A recent report commissioned by Royal London estimates that millions of workers who retire before their State Pension Age could give a significant boost to their state pension.
If a worker misses out on a number of years National Insurance contributions, for example early retirement, career break or working abroad, they can make voluntary payments for the missed years. Royal London estimate this can give a return of around 30%.
Employees of schemes that were contracted out might also be able to catch up on the missed years.
The new Flat Rate State Pension was introduced earlier this year. For people retiring after 6 April 2016 the full flat rate pension is £155.65 per week. This is based on someone making 35 years of full flat rate national Insurance contributions. However, people that paid reduced contributions will not receive the new rate at the start of the scheme.
Former Lib Dem MP Steve Webb, is now director of policy at pensions firm Royal London. Mr Webb said that “paying voluntary or ‘Class 3’ contributions were attractive because the rate paid on these contributions is heavily subsidised by the Government.”
He confirmed that one year of Class 3 National Insurance Contributions can be purchased for £733. This will potentially boost someone’s state pension entitlement by £230 per year for the rest of their lives.
Assuming someone lives for twenty years in retirement then an additional £4600 of extra State Pension would be generated. Someone who filled five ‘missing’ years in their national insurance contributions could receive an extra £23,000 in pension by paying £4,000, according to Webb.
Royal London have recently issued a publication called ‘ good with your money'. It provides useful information about the state pension.
Webb said: ‘Large numbers of workers could gain a substantial boost to their retirement planning for the payment of a relatively modest lump sum. But the rules around topping up State Pensions are complex so we hope that our new guide will help people to navigate the system.
‘It is rare for the Government to offer something on such generous financial terms and we want to make sure that everyone knows how to take advantage of this opportunity’.
Many public sector workers are entitled to take their workplace pension at the age of 60, but will not get a state pension until they are 65 or 66.
This means that no national insurance contributions are paid between their retirement date and State Pension Age. Buying additional years using class 3 contributions can be a very effective way of boosting your State Pension.
Royal London estimates around 210,000 NHS workers, 150,000 teachers and 130,000 civil service workers could make gains from voluntary contributions payments.
More on the State Pension
If you are interested in finding out more about your State Pension entitlement, then the best thing to do is to obtain a pensions forecast. This is very simple to do. All you need to do is call the Future Pensions Centre on 0345 3000 168. You will need your personal details to hand including your National Insurance number.
By now, you’ve probably heard the news: Your own behavioural biases are often the greatest threat to your financial well-being. As investors, we leap before we look. We stay when we should go. We cringe at the very risks that are expected to generate our greatest rewards. All the while, we rush into nearly every move, only to fret and regret them long after the deed is done.
August is traditionally a quiet month as
people go on holiday, factories close and parliament takes a break. Sadly, this year was dominated by terrorist
atrocities in Barcelona, and by an increasingly combative rhetoric from North
Korea that culminated in the firing of a missile over Japan. This brought about
a heightened demand for perceived “safe-haven” assets, whilst the price of gold
surged to an eleven-month high and reached its highest level since President
Trump’s election in November 2016.
Weather has dominated the headlines, with Tropical Storm Harvey hammering Texas and the US Gulf Coast. This was followed by Hurricane Irma, bringing devastation to the Caribbean, Florida and beyond. Jose and Katia are the latest to bring havoc of what is still the beginning of the tropical season.
The FTSE 100 Index rose by 0.8% during August. The only real change we may see to the pound over the coming months, is the removal of the old circular coin in mid-October! it continues to struggle again the EURO and USD.
UK equity markets rose over July, although
the overall performance of large companies was eclipsed by that of mid-caps.
While the blue-chip FTSE 100 Index rose by 0.8%, the FTSE 250 Index rebounded
from a poor June to end July 2.3% higher.
Royal Bank of Scotland (RBS) reached an agreement with the US Federal Housing Finance Agency over the mis-selling in the US of high-risk mortgage products before the financial crisis. RBS will pay US$4.75 billion to settle the case. Elsewhere, payment processor and fellow FTSE 100 constituent Worldpay confirmed that it was to be taken over by US payment processor Vantiv.
The UK economy posted quarterly growth of 0.3% for the second quarter of the year, compared with first-quarter growth of 0.2%. Growth in the services sector was boosted by a strong contribution from the UK retailing and film industries. The International Monetary Fund (IMF) downgraded its forecast for UK economic growth in 2017 from 2% to 1.7%, citing “weaker-than-expected activity” in the first quarter.
Having fallen by 1.2% in May, retail sales volumes rebounded in June, rising at a monthly rate of 0.6%. Sports retailer Sports Direct revealed a drop of almost 59% in full-year profits, which were weighed down by a period of bad publicity and the effects of the pound’s weakness. Sterling rallied to its highest level against the US dollar since September 2016 during July.
Supermarket retailers Sainsbury’s reported a stronger-than-expected sales increase during its first quarter, but sounded a warning note over the impact of mounting inflationary pressures. The UK’s annualised rate of consumer price inflation eased unexpectedly in June, falling from 2.9% in May – its highest level since June 2013 – to 2.6%, and posting its first drop since October 2016. The decline was primarily caused by a fall in motor fuel prices, and the news went some way towards alleviating pressure on the Bank of England (BoE) to consider tightening monetary policy.
The rate of unemployment in the UK fell to its lowest level since 1975 in the three months to May, declining to 4.5%. However, wage growth continued to lag inflation: average earnings (excluding bonuses) rose at an annualised rate of 2%. Moreover, once inflation was stripped out, real weekly wages fell at an annualised rate of 0.5%, stoking concerns about the possible impact on economic growth.
UK equity indices generally rose during
July, although medium-sized companies generally performed better than their
larger counterparts. Over the month, the FTSE 250 Index rose by 2.3%, while the
blue-chip FTSE 100 Index climbed by 0.8%. Meanwhile, the FTSE 250 Index’s yield
fell from 2.71% to 2.65% during July, and the yield on the FTSE 100 Index eased
from 3.84% to 3.80%. In comparison, the yield on the ten-year gilt edged down
from 1.33% to 1.29% over the month.
Support services and construction firm Carillion issued a profit warning and announced the suspension of its dividend pay-out. Elsewhere, HSBC Holdings announced a new share buyback of up to US$2 billion, taking its buyback total to US$5.5 billion. According to HSBC’s CEO, Stuart Gulliver, the company has paid “more in dividends than any other European or American bank” over the past 12 months.
UK Investment dividend pay-outs hit a new second-quarter record in 2017, according to Capita Asset Services’ quarterly UK Dividend Monitor, reaching a total of £33.3 billion. Dividends were boosted by a strong contribution from companies in a “resurgent” mining sector, where second-quarter pay-outs rose at an annualised rate of 73%. During July, miner Anglo American revealed stronger-than-expected half-year results and a sharp decline in debt, and announced the early reinstatement of its dividend pay-out. Its dividend policy will target a pay-out of 40% of underlying earnings. Anglo American announced the cancellation of its dividend pay-out in December 2015 as part of a restructuring programme designed to address a downturn in commodity prices.
Total underlying dividend payments of £28.6 billion were augmented in the second quarter by special dividends totalling £4.6 billion. Sterling’s weakness continued to flatter pay-outs from UK companies: underlying growth in the second quarter was 12.6%; however, when the currency effects were stripped out, underlying growth was a slightly more modest 7.8%. Looking ahead, although the second half of the year is expected to be quieter than the first half in terms of dividends, Capita still expects 2017 to be a record year.
Uncertainties surrounding Brexit continue. The UK will "soon regret" leaving the EU, European Commission President Jean-Claude Juncker has said. Inflation hit 2.9%, ahead of the Bank of England’s target of 2%....ongoing concerns of a rise in interest rates continue.
The euro rose to its highest level against the US dollar since January 2015 during August, driven up by concerns over the impact of Tropical Storm Harvey in the US, and by the strengthening European economy. The eurozone’s economy expanded at an annualised rate of 2.2% during the second quarter.
The euro’s appreciation generated some
apprehension about the impact on corporate earnings in the region. Over August,
the Dax Index fell by 0.5%, while the CAC 40 Index edged 0.2% lower.
European Central Bank (ECB) President Mario Draghi played down speculation that the central bank intends to start winding down its programme of economic stimulus measures soon. Mr Draghi said: “The last thing that the Governing Council may want is actually an unwanted tightening of the financing conditions that either slows down this process or may even jeopardise it”. Mr Draghi hailed the measures as successful, citing “all the economic sentiment indicators (and) survey indicators (which) are either at all-time highs or close to that”. The euro rose to its highest level against the US dollar since the beginning of 2015; meanwhile, the Dax Index fell by 1.7% and the CAC 40 Index dropped by 0.5% over the month.
Mr Draghi issued a cautionary note, however, warning that underlying inflation remains subdued and has not yet demonstrated “convincing signs of a pick-up”. The annualised rate of inflation in the euro area remained unchanged at 1.3% during June, remaining below the ECB’s 2% target. A survey undertaken by the ECB found that expectations for inflation in the euro area have deteriorated, highlighting the problems faced by the central bank. The survey found that the rate of inflation expected to remain below target in 2017, 2018 and 2019.
Economic sentiment in the eurozone rose in July to its highest level for ten years. Sentiment was boosted by stronger confidence in the services sector. The eurozone’s rate of unemployment fell to 9.1% during June, reaching its lowest level since February 2009. The International Monetary Fund (IMF) expects economic expansion in the eurozone to be stronger than previously predicted, and upgraded its forecast for 2017 from 1.7% to 1.9%, citing better-than-expected momentum in domestic demand. The IMF also upgraded its economic forecasts for several major European countries, including Spain – which is expected to expand this year by 3.1% - and Italy, which is forecast to grow by 1.3%.
Following a surge in demand for European equity funds in April and May, investors ’ appetite for funds in the Europe excluding UK sector declined during June, according to the Investment Association (IA). Nevertheless, in absolute terms, demand remained relatively robust and the sector experienced net inflows of £188 million during the month. Similarly, although demand for funds in the European Smaller Companies sector waned in June, net retail sales remained in positive territory.
The US economy expanded at an annualised rate of 3% during the second quarter of 2017, compared with an earlier growth estimate of 2.6%. The Dow Jones Industrial Average Index edged 0.3% higher over August.
The hurricane season is still playing havoc with the production of oil, refining activity, demand and distribution. Prices rocketed in August, early September and it is very unstable.
Credit ratings agency Moody’s reported that, of the US$1.84 billion cash pile held by US non-financial companies, 87% of the pile is held by investment-grade companies, and the top-five cash hoarders can all be found in the technology sector, led by Apple.
Despite a backdrop of persistently low inflation, speculation over the likelihood of tighter monetary policy continued to put pressure on global bond and currency markets during July. The US Federal Reserve is expected to begin cutting back its balance sheet soon; meanwhile, the European Central Bank is trying to curb speculation that it intends to wind down its programme of economic stimulus measures.
China’s economy posted annualised
growth of 6.9% during the second quarter of 2017, having alsoexpanded by 6.9% during the first three
months of the year. This growth exceeded the Chinese government’s official
annual economic growth target of around 6.5%. Although the news was generally
well received, it did not manage to allay broader concerns over the impact of
China’s mounting debt burden, excess capacity in the manufacturing sector, and
worries over a bubble in the property sector. The Shanghai Composite Index rose
by 2.6% during July.
The International Monetary Fund (IMF) upgraded its forecast for China’s economic growth in 2017 from 6.6% to 6.7%, and in 2018 from 6.2% to 6.4%, citing the country’s “policy easing and supply-side reforms”. China’s industrial output rebounded in June, rising at an annualised rate of 7.6%; meanwhile, imports grew at an annualised rate of 18.9% during June, while exports rose by 8.5%. Elsewhere, retail sales increased to their highest level for more than a year during June, rising at an annualised rate of 11%. During July, China’s authorities launched a new programme – Bond Connect – which is designed to open the country’s bond market and make it easier for foreign investors to buy and sell Chinese bonds.
In India, pressure on central bank policymakers continued to intensify amid calls to cut interest rates. The Reserve Bank of India’s (RBI’s) key interest rate currently stands at 6.25%. Disappointing inflation figures were compounded by lacklustre industrial production data in July. Annualised consumer price inflation fell from 2.18% in May to 1.54% during June, while the rate of wholesale price inflation dropped from 2.17% to 0.9%. The CNX Nifty Index rose by 5.8% during July.
Brazil’s economic growth is likely to remain weak for a prolonged period, according to a report by the World Trade Organisation (WTO), although the WTO expects the country to begin a gradual recovery over 2017. The WTO believes that, although Brazil’s fundamentals are generally solid, the economy remains vulnerable to fresh political uncertainties and delays in tackling fiscal imbalances and structural reforms. Meanwhile, the International Monetary Fund (IMF) believes that Brazil’s economy is reaching a “turning point”; nevertheless, like the WTO, the IMF remains concerned about the impact of political instability. Over July, the benchmark Bovespa Index posted a rise of 4.8%.
Time and time again forecaster try to predict what will happen in the future to Stock Markets. In reality, nobody knows what Markets will do next.
The Wall Street Journal in the US recently
published an article about the performance of Global Stocks and Shares. The
article was called, “ Global
Stocks Post Strongest First Half in Years, Worrying Investors
for stocks and shares investors is whether the strong first six months of 2017 heralds
a choppier second half or the start of a multiyear upswing. The data on global
rallies offers a mixed record.”
In plain English, this means:
“It’s impossible to predict whether markets will go up or down for the latter half of the year. Markets could go up or down or even trade sideways.”
The newspaper article also reported that: “Most of the major stock Market Indexes, 26 in total have risen in value so far in 2017. The last time this happened was in 2009.