The Financial Conduct Authority says there will be an investigation into the way details of its inquiry into life insurance schemes were made public.
Shares in some of Britain's biggest financial institutions fell sharply in the wake of the announcement that it would look at whether some policies set up between the nineteen seventies and 2000 still represented good value for money.
This stockmarket episode started out with major criticism of insurance companies' charges for old pension and endowment policies and news that the Financial Conduct Authority would launch an inquiry. It ended with a major embarrassment for the City watchdog itself -- with the authority being forced to launch an investigation into the way it had handled the announcement.
The authority had briefed the Daily Telegraph -- the resulting story suggested there would be action to give millions of savers a better deal, so share prices in insurers plummeted, some down 16 per cent at one point.
Furious insurance industry chiefs complained that a disorderly market had been created -- the Authority then published a statement saying talk about cutting the charges was overblown.
The investigation into the way the matter has been handled will in part be carried out by an external law firm. It's the first major setback for the authority since it started work last spring.
Friday, 28 March 2014
Friday, 14 March 2014
Working till you drop?
If you suffer from bad health in later years, then earning your living into ripe old age becomes a tricky proposition.
The government has accelerated the timetable for pushing up pension age, with a pension age of 68 now set to be implemented in the mid-2030s.
One thing that really matters is whether people are actually able to work that long. Figures today from the Office for National Statistics provide an insight into how serious the challenge might be for some people.
The stats show how the time you can expect to live in good health varies from place to to place - it's called healthy life expectancy.
Men in affluent areas can expect to live to 82.7 years, with 70.5 of those in good health.
But in deprived areas life expectancy is 73.4 years and healthy life expectancy is just 52.1 years.
Women live longer. The situation for women in affluent areas is that life expectancy is 85.7, with 71.5 years in good health.
But there is a wide gap in the most deprived areas: there women can expect to live to 78.9, but healthy life expectancy is only 52.5.
So a woman in a deprived area might live a long life but suffer 26 years of poor health.
Compare all those numbers to the path the government plans for pension age for both men and women: 66 in 2020, 67 in 2026-8, 68 in the mid-2030s.
After that 69 is likely to be introduced in the 2040s and 70 will come soon after that.
Does that make sense if people might struggle physically to continue in work?
Well, the whole point of the changes to pension age is cope with the consequences of life expectancy continuing to grow coming decades.
But clearly there is a need to improve the health of people in deprived areas to make it more likely that they can work longer and live to draw their pensions.
The government has accelerated the timetable for pushing up pension age, with a pension age of 68 now set to be implemented in the mid-2030s.
One thing that really matters is whether people are actually able to work that long. Figures today from the Office for National Statistics provide an insight into how serious the challenge might be for some people.
The stats show how the time you can expect to live in good health varies from place to to place - it's called healthy life expectancy.
Men in affluent areas can expect to live to 82.7 years, with 70.5 of those in good health.
But in deprived areas life expectancy is 73.4 years and healthy life expectancy is just 52.1 years.
Women live longer. The situation for women in affluent areas is that life expectancy is 85.7, with 71.5 years in good health.
But there is a wide gap in the most deprived areas: there women can expect to live to 78.9, but healthy life expectancy is only 52.5.
So a woman in a deprived area might live a long life but suffer 26 years of poor health.
Compare all those numbers to the path the government plans for pension age for both men and women: 66 in 2020, 67 in 2026-8, 68 in the mid-2030s.
After that 69 is likely to be introduced in the 2040s and 70 will come soon after that.
Does that make sense if people might struggle physically to continue in work?
Well, the whole point of the changes to pension age is cope with the consequences of life expectancy continuing to grow coming decades.
But clearly there is a need to improve the health of people in deprived areas to make it more likely that they can work longer and live to draw their pensions.
Tuesday, 4 March 2014
Service charges rip-off?
Housing associations and local authorities are to be included in an investigation into the service charges, sometimes thousands of pounds a year, which are imposed on home-owners with leasehold property.
The Office of Fair Trading is launching a market study into the charges, paid by 5 million leaseholders in England and Wales for maintenance of the shared areas of their building and for roof repairs.
It is acting on concerns about overcharging, commission paid by contractors to freeholders to win business and the lack of choice for leaseholders over who does repair work.
Since it gave warning of the investigation in December the OFT has received complaints that leaseholders with public sector landlords face just as many problems as those in the private sector - so the scope of the study is being expanded.
The Office of Fair Trading is launching a market study into the charges, paid by 5 million leaseholders in England and Wales for maintenance of the shared areas of their building and for roof repairs.
It is acting on concerns about overcharging, commission paid by contractors to freeholders to win business and the lack of choice for leaseholders over who does repair work.
Since it gave warning of the investigation in December the OFT has received complaints that leaseholders with public sector landlords face just as many problems as those in the private sector - so the scope of the study is being expanded.
Wednesday, 5 February 2014
Tax pensioners says IFS
The influential Institute for Fiscal Studies is suggesting a dramatic change in the tax paid by pensioners.
It wants the government to look at charging a levy on private pensions in payment, on the grounds that pensioners -- in the opinion of the IFS -- get more out of the tax system than they should.
Make no mistake, this would be a major reform which would result in pensioners paying much more tax.
The IFS argues that it would help to spread the task of dealing with the government’s financial problems "more evenly across the generations".
At the moment pensioners don't pay National Insurance on their pension income, a substantial benefit in comparison to workers who pay 12% National Insurance on top of their income tax.
However, if you save for a pension, that is out of money that is likely to have incurred National Insurance.
The tax break on pension contributions only applies to income tax, at whatever rate you pay. You still have to pay National Insurance on money paid into a pension scheme.
The point of this complicated system is to avoid the situation where pensioners are taxed twice on the same money - once when they pay into a scheme and again when they take their pensions.
The IFS suggests that pension contributions should attract National Insurance tax relief. But pensioners should then pay a charge on their pension income.
To prevent double taxation on people who have already salted away money in pension schemes, this charge or levy should start low, says the IFS, and then rise to the level of National Insurance as the bulk of pension savers began to benefit from National Insurance relief.
The maths favours the Treasury, because the new levy would also apply to pension income which came from pension contributions added by the employer.
Each 1% charged to pensioners would raise £350m a year for the government's coffers, so Chancellors would have a big incentive to push up the levy as quickly as possible.
A Treasury spokesperson commented that there were no plans to put National Insurance on pension income, nor were there plans to change pension tax relief.
It wants the government to look at charging a levy on private pensions in payment, on the grounds that pensioners -- in the opinion of the IFS -- get more out of the tax system than they should.
Make no mistake, this would be a major reform which would result in pensioners paying much more tax.
The IFS argues that it would help to spread the task of dealing with the government’s financial problems "more evenly across the generations".
At the moment pensioners don't pay National Insurance on their pension income, a substantial benefit in comparison to workers who pay 12% National Insurance on top of their income tax.
However, if you save for a pension, that is out of money that is likely to have incurred National Insurance.
The tax break on pension contributions only applies to income tax, at whatever rate you pay. You still have to pay National Insurance on money paid into a pension scheme.
The point of this complicated system is to avoid the situation where pensioners are taxed twice on the same money - once when they pay into a scheme and again when they take their pensions.
The IFS suggests that pension contributions should attract National Insurance tax relief. But pensioners should then pay a charge on their pension income.
To prevent double taxation on people who have already salted away money in pension schemes, this charge or levy should start low, says the IFS, and then rise to the level of National Insurance as the bulk of pension savers began to benefit from National Insurance relief.
The maths favours the Treasury, because the new levy would also apply to pension income which came from pension contributions added by the employer.
Each 1% charged to pensioners would raise £350m a year for the government's coffers, so Chancellors would have a big incentive to push up the levy as quickly as possible.
A Treasury spokesperson commented that there were no plans to put National Insurance on pension income, nor were there plans to change pension tax relief.
Strong interest in Help to Buy
The Halifax says it is receiving 500 applications per week from house buyers seeking assistance under the Help to Buy scheme.
The Help to Buy mortgage guarantee was launched 4 months ago for buyers who have trouble raising a big enough deposit.
Critics are concerned that the scheme will help create a housing bubble, particularly in London and the South East of England where prices have risen fastest.
However, the Halifax says that so far, 8 out of ten applications have been from other areas, and 80 per cent are from first time buyers.
The average house price under the scheme is £157,000, which is less than the typical UK price.
In December the Business Secretary, Vince Cable, described a "raging housing boom" in London and said ministers needed to look again at the Help to Buy scheme.
The Halifax reports interest in the scheme is still strong and it has completed 1,000 loans.
The Help to Buy mortgage guarantee was launched 4 months ago for buyers who have trouble raising a big enough deposit.
Critics are concerned that the scheme will help create a housing bubble, particularly in London and the South East of England where prices have risen fastest.
However, the Halifax says that so far, 8 out of ten applications have been from other areas, and 80 per cent are from first time buyers.
The average house price under the scheme is £157,000, which is less than the typical UK price.
In December the Business Secretary, Vince Cable, described a "raging housing boom" in London and said ministers needed to look again at the Help to Buy scheme.
The Halifax reports interest in the scheme is still strong and it has completed 1,000 loans.
Instant checks on payday loans
The danger of desperate borrowers taking out multiple payday loans in a single day should become a thing of the past with the launch of an instant checking service for lenders.
Short term loan providers on the High Street and the internet have faced a barrage of criticism for allowing customers to borrow several times from different lenders over hours or days and build up an unsupportable level of debt.
The credit reference agency, Experian, has announced that it will start a real time data sharing service from the second half of this year.
As soon as one member updates the system with details of a loan, other providers will be able to view the details on their screens, warning them about the customer's new debt.
Previously it could take weeks for the information to be shared.
Another credit reference agency, Callcredit, has already announced a rapid checking service, to be launched in April, which will update every day.
Short term loan providers on the High Street and the internet have faced a barrage of criticism for allowing customers to borrow several times from different lenders over hours or days and build up an unsupportable level of debt.
The credit reference agency, Experian, has announced that it will start a real time data sharing service from the second half of this year.
As soon as one member updates the system with details of a loan, other providers will be able to view the details on their screens, warning them about the customer's new debt.
Previously it could take weeks for the information to be shared.
Another credit reference agency, Callcredit, has already announced a rapid checking service, to be launched in April, which will update every day.
Thursday, 23 January 2014
Huge cost of pension charges
Paying 1% a year on your pension savings, rather than 0.5%, could cost you £77,900.
Paying 1.5% rather than than 0.5% would cost you £144,200.
That is how much less your fund would be worth because of higher charges -assuming you started putting in £100 month and raised contributions gradually over 46 years and got some decent investment growth.
The analysis comes from the DWP's consultation on capping charges at 0.75% or 1%.
The Pensions Minister, Steve Webb has put off imposing a cap until after April 2015
The average charge for new savers is 0.51% but thousands are already on higher rates.
Paying 1.5% rather than than 0.5% would cost you £144,200.
That is how much less your fund would be worth because of higher charges -assuming you started putting in £100 month and raised contributions gradually over 46 years and got some decent investment growth.
The analysis comes from the DWP's consultation on capping charges at 0.75% or 1%.
The Pensions Minister, Steve Webb has put off imposing a cap until after April 2015
The average charge for new savers is 0.51% but thousands are already on higher rates.
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