News Updates - March
13th March 2019
Stop pensions discrimination against women
A United Nations committee has urged the government to ensure the increase in state pension age does not have a discriminatory impact on women. In its comments on the UK’s eighth periodic report, published on March 11, the UN committee on the Elimination of Discrimination against Women expressed its concern regarding the increase in the state pension age for women from 60 to 66. It stated that the several legislative changes had affected the pension entitlements of women born in the 1950s, and were contributing to "poverty, homelessness and financial hardship among the affected women". Backto60, a campaign group requesting the state pension age be kept at 60 for women born in the 1950s, gave evidence to the committee. Along with other campaign groups like Women Against State Pension Inequality (Waspi), Backto60 is arguing the changes had contributed to perceived 'inequality and unfair treatment' of women born in the 1950s. The groups claim when the 1995 Conservative government's Pension Act included plans to increase the women’s state pension age to 65 – the same as men's – the changes were implemented unfairly, with little or no personal notice. The movements also claim the changes were implemented faster than promised with the 2011 Pension Act, and left women with no time to make alternative plans, leading to devastating consequences.
Mortgage market exodus
AA Mortgages is the fifth lender to close its doors to new customers in the past three months as fierce pricing wars force providers out of the market. The lender confirmed that it will not be offering mortgages to new customers for the foreseeable future, however it did not rule out re-entering what it described as a ‘highly competitive market’ in the future. Industry observers described the situation as “worrying” as big lenders seek to undercut the rest of the market and the small exodus of lenders since December has led to concern these could be early warning signs that a second credit crunch is on the way. With the current climate of low interest rates and extreme competition between lenders, it’s possible that more mortgage providers could be feeling the pressure, too. Less competition for banks, of course, will not serve consumers in the long term.
Rising prices for food and alcohol pushed inflation higher in February, the latest official figures show. The Consumer Price Index (CPI) rose to 1.9% last month, the Office for National Statistics (ONS) said. The index is a measure of inflation calculated by tracking the price of a selected basket of goods and services. It is worth noting, though, that while February’s rise in inflation may be marginally disappointing for consumer purchasing power, it is still looking appreciably better than in mid-2018 – especially as earnings growth retained its firmer tone in January. Real earnings growth is currently 1.5%, the best level since end-2016, although still appreciably below long-term norms. Most commentators believe that inflation will spike significantly higher if the UK leaves the EU without a deal, primarily due to a likely marked fall in sterling – even though the government has indicated that under a temporary scheme, 87% of imports by value would be eligible for zero-tariff access compared to 80% of imports currently being tariff-free.
House price growth at its slowest for five years
House price growth hit a five-year low in January 2019, Land Registry data shows. Its figures revealed that house prices grew 1.7% annually at the start of the year to an average of £228,147 and fell 0.8% on a monthly basis. The annual figure is down from 2.2% in December 2018 and the lowest rate since June 2013 when growth was at 1.5%. While we have grown accustomed to a slow start in the property market following the Christmas period most commentators agree these figures suggest that the mounting political uncertainty has undoubtedly contributed to the underwhelming low house price growth. Positively some are still expecting a modest spring bounce. This will be aided by pent-up demand from those looking to carry on with business as usual and there could be a flurry in the market once a deal has been done and a decision has been made – regardless of whatever decision that may be. There’s no doubt that a cut to Stamp Duty rates to the middle to top end of the market would be welcome, but Government clearly only has Brexit on the brain.
Asset manager fees still misleading
The UK regulator has rebuffed calls from asset managers to push for changes to new EU cost disclosure rules, saying that the extreme results thrown up by the regulation are a result of poor compliance. The Financial Conduct Authority said last week that it had uncovered problems with the way asset managers calculate and present transaction costs under the Priips (packaged retail and insurance-based investment products) regulation. Priips obliges investment groups to disclose the transaction costs incurred by their funds for the first time. The requirement has been heavily criticised by the sector, which argues that the calculation methodology stipulated in the regulation produces confusing results, including negative transaction costs. However, following a recent review of the application of the new rules, the FCA said that it had not found “credible evidence to support claims that the methodology is not working as intended”.
ISA investors defy Brexit gloom
ISA investors are defying Brexit uncertainty by buying British in January, according to data. With the Isa season now underway, UK assets featured strongly in the best-selling funds and sectors on platforms in January. The HSBC FTSE All Share Index C was the best-selling fund on one online investment platform, while UK Equity Income topped the sectors table, followed by UK All Companies and Sterling Strategic Bond. Investors are clearly happy to buy the UK despite Brexit uncertainty. They continue to demand income though, which shouldn't come as too much of a surprise as most investors are getting closer to retirement and income remains elusive. The interest in Asian equities is also notable given the region suffered in the second half of 2018. Investors have responded to the recent sell-off by seeing it as an opportunity to invest. Not all investors are so adventurous, however, and we are still seeing demand for the more cautious asset classes in sterling strategic bonds and mixed assets."
End of tax year tips
For most people, the end of the tax year isn’t a big occasion. Yet when the 2019/20 year tax year starts on the 6 April, it’ll bring several important changes for your money. Many of them are automatic: your income could be boosted, whether by the increasing minimum wage or rising tax brackets. However, the end of the tax year also means the end of several allowances that could reduce the tax you pay – and therefore, save you money. Many don’t roll over, and so not using these allowances by 6 April means you lose them forever. To make sure you don’t miss out, we’ve put together a five-part checklist for the coming month:
- Start with ISAs
- Pay into your pension
- Clear out your investments
- Give £3,000 to your kids
- Top up your National Insurance contributions
Further HMRC offshore crackdown
Almost a third of British billionaires have moved to tax havens or are in the process of relocating, research has found. Those living offshore must obey local tax laws but avoid paying HMRC 38.1% on dividends or 20% on the sale of shares. HMRC said it did not have official figures on how much this costs, but previous estimates have suggested the UK misses out on £1billion of tax a year from those living in Monaco alone. The principality was the most popular destination for British billionaires, followed by the Channel Islands, Switzerland and the Isle of Man. But HMRC has now escalated its crackdown on individuals with undeclared offshore assets, sending a request for information to thousands of taxpayers with possible liabilities or their advisers.HM Revenue & Customs said it was following up on information shared by more than 100 countries. This includes data obtained from banks and other financial institutions, including those based in countries previously considered tax havens.
What will Brexit mean for house process?
The EU has confirmed that there have been no breakthroughs so far in its negotiations with the UK over the Irish border. The statement comes ahead of a ‘meaningful vote’, scheduled for Tuesday 12 March, on Theresa May’s Brexit deal. If, as many predict, the deal is rejected next week, the prime minister has offered two further votes: one allowing MPs to rule out leaving the EU without a deal, and another allowing her to push back the Brexit date. Many are now predicting that Brexit will be delayed until the end of June at the earliest. There has undeniably been a stagnation in the market over the last year in areas such as London, the South and East (which had all overheated) and this slowdown has spread to other areas over the last few months. Buyers are holding back in the hope that prices will fall. But it’s not only demand that’s dropping – supply is, too, with many people battening down the hatches until we have a clearer picture of what’s going to happen. This can limit the likelihood of decreasing house prices, but also mean that few move, as there’s little choice on the market for would-be sellers. While views vary, the overall consensus is that buyers should not be put off by fears of a house price crash as long as they mitigate the risks.