Officials from the consultancy LCP have warned that widowed spouses could find themselves in dire financial straits due to state pension system changes. The drop in final salary pension schemes will also leave many facing a financial shock in the event of the death of a partner, according to LCP.
The consultancy recently published a report with data showing that bereaved spouses who retire on the new state pension could be far worse off than bereaved spouses who retired previously. According to LCP analysts, bereaved spouses retiring on the new state pension scheme could face a significant drop in their finances compared to those who retired on the old state pension.
Massive drop in living standards
The report showed that the standard of living for bereaved women fell around 9% under the old system. However, under the new system, the standard of living plummets by about 24%. This is because the old state pension enabled women to get pensions based on their husbands' contributions. However, this was changed in 2016 when the new state pension was brought in.
Steve Webb, former Pensions Minister and now a partner at LCP, said a widow's state pension was enhanced in the past. Under the new system, widows are left facing a financial crisis.
He said, “Coping with bereavement is hard enough, but coping with a sharp fall in living standards thereafter is even tougher. Although the new state pension generally pays more to women in their own right at retirement than the old system, it has very limited provision for widows and widowers.”
Mr Webb added, “Newly retired couples and those coming up to retirement need to find out where they would stand with state and private pensions if one of them were to die and to explore making additional provision to cushion the financial impact of bereavement.”
Experts have warned that couples should think about the future in this respect and try to plan ahead and work out how the surviving partner would cope. Couples enjoying early retirement are also urged to think carefully about taking on any new debt, as this could have a significant impact if income is dramatically reduced due to a death.
Banks could be fined over branch closures
It has been reported that the Financial Conduct Authority is looking at ways to reduce the number of bank branches being closed. This comes after figures showed that more than 4,000 branches have been closed since 2015, which has left substantial numbers of people struggling to access their cash.
According to reports, banks could soon be fined for closing branches. Some could even find themselves being blocked from closing branches under new rules being considered by the FCA. The FCA is keen to ensure that individuals and businesses can access cash with ease and convenience. However, the increasing number of bank closures is currently making this increasingly difficult.
Campaigners have been calling for action
Many campaigners have been calling for action to be taken. Last year, the Chancellor, Rishi Sunak, promised to take steps to protect access to cash.
Last month, the Treasury started the ball rolling by launching a consultation into how new laws to protect access to cash could work. Among the proposals put forward are powers for the FCA to impose fines on banks that close branches in areas where they are considered vital. In addition, the FCA may be given the right to enforce injunctions to block banks from closing branches when deemed necessary.
It is reported that as part of the plans, 90% of neighbourhoods could be given the legal right to have free access to cash within 0.6 miles.
While news of the consultation will be welcomed by campaigners and consumers, it will be a long and challenging process. Though the consultation will continue until near the end of September this year, it is thought that any new laws could take two years to implement and subsequently enforce.
Head of Money at Which?, Gareth Shaw, said, “The government’s proposal to put the FCA in charge of the cash system, including holding industry accountable for providing access, is a vital step. As cash machine and bank branch numbers continue to decline sharply, the government’s legislation plans cannot be introduced soon enough.”
Treasury officials also commented on the consultation, with one spokesperson stating, “We know that cash remains vital for millions of people, and we are committed to protecting access to cash across the UK.”
Energy bills set to rocket in the autumn
It has been revealed that millions of people across the UK face soaring energy bills this year just as colder weather comes around.
Energy price increases are set to hit in October as the chilly autumn weather sets in. The energy regulator, Ofgem, has confirmed that the price cap for default energy deals will be increased in a bid to cover extra costs faced by suppliers.
As a result, the average energy customer could see their energy costs rise by £139 a year, taking the average annual gas and electricity bill to £1,277. In addition, customers on prepayment metres could see costs increased by over £150, bringing their yearly bill to £1,309.
Families will be hit hard
Charities have said that many families will be struck financially because of the increases, particularly considering the timing. Many families will already be facing the financial impact of universal credit being reduced at around the same time, so this will be an added financial burden.
Ofgem's Jonathan Brearley spoke to the BBC regarding the reasons behind the energy price hikes. He said, "The reason the price cap is going up is there has been a record increase in energy prices across the board, not just in gas and electricity but in petrol and diesel."
He also said that energy customers needed to ensure they shopped around to try and get the best deals, adding that switching could result in significant savings.
Mr Brearley said, “You don't have to live with this tariff. The price cap is a backstop. We'd encourage any customer, particularly those struggling to pay their bills, to contact their supplier, and get access to a wide range of help and support.”
However, Peter Smith from the charity National Energy Action said that the considerable increase will come at the worst time for millions of households. He described the increase as 'devastating'. He added that millions of families were already struggling financially, and this increase would push many into fuel poverty.
Senior economist, Jonathan Marshall, said that it was vital for the government to focus on its warm homes discount scheme given the up-and-coming price increase. In addition, he said that the government needed to seriously consider reversing the decision to remove the universal credit increase of £20, which was brought in at the onset of the Covid-19 pandemic.
Over one-third of Brits targeted by scammers in the past year
Shocking new figures have shown that millions of Brits have been targeted by financial scammers in the past year alone. An Openwork survey found over 20 million Brits had been targeted by financial scammers, with the problem surging over the past 18 months.
Many have experienced substantial financial issues over the past 18 months because of Covid-19, which has brought job losses and reduced income due to furlough. The pandemic has also led to a sharp increase in scams, with 38% of Brits targeted over the past year.
The report from Openwork also showed that just 4% of people believe that fraud scams have dropped over the past year, and 15% said that they or someone they knew had lost money to financial scammers.
Scams causing frustration among consumers
With so many people battling their own financial issues because of the pandemic, the rise in financial scams has caused much frustration and anger among consumers.
According to the data, 45% of people feel frustrated that the police, regulators, and the government do not appear to be taking any action to put an end to these scams. In addition, close to 40% said they were angry that there seemed to be no punishment for attempted scams.
The report also indicated that the most common method used by scammers to try and claim their victims was email. Around 55% of people said that they or someone they knew had received suspicious emails. Another 52% said that they or someone they knew had been targeted by scammers by phone, and 44% by text. Just 7% said that they or someone they knew had been targeted via letters sent by scammers.
Mike Morrow from the Openwork Partnership said, “The pandemic has been a playground for financial scammers as more people have had to go online to carry out essential business. It is worrying to see the sheer scale of scamming with more than 20 million reporting an increase in attempts over the past year and sizeable numbers saying they or people they know have lost money. We would urge people to always take professional financial advice before making major decisions and always report attempted scams where possible.”
Many pensioners missing out on state pension boost
The Department for Work and Pensions (DWP) has warned that huge numbers of pensioners are failing to claim a state pension boost that they are entitled to.
According to DWP officials, most retirees don't claim pension credit even though many are entitled to it. The benefit is designed to help pensioners on a low income. It also enables successful claimants to get other assistance, such as a free TV license if they are aged 75 or over.
Despite the benefit's availability, many pensioners continue to struggle on a meagre income, with many not even aware that pension credit exists. The DWP is now urging those who think they may be eligible to make an application, which can be done quickly and easily online.
Designed to top up the income of eligible pensioners
Pension credit is designed to top up the income received by eligible pensioners and can provide a valuable and essential income boost. However, many pensioners are unaware of the benefit. As a result, huge numbers have failed to make a claim despite being eligible to do so.
The DWP stated, “Two in five eligible pensioners do not claim Pension Credit to help with living costs. If you know someone over state pension age, make sure they don’t miss out by telling them about it or helping them to apply online.”
Pensioners who think they may be eligible for pension credit can go onto the GOV.UK site for details about eligibility. There are also tools available for potential claimants to calculate their current income, and the questionnaire can be completed online to determine eligibility.