Steps are being taken to help ensure Brits make the most of their retirement. This will be achieved by providing guidance that will enable them to make more informed choices regarding their retirement.
It is hoped the move will enable and encourage hundreds of thousands of people to get expert guidance regarding their pensions before they consider accessing their money. The scheme is set to come into force from June 2022.
Appointments with Pension Wise before withdrawing any funds
As part of the new scheme, pension providers will need to offer appointments with Pension Wise to customers who are considering drawing funds from their pensions for the first time. The Pension Wise service is backed by the government and enables people over 50 to get free advice.
Under current rules, pension providers must tell savers about Pension Wise so they know the service is available. However, they do not have to offer to make an appointment, and many people do not bother to do this themselves. Under the new rules, they will need to offer an appointment or provide details to make one. This could result in more people choosing to receive guidance before drawing on pension funds.
Providers that handle personal and stakeholder schemes will need to abide by the new measures when they come into play next summer. This includes those operating self-invested personal pensions. In addition to referring customers to Pension Wise with the offer of an appointment, providers will also have to explain the purpose of the guidance and how it will benefit the customer.
Making sure people have the right information
The Financial Conduct Authority (FCA) wants to ensure that people have the correct information to hand when making decisions about their pensions. It is hoped that accessing guidance and support via Pension Wise will help many make wiser decisions.
Sarah Pritchard, FCA Executive Director for Markets, said: “We want to make sure people get the guidance and advice they need to secure the best retirement possible."
Pension Wise has been running since 2015 and was initially set up after pension reforms gave Brits the ability to freely draw their pension money when they wanted to. Figures show that in 2019/2020, the service conducted over 130,000 appointments either by phone or in person, increasing 29% compared to the previous year.
Scheme to get cashback at shops being expanded
It has been reported there will be a rapid expansion of a scheme that allows people to withdraw their cash from shops in the form of cashback. According to reports, the scheme will expand quickly in the coming weeks due to the rising number of ATMs being closed.
The ability to take cash out at shops has already been trialled, with around 900 shops offering the facility. The plan is to expand this quickly to approximately 2,000 shops, giving consumers easier access to their money as cash machines continue to disappear. The facility is provided through the PayPoint network in local shops and is backed by Link.
One of the benefits of shop withdrawals is that people can withdraw any amount they wish up to £50 rather than being limited to the sums and denominations that cash machines allow. In addition, they do not have to make a purchase at the shop, and there are no fees applied.
The trial of this service has been in place for a year. Close to 25,000 transactions have taken place during that period, with £27.81 the average amount withdrawn during the trial.
Warning about the expansion of the scheme
While many people will be happy about the scheme's expansion because of ATM closures, not everyone sees it as a positive. Some retail groups believe that there could be issues with the expansion and that shops should not be seen as a substitute for ATMs.
Tom Ironside, director of business and regulation at the British Retail Consortium, said, "Alternative ways of providing cash are essential, which is why we welcome the extension. Nonetheless, the provision of cashback is not suitable for all retailers as it often requires them to hold significantly more cash than normal - putting them at an increased crime risk. For this reason, the availability of free-to-use ATMs in all parts of the country remains essential."
Martin McTague, from the Federation of Small Businesses, also commented on the situation. He said that there needed to be incentives for shopkeepers in order to expand the scheme successfully. This included payments that would cover higher insurance costs relating to having more money onsite and compensation for the time involved in taking cash to and from access points.
Many middle-aged people turning to BNPL
According to a recent report, more people have been turning to buy now pay later (BNPL) services recently, including many people in their 40s and 50s. The fastest growth has been seen in these age groups, and experts say that this shows that the issue is no longer confined to younger people.
Data shows that more than 17 million consumers in the UK have used BNPL companies to make online purchases. There are also predictions that this Christmas will be the biggest one yet for this payment method. Those who use BNPL can either delay payment of their bill for a specified period or spread the repayments.
The heightened risk of debt
While some consumers rely on this payment method, particularly at Christmas when there are lots of gifts to purchase, others believe that it could lead to a rising debt problem. Some have said that stricter rules are necessary to try and control spending among consumers so that people do not fall into unmanageable levels of debt.
The biggest provider of these services in the UK is now Klarna. According to figures, its customer base has doubled to 15 million since the early part of last year. Other BNPL providers are also seeing their customer numbers grow as more people decide to use this payment method when making their purchases.
Citizens Advice recently carried out a survey, with the results showing close to 10% of people were planning to use BNPL for Christmas shopping. Consumers are being urged to avoid spending more than they can realistically afford to repay.
Kate Hobson from Citizens Advice said, "If you're considering using buy now pay later, make sure you understand what you're signing up for, how you'll make the repayments, and what will happen if you can't pay on time."
Despite these concerns over mounting debt, operators have said that their services provide consumers with a simple and stress-free way of making purchases and enjoying more financial freedom. They said that, unlike credit cards, customers can avoid paying interest and that many repay what they owe early.
DWP reveals scheme to help pensioners access cash after Post Office card accounts close
In light of the impending closure of Post Office card accounts, the Department for Work and Pensions (DWP) has announced a new service that could be a financial lifeline to many pensioners and other benefits claimants.
Many people use these accounts and have their benefits paid into them. However, the accounts are scheduled to close, although an extension has been put into place to ensure people have enough time to find an alternative banking solution. The extension means some people can keep their accounts active for another year, so they have longer to make arrangements to open another suitable account.
New Payment Exception Service
The government wants to ensure that all account holders can safely transition to traditional bank accounts or suitable alternatives. This is why the closures, announced in September, have now been pushed back. The previously scheduled closing date was November of this year, but the pandemic has caused so much disruption that the government had to rethink this date.
In addition, a new Payment Exception Service has been announced for those who are unable to open another account to replace their Post Office card account. Under the new service, claimants will choose how they get their payments, including using a new card to get it directly from the Post Office.
The Pensions Minister, Guy Opperman, said, “Whilst the vast majority of pensions and benefits are paid directly into peoples’ bank accounts, some people prefer to collect their payments over the counter at their local Post Office. This extra time means we can support our most vulnerable customers to move to the payment method that will suit them best – even if that means making sure they can still get cash via the Post Office using a card from the new Payment Exception Service.”
In the meantime, the DWP has confirmed it will write to all pensioners and claimants that receive their money into Post Office card accounts to update them about the closures. In addition, a second letter will be sent to all affected account holders to advise them of the new Payment Exception Service and to advise that they will be moved over to this if they are unable to find an alternative account.
Family spending set to rocket due to soaring inflation
A worrying forecast carried out for BBC Panorama by the Centre for Economics and Business Research (CEBR) suggests that household spending could rise by over £1,700 per year next year. This is due to soaring inflation, with predictions that it could increase to 4.6% by Christmas. The increases are primarily the result of higher fuel and energy prices.
According to analysts, consumers are not yet feeling the true impact of rising inflation because the full extent of the increases has not yet been passed down to us. Supermarkets are maintaining pricing consistency to avoid losing customers at what is the busiest and most lucrative time of the year. Therefore, many are taking the hit themselves to keep prices down despite rising inflation.
Forecast based on a range of commonly purchased items
The forecast suggests that families of two adults and two children will see living costs increase by £33.60 per week.
Price increases will be seen on a range of items commonly purchased by households, such as food, household items, and clothing. In addition, increased payments on energy bills will hike up spending for the average family, as will the cost of transportation and even recreational activities as a family.
The data is based on the spending habits of families remaining as they are now and assumes inflation remains at the 4.6% level it is expected to increase to. However, many believe that inflation could increase far beyond this level in 2022, meaning further financial strain for families.