Over 230,000 savers have taken money from their pension pot, reveals HMRC

232,000 individuals have withdrawn an overall total of £4.3 billion from their pension pots since the introduction of new pension rules a year ago, HM Revenue & Customs (HMRC) data has revealed.

In the initial three months of 2016, 74,000 people withdrew a total of £820 million from their pension savings.

The latest figures are inclusive of those taking flexible incomes from their pension pot, and individuals purchasing annuities.

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Since 6 April 2015, retirees aged 55 or over have been able to withdraw up to 100% of their pension pot, subject to income tax.

Previously, savers have had to pay a 55% tax charge.

Retirees are now able to withdraw all the funds at once, or can take savings out as permitted by their pension provider.

However, the latest figures are lower than previous Financial Conduct Authority (FCA) estimates: the FCA had revealed that 179,000 people withdrew money from their pension pot during the third quarter of 2015 alone.

These lower figures may be due to under-reporting to HMRC.

Harriet Baldwin, Economic Secretary to the Treasury, stated: ‘It’s only right that people should have a choice over what they do with their money and in their first year our successful pension freedoms have already given thousands of people access and responsibility over their hard-earned savings’.

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Chancellor claims Brexit threat is ‘weighing on the economy’ as UK growth slows

Britain’s Gross Domestic Product (GDP) grew by 0.4% between January and March, down from 0.6% in the last quarter of 2015, according to figures from the Office for National Statistics (ONS).

Although the three months of 2016 showed slower growth than the previous quarter, the 0.4% rate was in line with expectations, and marks the 13th consecutive quarter of positive growth for the UK. On an annual basis, growth was 2.1%.

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Chancellor George Osborne said that the fact that Britain was still growing was ‘good news’, but added that ‘there are warnings . . . that the threat of leaving the EU is weighing on our economy. Investments and building are being delayed, and another group of international experts, the Organisation for Economic Co-operation and Development (OECD) confirms British families would be worse off if we leave the EU’.

The OECD had earlier claimed that Britain leaving the EU would be the equivalent of imposing an additional ‘tax’ of one month’s income on UK workers, and that economic growth would be lower outside the EU. It suggested that leaving the EU would result in 3% lower economic growth than would otherwise be the case by 2020, rising to 5% in 2030 and costing households, on average, £3,200.

These claims were heavily criticised by Leave campaigners. Economist and Brexit campaigner, Andrew Lillico, said that the figures implausibly assumed that the UK would be unable to agree a trade deal of any kind with the EU before 2020, or preferential deals with other countries before 2023. He said: ‘One of the main reasons we would leave the EU is in order to do new trade deals with the rest of the world, with Japan, Australia and other countries’.

The ONS attributed the economic slowdown to a drop in manufacturing and construction output, but said it had no evidence for it being linked to the forthcoming EU referendum – and many economists expect growth to accelerate again this year.

Ruth Miller, UK economist at Capital Economics, said: ‘Many of the factors likely to be to blame for the first quarter’s weakness should prove short-lived. We would not be surprised if growth were to subsequently accelerate in the second half of the year, putting the economy back on track’.

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TUC study finds significant wage gap between working fathers and childless men

A new report by the Trades Union Congress (TUC) has found that fathers working full-time get paid a fifth more than childless men with similar jobs.

The study revealed that fathers earn, on average, a 21% ‘wage bonus’ compared to men without children, and that those with two children earn on average 9% more than those with just one.

In its analysis of the findings, the TUC suggests that the ‘wage bonus’ can be partly explained by fathers working longer hours and putting in increased effort at work. Labour market figures show that men with children work slightly longer hours, on average, than those without.

An additional factor may be positive discrimination: the TUC report cites international studies, which found that CVs from fathers were scored more highly than identical ones from non-fathers. This suggests that employers potentially view fathers as ‘more reliable and responsible employees’.

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However, this is in contrast to the experience of working mothers. The report found that women who become mothers before 33 typically suffer a 15% ‘pay penalty’.

The same international studies revealed that CVs from mothers were marked down against those from women without children, and UK figures show that mothers tend to work shorter hours than childless women in similar jobs.

The report used data from the 1970 British Cohort Study, which follows the lives of more than 17,000 people born in England, Scotland and Wales in a single week of 1970.

TUC General Secretary, Frances O’Grady, said: ‘In stark contrast to the experience of working mums who often see their earnings fall after having children, fatherhood has a positive impact on men’s earnings.

‘It says much about current attitudes that men with children are seen as more committed by employers, while mothers are still often treated as liabilities.

‘While men play a much more active role in raising their children nowadays, many are afraid to request flexible working or time off in case it damages their career prospects.

‘We won’t break this cycle unless fathers are given access to independent paid leave to look after their kids, that isn’t shared with their partners. And we need more decently-paid jobs to be available on a reduced hours or flexible work basis. This would reduce the motherhood pay penalty and enable more dads to take work that fits with their parenting responsibilities.’

Studies have consistently shown that men earn more than women, regardless of whether they are parents or not. The Office for National Statistics (ONS) recently revealed that the gap between men and women’s pay for full-time workers was 9.4% in April 2015, compared with 9.6% in 2014.

Government to review rules that ‘stifle’ entrepreneurship

The Government has announced plans to investigate red tape that it claims may be ‘stifling’ small businesses and entrepreneurship.

Business Secretary Sajid Javid is due to launch a call for evidence on the rules surrounding so-called ‘non-complete clauses’, which prevent individuals from competing against their former employer.

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The clauses can currently be written into an employee’s contract for a set period of time, sometimes up to nine months. The clause may then be enforced by a court of law if it is found to protect a ‘legitimate interest’ and is ‘reasonable’.

However, the Government said it believes these rules could be hampering innovation by preventing employees from starting up their own business. Some critics have also warned that the clauses could hinder businesses from hiring the best people.

Commenting, Mr Javid said: ‘Home to some of the most innovative companies in Europe, Britain is already ahead of the curve in many ways when it comes to driving forward new ideas.

‘But I am clear that I want to see more enterprising start-ups and greater productivity in a free and fair marketplace, by making sure we take action to break down any barriers that are curbing innovation and entrepreneurship.’

Businesses are also being invited to take part in an ‘Innovation Survey’ to share their views on how the UK can improve its innovation framework. Further information can be found here.

FCA outlines rules for pensions secondary annuity market

The Financial Conduct Authority (FCA) has published a consultation paper with proposed rules and guidance for the pensions secondary annuity market, in an attempt to protect ‘vulnerable’ pensioners.

Currently, it is possible to sell an annuity, but doing so incurs a tax charge of between 55% and 70%. From April 2017, individuals who receive a lump sum from selling their annuity will only pay tax at their highest marginal income tax rate. The Government currently estimates that 300,000 people will cash in their products.

This will create a secondary market for people to sell their annuity, and the FCA has been tasked with proposing regulations to ‘balance the need to support this new market with protecting consumers’.

Christopher Woolard, director of strategy and competition at the FCA, said: ‘Opening up this market extends the Government’s pensions reforms to those who have already bought annuities, however, there are potential risks involved for consumers and we recognise that some consumers may be particularly vulnerable. We have set out proposed rules and guidance . . . that will help ensure that consumers have an appropriate degree of protection should they decide to sell their annuity income.’

The proposals include:

  • requiring sellers to seek financial advice for annuities over a certain value, and giving them specific warnings of the risks early in the selling process
  • extending the Government-backed, free Pensions Advisory Service
  • requiring brokers to gain consent from anyone else who would benefit from the annuity, such as a spouse, before it is sold
  • requiring brokers and advisers to set out their charges upfront
  • introducing a 14-day cancellation period and providing access to the Financial Ombudsman if sellers are unhappy.

The consultation will be open until 21 June 2016.

The Financial Conduct Authority (FCA) has published a consultation paper with proposed rules and guidance for the pensions secondary annuity market, in an attempt to protect ‘vulnerable’ pensioners.

pension

Currently, it is possible to sell an annuity, but doing so incurs a tax charge of between 55% and 70%. From April 2017, individuals who receive a lump sum from selling their annuity will only pay tax at their highest marginal income tax rate. The Government currently estimates that 300,000 people will cash in their products.

This will create a secondary market for people to sell their annuity, and the FCA has been tasked with proposing regulations to ‘balance the need to support this new market with protecting consumers’.

Christopher Woolard, director of strategy and competition at the FCA, said: ‘Opening up this market extends the Government’s pensions reforms to those who have already bought annuities, however, there are potential risks involved for consumers and we recognise that some consumers may be particularly vulnerable. We have set out proposed rules and guidance . . . that will help ensure that consumers have an appropriate degree of protection should they decide to sell their annuity income.’

The proposals include:

  • requiring sellers to seek financial advice for annuities over a certain value, and giving them specific warnings of the risks early in the selling process
  • extending the Government-backed, free Pensions Advisory Service
  • requiring brokers to gain consent from anyone else who would benefit from the annuity, such as a spouse, before it is sold
  • requiring brokers and advisers to set out their charges upfront
  • introducing a 14-day cancellation period and providing access to the Financial Ombudsman if sellers are unhappy.

The consultation will be open until 21 June 2016.

Chancellor warns businesses not to cut perks to compensate for National Living Wage

Chancellor George Osborne has issued a warning to businesses that choose to cut perks for their employees in order to compensate for the additional costs generated by the implementation of the National Living Wage (NLW).

A significant number of businesses have reduced overtime pay and other work-related benefits in order to fund the rise.

Commenting on the issue, the Chancellor stated: ‘We will enforce the letter of the law but we want companies to also live by the spirit of the law’.

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Mr Osborne’s comments come following a Commons debate regarding the impact of the new NLW, which is set at a rate of 50p an hour more than the National Minimum Wage (NMW).

A motion urging the Government to ensure that low-paid workers are protected was also passed, following a warning that thousands have been left ‘significantly worse off’ as a result of the introduction of the NLW.

The new NLW came into effect on 1 April 2016 for workers aged 25 or over. Initially set at £7.20, the wage could potentially rise to over £9 an hour by 2020.