The 2019 ISA season is now in full swing, and it's as good a time as any to focus on financial planning - and, within that, looking ahead to your retirement years to ensure financial security.
Mind the gender pensions gap
Last week, a controversial landmark was achieved: gender equality in the state pension age. Having spent decades apart, the process of convergence began in 2010 (off the back of legislation passed 15 years prior), at which point the state pension age for women was 60, while for men it was 65. Eight years later, parity has finally been reached, with men and women now eligible to claim their state pension at 65. By 2020, it will be 66 for both.
On the face of it, there seems little scope for resentment about such a milestone. After all, the ambition of equality is surely a noble one. Added to that, the Office for Budget Responsibility reported that the cost to the Treasury for state pensions in general is in the region of £95bn each year – some 12 per cent of total public expenditure. And with the ratio of taxpayers to over 65s dwindling in the face of an ageing population, the strain applied by state pension spending on the public finances is set to intensify in the coming years.
On this basis, who could argue with equality in the name of fiscal prudence – especially given the UK’s ominous £1.8 trillion national debt mountain?
Equality against an unequal backdrop
The problem with assessing such a policy change in a vacuum is that it assumes other things are equal. And in the case of women who are either retired, or approaching retirement age, that is simply not the case. Figures released by the trade union Prospect forecast that women retiring today will receive 40 per cent less pension income than their male counterparts, which amounts to a gap of £7,000 per annum.
Separate research by Which? In 2017 found that women, on average, receive 20 per cent less state pension income than men, while pension provider Zurich revealed that the value of women’s retirement pots last year was roughly half that of men’s.
Diagnosing such stark gaps isn’t difficult: society and policy were rather different in previous decades, with the workplace heavily skewed in favour of men. Given the contributory nature of the state pension system, many non-working women were thus disadvantaged during this period, and ultimately dependant on their husband’s state pension record in order to receive retirement income. A further consequence of this dynamic was that few women were able to build up a workplace pension, thus compounding the disparity.
A system of endemic discrimination
As a result of the eligibility age increase, women born in the 1950s are the most heavily disadvantaged, given that, in 2011, the Coalition Government decided to expedite the process of state pension age equality. It meant that older women have had only five years’ notice for state pension age increases of up to 18 months. Meanwhile, their male counterparts had a minimum of seven years’ notice for a 12-month increase.
Furthermore, many women already in retirement do not reap the benefits of the triple-lock system. The triple lock only applies to state pensions, whereas those on the pension credit system only see their benefit rise in line with earnings. Of the 500,000 people in their 80s receiving pension credit, about 90 per cent are female.
But it isn't just those approaching or in retirement who are at a disadvantage. A good example of this is the otherwise-successful auto-enrolment scheme, which precludes those earning less than £10,000 per annum (even those who work multiple jobs which individually pay less than this salary, but collectively more). A disproportionately-high number of people who fall into this category are women, which further boggles the mind as to why this arbitrary earnings limit was put in place.
Similarly, those who earn less than £116 per week - again, even if they work multiple jobs which collectively exceed this threshold - are excluded from state pension credit. And it will not surprise you to learn that women are far more likely to fall into this category than men.
Perhaps the most ridiculous injustice of all is that mothers who don't claim child benefit lose their state pension - even if they aren't eligible for child benefit! Should their partner earn £60,000 or more, women are not entitled to this allowance. However, if they do not go through the pointless task of registering for it anyway (and assuming they are not making National Insurance contributions themselves), their credits towards state pension fall away.
A gap that needs to be bridged
There are numerous other ways in which the odds are unfairly stacked against women when it comes to pensions. For example, the enduring gender pay gap leads to lower lifetime earnings for women, which in turn results in lower workplace pension savings.
Although robust measures are being put in place to tackle the gender pay gap, the truth is that the pensions system - both with respect to state pensions and workplace pensions - is archaic, and lagging badly behind. And new counter measures to address the pay gap do nothing to assist women already in retirement either.
Last week we learned that the fertility rate in the UK has plummeted to just 1.7, putting into sharp focus the difficulties our ageing population will face in the future. Pensions and retirement planning will thus become all the more vital, yet the current system - which so visibly discriminates against women – is not fit for purpose. In fact, the status quo actually works against those in flexible jobs, which is utterly perverse given the role flexible and part-time work could play in balancing family life with retirement saving.
It is all very well to pick low-hanging fruit such as achieving state pension age equality. But in the absence of meaningful solutions to the gross unfairness elsewhere, we are ultimately left with a broken system. And, given the challenges that lie ahead in the future, it is our society as a whole that will be the worse for it.
The Lifetime ISA (LISA), announced in 2016, would prove to be one of George Osborne’s last flagship gestures to UK savers and investors as Chancellor, eventually launching against a backdrop of anti-climax a year later in April 2017.
There is barely a week to go until the conclusion of the 2017/18 financial year, which means that, as ISA season begins to hot up, time is running out to take advantage of your ISA allowance.
Over the last decade, there can be little dispute that the reputation of mainstream banks – and particularly the so-called ‘Big Four’ (HSBC, Barclays, Lloyds and RBS) – is at its lowest ebb.
The peer-to-peer (P2P) lending industry is now regulated by the Financial Conduct Authority (FCA). The regulatory framework has been designed to protect customers and promote effective competition.
Loan underwriting is the process that we undertake to analyse all of the information provided by each loan applicant and their credit file to assess whether or not that applicant meets our minimum loan criteria. As part of that process all data is verified, analysed and summarised to paint a picture of each applicant.
When you earn interest from a regular bank savings account, for example, the bank automatically deducts basic rate tax (currently 20%) before paying your interest. With interest earned from peer-to-peer lending, tax is not deducted automatically so lenders will need to declare their income to HMRC.
As 2018 draws to a close, with our bellies full of Christmas turkey, it's only natural to look back on the past 12 months and reflect. No doubt, it's been a turbulent one economically and politically, and not everyone has had it all their own way.