Wealth Design News

UK house prices fell 0.7% in December and price growth for last year dropped to its slowest pace since 2013, according to the latest Nationwide House Price Index. The average price of a house fell to £212,281 in December, compared with £214,044 in November, and the rate of growth dipped to 0.5% for 2018, down from 2.6% the year before. The building society said the primary cause of the slowdown was the unusually uncertain economic outlook. Most commentators believe it is likely that the recent slowdown is attributable to the impact of the uncertain economic outlook on buyer sentiment, given that it has occurred against a backdrop of solid employment growth, stronger wage growth and continued low borrowing costs. 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.
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.
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.
Christmas Day and Boxing Day prove to be very popular for filing Self Assessment returns. HMRC has reported that over 10,000 Self Assessment tax returns were filed over Christmas Day and Boxing Day. For many completing their tax return may not be a top priority on Christmas Day, but for some taxpayers completing their return on Christmas Day is as traditional as spending time with family and friends, or waiting for the Boxing Day sales to start, says HMRC.

With this in mind, now is a good time to remind clients that the online Self Assessment deadline of 31 January is round the corner. More importantly, failing to submit the return and pay any tax due could be costly for clients as penalties will be levied. Also for those who completed a Self Assessment tax return last year but didn’t have any tax to pay, they still need to complete a 2017 to 2018 tax return unless HMRC has written to them to say that it is not required.
HMRC has announced a new and final settlement opportunity for employers, employees and contractors who have used disguised remuneration schemes in the past. This will give them a chance to settle their tax liability now before a new loan charge is introduced. Typically, disguised remuneration schemes involve an employer paying a contribution to a third-party, usually an employee benefit trust, rather than paying an employee directly. The trust then pays the employee in the form of interest-free loans with terms that mean they will never be repaid in the recipient’s lifetime, thereby avoiding the income tax and NICs that would otherwise arise from the payments.

Those who would like to take advantage of this opportunity have to register their interest with HMRC by 31 May 2018 and make a full disclosure by 30 September 2018. Meeting these deadlines will give those involved the time they need to complete the settlement before the new loan charge becomes effective on 5 April 2019.
Pension experts are warning the government's proposed single pension finder service for the pension dashboards will unnecessarily drive up costs for providers and the end consumer. The Department for Work & Pensions (DWP) had published a consultation on the project on Monday (December 3), accompanied by the long-awaited feasibility study, which proposed multiple dashboards but a single system to search for data from different pension schemes. The plan for the pension dashboards, with the first one due to be launched in 2019, was to allow savers to see all of their retirement pots in one place at the same time, giving them greater awareness of their assets and how to plan for their retirement. The government said the pension finder service, which will collate the data, should be run on a non-profit basis and it left it to the dashboard industry delivery group to decide how to best deliver it. The fears are that having only one finder service means there is a lack of competition on pricing.
A high court judge has granted a judicial review to determine whether recent increases to women’s state pension age were lawful. The case was brought by BackTo60, a campaign group representing women born in the 1950s who have borne the brunt of recent of increases to the state pension age. Until 2010, women received their state pension at age 60. However, this has gradually been increasing and currently state pension age is 65 for both men and women and will increase to 67 by 2028. State pension ages rose faster for women, in order for them to be equalised with men’s. BackTo60 and other campaign groups, notably WASPI (Women Against State Pension Increases) argue that many women born in the 1950s were not warned of the changes and have suffered financial hardship as a result. BackTo60 is campaigning for all women born during the 1950s to have their financial position restored to the position it would have been, had the state pension age remained at 60.
On Friday 23 November when the proposed benefit rates and pension rates for 2019/2020 were set out in a written ministerial statement by the Minister for Family Support, Housing and Child Maintenance (Justin Tomlinson, if you cannot remember). Curiously this is not mentioned on the DWP website or included as an announcement, although it can be found by trawling through the DWP publications list.

The main numbers to note are:
  • The New State Pension (aka single tier) will rise by £4.25 a week (2.6%) to £168.60. That increase was driven by the July rise in the average earnings element of the triple lock (CPI inflation was 2.4% for the year to September and RPI inflation 3.3%).
  • The Old State Pension (aka basic) will rise by £3.25 a week (also 2.6%) to £129.20, again on the triple lock principle.
  • Additional Pension, Graduated Pension and other pension increments will rise by 2.4%, in line with CPI.
  • The main working-age benefits, such as Employment Support Allowance, Jobseeker’s Allowance, Income Support and most of Universal Credit remain frozen for the fourth (and final) year.
Around three million homeowners expect to still be paying back their home loans into retirement and lenders are responding by launching increasing numbers of mortgages for older borrowers. One in five (21% of) mortgage holders – which works out at around three million people – worry that they’ll still be paying their mortgage off into retirement. Over half (58%) don’t know how they’ll keep up their repayments when they’re no longer working, and 53% of that group are already aged over 55, meaning time is running out to make a plan. The ageing population coupled with many people having to wait longer to buy their first home has prompted some lenders to innovate.

This new type of deal is designed for retirees who may struggle to get approved for a repayment mortgage because of their age and reduced income. As the name suggests, you just pay back the interest (and none of the capital) each month; the loan itself is only paid back once the mortgage ends. In this regard, RIOs are just like regular interest-only mortgages. However, most retirement interest-only mortgages come with indefinite terms, meaning they only need to be paid back when you die or go into long-term care and the house is sold.
On 30 November 2018 a campaign group called Backto60 won the right to a Judicial Review of the Government’s handling of a rise in their state pension age from 60 to 65.

The group argue that women born in the 1950s have been disadvantaged by the increase of their state pension age from 60 to 65. In addition, they argue that they were not appropriately notified about the change. The DWP has resisted calls to compensate for the change and dispute the call for the Judicial Review. On 23 November, Djuna Thurley and Richard Keen published a House of Commons Briefing Paper, Number CBP-7405, on the same subject.

This document is extensive, running to 60 pages, but in the summary the document states: The Government argues that the changes in the 2011 Act were debated at length and a decision made by Parliament, as part of which a concession was made to limit the impact on those most affected. It says it will “make no further changes to the pension age or pay financial redress in lieu of a pension.” This clearly shows the stance of the Government on this subject.