Chancellor Rishi Sunak has been warned that dropping the state pension age could decrease recipients' payments. There has been increased pressure for the state pension age to be lowered recently. Some claim that dropping the age from 66 to around 63 could help boost the economy.
Several potential changes are set to take place regarding the state pensions system. This includes the possible abandonment of the triple lock system due to the expected higher-than-normal increase in average earnings as the country continues to recover from the Covid-19 pandemic.
Younger people struggling to find work
One of the key reasons behind the calls for a drop in the state pension age was that younger people are struggling to find work after losing their jobs during the pandemic. Some believe that it is much fairer for older people to be able to retire earlier, thus freeing up more jobs for younger people who need to find work.
Many believe this would prove helpful in several ways. First, it would allow older people to draw their state pension sooner and enjoy a longer retirement. Second, it would mean more jobs become available for younger generations who need to earn a living but struggle to find work.
A recent petition called for the pension age to be lowered to help the economy and reduce unemployment among the young. This has put mounting pressure on the government to consider lowering the state pension age.
However, Steven Cameron, a pensions expert from Aegon, warned that reducing the state pension age could see monthly state pension benefits drop.
He made a statement recently, saying, "The older the state pension age is, the more difficult it will be for some in stressful or manual occupations to keep working until state pension age. There is a case for government to explore allowing people to choose to take their state pension from an earlier age, perhaps 63, but at a reduced amount to reflect the fact it is starting earlier and will be paid for longer."
Mr Cameron added, "Offering early access at a reduced level could be a big help to many thousands. It’s already possible to defer taking state pension in return for an increased weekly amount.”
Contactless card limits to increase again next month
The limit on contactless card transactions is set to rise again next month. The limit was increased from £30 to £45 last year as more people were using cards for payment at the height of the pandemic. This is now set to grow again, to £100.
Banks have revealed that the latest increase will come into force on 15th October after plans to increase the limit were announced in the Budget earlier this year. According to figures, close to two-thirds of all debit card transactions are made via contactless technology, with far more people now using this payment method than before the pandemic.
Concerns about crime levels
While many will see the increased limit as means of enjoying greater convenience and ease; however, some are concerned it will lead to an increase in crime. The fact that no PIN is needed to conduct transactions means that anyone who gets hold of another person’s card will be able to spend up to £100 on it once the limit is raised.
The limit on contactless transaction values has risen gradually since being introduced in 2007 when it stood at just £10.00. It then increased to £20.00 in 2012, and £30 in 2015. The increase to £45 was made last year due to the pandemic and subsequent growth in card payments.
Speaking about the increase, Chancellor Rishi Sunak said, "Increasing the contactless limit will make it easier than ever to pay safely and securely. As people get back to the High Street, millions of payments will be made simpler, providing a welcome boost for retailers and shoppers."
Credit card use hits highest levels since before the pandemic
Figures have shown that credit card use surged to its highest level since before the pandemic, thanks to people splurging on plastic over the recent bank holiday weekend. Brits are said to have used their cards more over the August bank holiday this year than at any time since Christmas 2019.
In August, the number of people spending on the High Street was just 18.6% lower than before the pandemic. This made August the best month for spending since the start of Covid-19. The sectors benefitting most were hospitality, leisure, and entertainment.
Considerable rise in transactions
According to Barclaycard, the August bank holiday weekend saw transactions increase by 14.4% compared to the same period in 2020. In addition, transaction levels were up by 9.4% compared to 2019.
While the Office for National Statistics recently suggested that caution being exercised by Brits had caused a levelling off in card spending, Barclaycard said spending had been strong over the recent bank holiday. The financial giant, which accounts for £1 in every £3 spent on debit and credit cards, said some sectors had enjoyed a significant boost due to the spending.
Barclaycard Payments chief executive Rob Cameron said, “This is hopefully a sign of more positive times to come, and a testament to the strength and resilience of British businesses when it comes to adapting and thriving in a post-lockdown world.”
He added, “The sectors where we’ve witnessed particularly strong growth – leisure and entertainment, and food and drink – demonstrate that consumers certainly haven’t lost their appetite for a celebration.”
Savings shortfall affecting financial security
A recent report from Yorkshire Building Society and the Centre for Economics and Business Research claims that Brits are suffering a vast savings shortfall when it comes to enjoying financial security.
According to the report, Brits need to plug a collective shortfall of £371 billion if they want to have adequate savings to cope with financial shocks in the future. To feel financially secure, experts claim people should have savings of £17,465. However, on average, people have around £10,245 saved up, which means a shortfall of over £7,000.
More money saved during the pandemic
While a significant amount needs to be saved by the average person to enjoy financial security, data shows that financial resilience has improved dramatically over the past year. Some experts believe this is due to people putting more money aside and spending less because of the pandemic and the various lockdowns.
Data shows that financial resilience improved the most in London, which has now become the second most financially resilient urban area. In 2019, it was in 15th place, so the improvements have been dramatic. On the other hand, financial resilience fell in Sheffield, which slid from second place in 2019 to seventh in 2020. The most financially resilient city was Edinburgh, while the least resilient was Milton Keynes.
Many people experienced financial woes during the early stages of the pandemic. Some were furloughed on partial salaries, while others were laid off altogether. However, throughout the year, many managed to put aside more cash than before due to various grants and schemes from the government and not going out because of the restrictions in place.
However, even though financial resilience has improved in many areas, there are concerns that many people will feel the pinch over the coming months. Costs such as transport, housing, and energy are expected to increase throughout autumn and winter, and this could leave many people facing severe financial strain.
In addition, data shows that savings levels have already started to drop now things are getting closer to normal and restrictions have been lifted. Bank of England figures showed that savings levels in July fell to £7.1 billion, compared to £9.8 billion in June.
Tina Hughes, director of savings at Yorkshire Building Society, said, “Despite many people managing to put away more money during the past 18 months, this latest research proves just how fragile people's savings are, and how far away they are from reaching a state where they feel they have sufficient reserves to be financially secure.”
Older homeowners losing out financially due to reluctance to downsize
According to recent research, the number of homeowners aged 55 and over who want to stay in their homes has increased in the past few years. The pandemic has further bolstered this trend, with more older homeowners wanting to stay in their existing homes despite many having spare rooms they do not need or use.
Officials said that many people who are refusing to downsize could be losing out on tens of thousands of pounds. In fact, calculations show that, on average, these homeowners could make £150,000 in cash by downsizing, particularly given the rise in house prices seen over recent months. Despite this, the number of older homeowners looking to downsize has fallen by 200,000 in three years, according to Legal & General Financial Advice.
More value on space and community
The report claims that many empty-nesters in the 55+ age bracket now put more value on space and community than on making money. The pandemic has made them value their space and communities even more, leading to more people in this age group deciding not to downsize even though they live in properties that are far bigger than their needs.
Data shows that nearly a quarter of all households aged 55+ is made up of potential downsizers, equating to 2.9 million homes. Many asked about their reasons for not downsizing said it was down to not wanting to leave the security of their local communities.
Sara McLeish, chief executive of Legal & General Financial Advice, said, “The impact of Covid-19 has clearly changed the mindset of many older homeowners, and we can see there has been an uplift in those who want to keep hold of their home.”
She added, “Over time, priorities can change, and it is only natural that over the course of the 16 months people have grown closer to their local community, valued having family nearby, and enjoyed having the space to relax while in lockdown.”