News Updates - January
10th January 2019
Self-employed pensions time bomb
Latest figures indicate the financial affairs of huge swathes of the country are unstable. Millions of households have nowhere to go when, rather than if, everyday events upset the very fine line between income and spending walked by so many. With unemployment low and recent headlines about increasing real wages it would be easy to assume that we’re in reasonably good shape as a nation of consumers. We’re not. Personal debt levels are now at pre-financial crisis levels and just one of the major debt charities estimates that someone new contacts them every 51 seconds because they’ve hit the buffers. But then there’s the silent creep towards a financial precipice many don’t even know is there. The 5 million self-employed at risk of an old age in poverty for example, ignored behind the fanfare of the workplace pension for being too complex a problem to tackle. So far, the sticky-plaster approach to fixing these and other huge issues by rolling out a series of savings incentives, schemes and limits has only made things more complicated, erecting yet more barriers to getting back on an even keel.
Pensions cold-calling finally banned
The UK Treasury has signed into force a statutory instrument banning any unsolicited phone calls for direct marketing purposes in relation to occupational or personal pension schemes. This means very shortly the ban will become effective and all cold-calls will be illegal. The amendment legislation was signed on 19 December 2018 and will come into force on the 9 January 2019. According to the amendment, “a person must not use, or instigate the use of, a public electronic communications service to make unsolicited calls to an individual for the purpose of direct marketing in relation to occupational pension schemes or personal pension schemes”. The only exemptions to the amendment are: if the caller is an authorised person or if they are a trustee or a manager of a pension scheme; if the individual being called has given consensus on being contacted via phone calls or if they are a client of the caller and/or did not refuse being contacted for marketing purposes.
Rushing to re-mortgage amid Brexit uncertainty
Re-mortgaging has reached its highest level in nearly a decade as experts say Brexit uncertainty and cheap loan rates are encouraging borrowers to lock into new deals. Re-mortgage loans worth £9.2 billion were handed out to home owners in October, according to trade association UK Finance. This was a 22.7% jump on a year earlier and the highest figure since November 2008. In total, 50,500 new home owner re-mortgage loans were completed in October, 23.2% more than in the same month a year earlier. With the number of new purchases remaining subdued, lenders are focusing on where the business is and offering competitive deals to those coming off fixed-rate mortgages. The consensus is that this trend is set to continue into 2019. Near term prospects will be heavily dependent on how quickly this uncertainty lifts, but ultimately the outlook for the housing market and house prices will be determined by the performance of the wider economy – especially the labour market.
Resistance to probate fees rise
A House of Lords committee has reiterated concerns that government proposals to increase probate fees are a "stealth tax" after concerns were raised that changes to the fees system could cost charities £10m a year in legacy income. Earlier this month, Lucy Frazer, the justice minister, announced that the government was revising its previous proposals for reforming probate fees and would push ahead with removing the existing flat-rate fee of £215. Instead, probate fee bands would be brought in, Frazer said, with estates of more than £50,000 paying between £250 and £6,000, with the maximum amount reserved for estates worth more than £2m. But a report by the House of Lords Secondary Legislation Scrutiny Committee, published today, says the government’s proposals "bear no relation to recovering the actual cost of providing the service" and "represents a significant move away from the principle that fees for a public service should recover the cost of providing it and no more". The Lords report also highlights that, despite the government’s proposed increases to probate fees, it has issued a separate statutory instrument to introduce an online application process for processing a grant of probate, which will cause the administrative cost per application to fall to only £9.30. One to watch.
Problems for the pension dashboard
The Government’s Pensions Dashboard plans unveiled last month have many hurdles to overcome and poor pension records could torpedo them, an ex Pensions Minister has warned. Baroness Ros Altmann says legacy schemes will take years and cost huge sums to convert to electronic format.
While welcoming progress on the dashboard, she believes trying to get all old pensions included on a Pensions Dashboard on day one is “doomed to failure” and a more realistic approach is to start with auto-enrolment and the State Pension first but regulators must ensure all pension records are correct. She said even recent auto-enrolment data was full of errors and there were no official requirements to report on accuracy or error corrections. Consensus is that the biggest three hurdles are:
- Legacy pensions are not held in electronic format so will take years and cost huge sums to add all old pensions to a dashboard
- Legacy pensions could be better handled initially by mandating a standard format for written statements
- For any Pensions Dashboard to be meaningful, it needs to have accurate data but current data is often riddled with errors