Just when it was all going so well…
By and large, the news coming out of world financial centres in September was good. In the UK, Jaguar was planning to create 1,700 more jobs and the OECD were revising their growth forecasts upwards. Shares in the US ‘roared to record levels’ as the Federal Reserve decided to continue its $85bn a month stimulus plan and in the Far East there was a thaw in North and South Korean relations as the Kaesong industrial complex re-opened.
As we said, it was all going so well. And then the Republicans and the Democrats fell out (again) and suddenly the US Government was on the point of running out of money.
The last day of September started with the news that vast parts of the US bureaucracy could shut down at midnight, leaving pensions unpaid, passports unissued and taxes uncollected. Not surprisingly, stock markets around the world took fright at the news and immediately went into reverse – but not by enough to reverse the gains made earlier in the month.
Figures released by the Office of National Statistics (ONS) in June 2013 show that there are now more than one million over 65s continuing to work and earn after passing their anticipated point of retirement. This is the highest number since the ONS started collating this data in 1971.
There are a number of reasons contributing to this change in working patterns. Whilst we might expect that one of the biggest causes is financial need, many older workers choose to continue working because that is what they enjoy and are comfortable doing. Others see the point of retirement as an opportunity to do something different in the world of work, moving into a new area of employment or venturing into self-employment and business development. The ‘Golden Age’ of retirement may not be so attractive to people who have worked all their lives and who are now feeling the loss of feeling valued and motivated as a worker.
In April 2013, the Government published plans to reform the current state pension into a simple Single-Tier Pension (STP), which subject to the agreement of Parliament, will be in place for people retiring after the 6th April 2016. If you reach State Pension age before that date you will receive your state pension in line with existing rules.
It is proposed that if you contribute entirely to the new single-tier scheme, it will replace today’s complicated state pension with a single amount based on 35 qualifying years of National Insurance contributions. If you have fewer than 35 years when you reach State Pension age you will get a pro-rata amount, provided that you have a minimum number of between 7 and 10 qualifying years when you reach State Pension age.
If you have made National Insurance contributions or received credits under the current system, they will be converted into a single-tier foundation amount. Providing you meet the minimum qualifying year requirement, you will get no less than the amount calculated using the present scheme rules. According to the Department of Work and Pensions (DWP), the single-tier pension will deliver a modern state pension based on individual qualification.
Prudential’s Class of 2013 research, the latest of its annual studies into the financial plans and expectations of people planning to retire in the next year, has for the first time looked at the impact of divorce on retirement finances.
The results have highlighted stark differences in expected retirement income between those who have been divorced and those who have not.
The research shows that 40 per cent of those planning to retire in 2013 have been divorced, and in general they are less likely to have private pensions, more likely to retire with debts and less likely to believe they are financially well prepared for retirement.
They are also less likely to expect to be able to leave an inheritance. Divorce reduces average expected retirement income by around £2,600 p.a., and for those who have been divorced and are planning to retire in 2013, this will be an average reduction in income of 16% a year.
Economics and politics often make uneasy bedfellows and so it was in August as the threatened US-led intervention in Syria depressed stock markets at the end of the month.
In the UK, David Cameron suffered defeat in the Commons, appearing to totally mis-judge the strength of backbench opposition. If there’s one thing the financial markets don’t like it’s uncertainty and in the last week of August the Prime Minister delivered precisely that.
Yet on the face of it August was a month when there was much to be cheerful about, particularly in the UK. By the end of the month, both The Confederation of British Industry (CBI) and the British Chambers of Commerce had published optimistic growth forecasts, significantly up on those published earlier in the year.
There was good news and bad news for the world economy in July – as ever, commentators were divided on whether the glass was half full or half empty…
The price of gold has been steadily falling since its peak of $1,900 an ounce in August 2011. At the beginning of July it stood at less than $1,250 – which surely heralds a worldwide return of confidence. After all, gold is traditionally held as a hedge against economic uncertainty and downright financial Armageddon.
Then again, maybe we are facing trouble in the long term. By the middle of July, the G20 group of countries was warning that more and more global multinationals were paying no tax as they skipped nimbly from one financial jurisdiction to the next. Never mind the price of gold, surely someone, somewhere has to pay some tax…
For now, the major stock markets were fairly relaxed about that prospect and they at least decided that the glass was half full. Nearly all the major markets were up in July, with the UK and France leading the way with gains of 7%.
June saw the G8 summit taking place in Northern Ireland – but amid the talk of recession, tax evasion and the cost of the security, it was the fate of two men that stole the headlines.
American hero – or whistleblower, depending on your stance – Edward Snowden was holed up, first in Hong Kong and then in the departure lounge at Moscow airport, having revealed the full extent of NSA surveillance of American citizens.
Meanwhile Nelson Mandela was in intensive care as the world waited for updates on the condition of the man who did so much to shape South Africa – and wondered what the future would hold for the region when the inevitable finally happened.
In the UK, Chancellor George Osborne presented his Spending Review – there barely seems to be a month he’s not presenting something – and then found himself embroiled in a spat over healthy eating with the unlikely figure of Eric Pickles.