where the economy is heading then a look at inexpensive treat items is often a good indication that things are not all well. The boss of John Lewis last week pointed to a return of “the lipstick effect” – when a rise in sales of beauty products heralds a consumer squeeze. With disposable income under pressure, shoppers are holding off on buying big ticket household items like sofas, beds and washing machines. But tough times also encourage shoppers to treat themselves, and history has shown that sales of cheap thrills – from lipstick to takeaway coffee, expensive perfume, skin cream and sparkling wine – can do well in a downturn. Subsequent fears about a slowdown have been sounded.
Financial Advice Including Pension Advice, Bristol
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