HM Treasury – Page 6 – The NEN – North Edinburgh News

UK facing ‘pensions tsunami’

Treasury’s ‘£17bn mistake’ that will take “generations to resolve”

In its report published today the Public Accounts Committee says HM Treasury has “done little to identify and manage the stark differences in average pensions between genders and other groups” and “should have foreseen the age discrimination issue that gave rise to the 2018 McCloud judgment”.

In 2011 and 2015 the Treasury introduced reforms aimed at making public service pensions more sustainable and affordable, but a 2018 Court of Appeal judgement (the McCloud judgement) ruled parts of the reforms unlawful.

The Treasury now wants pension scheme members to pay the estimated £17 billion cost to put that right, despite the unlawful reform having been “its own mistake – a mistake which could have been avoided by listening to advice and which will take many decades to resolve.”

Around 25% of pensioners and 16% of the working-age population are members of one of the four largest public service pension schemes covering the armed forces, civil service, NHS and teachers. The schemes are almost all unfunded, meaning retirees’ pension benefits are paid out of current workforce contributions.

The Committee saw “evidence of public service pensions issues affecting delivery of frontline services, and independent schools opting out of pension schemes because of increasing costs”.

It says HM Treasury doesn’t have the data it needs nor evaluated the impact of its reforms, or whether they are achieving its pension policy objectives – the PAC is “not convinced it is on track”.

The Treasury also seems “unconcerned about the drop in enrolment by some workers”. The Committee warns on the “a danger of a perfect storm where some young people believe they cannot afford pension contributions because of high costs of living and retire with a reduced public sector pension as a result.

Many younger workers will continue to pay rent in retirement because they cannot afford to buy a home and the cost of supporting this generation will fall on future taxpayers”.

Meg Hillier MP, Chair of the Public Accounts Committee, said: “The Treasury’s £17 billion mistake on pensions reform is a ripple compared to the tsunami of costs to the public purse if Government fails to address the growing number of young people unable to afford to plan for a proper pension.

“It’s lack of curiosity about why nearly a quarter of a million workers are not joining these pension schemes is a concern. Pension planning must be long term; mistakes and poor planning have an impact for decades. Short term cost savings can become long term costs to individuals with lower retirement incomes and the taxpayer who may end up supporting them.”

Government consults on plan to protect future of cash

People will be able to get cashback from shops without needing to buy anything under new proposals to protect the UK’s cash system announced today (15 October 2020).

government sets out plans to protect the UK’s future cash system and ensure people have easy access to cash
proposals would see cashback offered at shops without consumers having to make a purchase
the Financial Conduct Authority would also be given overall responsibility for the UK’s retail cash system to protect consumers and SMEs

Under the government proposals, cashback without a purchase could be widely available from retailers of all sizes in local communities across the UK.

Although cash use is declining, with people increasingly choose cards, mobile and e-wallets to make payments, it remains crucial for groups across the UK – including the elderly and vulnerable. Many find that cash is more accessible than digital payments methods or that it helps them to budget and manage their finances.

These proposals, which also include making the Financial Conduct Authority (FCA) responsible for ensuring the cash system benefits consumers and SMEs, are the latest step in the Government’s effort to support the millions of people and business who rely on cash day to day.

John Glen, Economic Secretary to the Treasury, said: “We know that cash is still really important for consumers and businesses – that’s why we promised to legislate to protect access for everyone who needs it.

“We want to harness the same creative thinking that has driven innovation in digital payments to maintain the UK’s cash system and make sure people can easily access cash in their local area.”

To ensure no one is left behind by the transition to digital payments, the government announced at the March 2020 Budget that it would legislate to protect access to cash and ensure that the UK’s cash infrastructure is sustainable in the long-term.

Today it is seeking views on its approach to this legislation from consumer organisations, businesses, financial institutions, providers of ATM and payment services and others through a call for evidence.

One proposal under consideration is cashback without a purchase, which could help to keep cash widely available by reducing cash infrastructure costs.

When local shops accept and dispense cash, it is recycled through local communities and there is less need to transport and distribute notes and coins via cash centres, which reduces the associated costs.

Last year, consumers received £3.8 billion of cashback when paying for items at a till – making it the second most used method for withdrawing cash in the UK behind ATMs.

Current EU law makes it difficult for businesses to offer cashback when people are not paying for goods and this has been a barrier to widespread adoption. The Government is now considering scrapping these rules once the transition period ends on 31 December 2020.

The government is also considering giving the FCA overall responsibility for maintaining a well-functioning retail cash system given its existing regulatory role and consumer protection objective.

At present, The Bank of England, Financial Conduct Authority, Payment Systems Regulator, and HM Treasury each have specific roles and responsibilities for oversight of the cash system. Close coordination between these authorities has been highly effective, particularly in managing risks to cash through Covid-19, but there may be significant benefits to giving a single authority overall responsibility for setting requirements to meet the cash needs of consumers and SMEs.

The call for evidence opens today (15 October 2020) and will run for six weeks. It will seek views on how to ensure industry continues to offer ways to withdraw and deposit cash, how to improve cashback, what affects cash acceptance, and where regulatory responsibility should sit.

More detail on the government’s proposals is available in the Access to Cash Call for Evidence document.

The Call for evidence will close on 25 November 2020.

Chancellor allocates extra £2.1 billion to ‘turbo-charge No-Deal Brexit preparations’

Chancellor doubles Brexit funding for this year, announcing £2.1 billion to prepare for no deal.
New immediate cash boost of £1.1 billion to prepare critical areas for EU exit on 31 October.
A further £1 billion available to enhance operational preparedness this year if needed.
Funding will accelerate preparations at the border, support business readiness and ensure the supply of critical medicines.

An immediate cash boost to help get the UK ready for Brexit on 31 October has been announced by the Chancellor of the Exchequer, Sajid Javid. Continue reading Chancellor allocates extra £2.1 billion to ‘turbo-charge No-Deal Brexit preparations’

New £50 note is’cash fit for the future’

Treasury confirms £50 note will continue to be part of the UK currency
Bank of England announces it will make a new modern polymer note
more secure note will help clamp down on crime

Modern money will help prevent crime, the Exchequer Secretary has declared as plans were unveiled for a new, more secure £50 note. Continue reading New £50 note is’cash fit for the future’

Billion-pound backing for “catapult centres”!

£780m of extra funding for high-tech hubs
This builds on £180m announced last month for North East
£96m of extra funding for high-tech hub in Scotland
Backing for British expertise at 40-year high
Latest GDP figures confirm economy continues to grow

Britain’s world-leading researchers and entrepreneurs will benefit from an additional £780 million to create the technologies of tomorrow, the Chancellor announced yesterday. Continue reading Billion-pound backing for “catapult centres”!

Tell George Osborne what he can do with his Budget!

Did you have your say on the city council’s budget proposals? Have you got the taste for balancing the books? Well, you now have the opportunity to give Chancellor George Osborne some timely Budget advice. Read on …

What would you like to see in Budget 2015?

The government is seeking your views on what you would like to see in Budget 2015, which will take place on Wednesday 18 March.

The government encourages open and transparent policy-making, and welcomes original and innovative ideas. Your views will be considered by HM Treasury as part of the policy-making process.

Please submit your representation by filling in our short survey.

If you would prefer to submit your representation as a file attachment, please email budget.representations@hmtreasury.gsi.gov.uk

For information on the correct procedure for submitting your representation, please view the guidance.

To allow for full consideration in advance of the Budget, any submission should be sent to HM Treasury by Friday 13 February

Follow HM Treasury on Twitter for all of our latest news and Budget coverage.

New basic fee-free bank accounts will help millions manage their money

Government secures deal with the big banks on basic bank accounts – ending fees for failed payments

For the first time, basic bank accounts will be truly fee-free, helping people to manage their money without fear of running up an overdraft. Accounts will be available to anyone who doesn’t already have a bank account or who can’t use their existing account due to financial difficulty.

The Economic Secretary to the Treasury Andrea Leadsom recently hailed a major agreement between the government and the banking industry to establish new basic bank accounts that will end bank charges if a direct debit or standing order fails.

New basic bank accounts will help people who do not have a bank account or who are frozen out of existing accounts because of previous money problems.

Following extensive negotiations with the banking industry to bring basic bank accounts up to scratch, nine high street banks and building societies covering over 90% of the UK current account market have agreed to offer a better deal to customers.

Those banks are:

Barclays
the Co-operative Bank
HSBC
Lloyds Banking Group (including Halifax and Bank of Scotland brands)
National Australia Group (including Clydesdale and Yorkshire brands)
Nationwide
RBS Group (including NatWest and Ulster Bank brands)
Santander
TSB

The changes will minimise the risk that basic bank account customers will be forced into overdraft by fees or charges.

In some cases, charges had been as high as £35 per failed item, and uncapped, meaning charges could accumulate to hundreds of pounds over time and drive people into serious debt.

Basic bank account customers will now also be offered services on the same terms as other personal current accounts that the banks provides, including access to all the standard over-the-counter services at bank branches and at the Post Office, access to the entire ATM network.

There are an estimated 9m users of basic bank accounts in the UK.

This deal comes on top of the estimated £300 million cost to the banking industry of providing basic bank accounts today. It is vital that banks offer products which are suitable for day-to-day transactions for all consumers.

The Economic Secretary Andrea Leadsom recently met Toynbee Hall’s specialist financial advisers and people who may have found it difficult to access mainstream banking services in the past, to discuss how the new basic bank accounts will make a difference.

She said: “I welcome the banks’ agreement to remove these charges from their basic bank accounts. This means that people who don’t have an account, or who would struggle to get a standard account due to money problems, will be able to manage their money with certainty and clarity.

“It will end people being effectively locked out of their basic bank accounts due to high fees and charges when their payments failed.

“Ending this unfair situation is a real step forward for the banking industry’s most vulnerable customers and improving access to banking is a key part of our long-term economic plan.”

BBA Chief Executive, Anthony Browne said: “Banks in the UK lead the way when it comes to providing accessible banking and take their responsibility seriously – the proportion of the population with no account at all is less than a third of that in the US and Europe.

“Now we will be helping even more people access banking services than ever before, as these accounts are designed for people who don’t have a bank account today and are vulnerable.

“These basic accounts will make it easier for more people to manage their money. They will have many features that will help people to budget, pay bills and save up. We are delighted to be offering this service to those who will really benefit.”

Gillian Guy, Chief Executive of Citizens Advice, said: “A good bank account is an essential ingredient to managing your money. Any barriers to essential banking services can make it even harder for people keep on top of their finances. Up until now, some basic bank account customers didn’t get a debit card, were afraid of being hit with fees for unpaid direct debits and some were shut out of banking altogether.

“Citizens Advice has been at the forefront of the campaign for decent basic bank accounts, and is pleased that the Government and banks have listened to the problems experienced by our clients. We look forward to continuing to work with the Treasury as well as with banks to make sure these new standards meet the needs of customers.”

Graham Fisher, Chief Executive of Toynbee Hall, said: “The announcement to create genuinely accessible and inclusive fee-free bank accounts for the most vulnerable people is a significant step forward in creating a truly financially inclusive society.

“At Toynbee Hall we have helped a significant number of clients to set-up new bank accounts, which can at times be a difficult and frustrating process, but with these changes we will be able to help more people access this incredibly valuable financial product.”

The terms of the agreement are published today so that every customer knows what they can expect from their bank in future and the new accounts will be in place by the end of 2015.

The terms of the agreement make clear that the accounts should be made available where people are ineligible for a bank’s standard current account, and either:

have no bank account
have a bank account elsewhere, but want to change provider
have a bank account, but are in financial difficulty and want their bank to open a new, functional account for them.

Note: Not all banks will apply these criteria in full – some may choose not to set any eligibility requirements and offer customers a choice from their full range of personal current accounts.

Pensions: millions to benefit from impartial advice

Millions of people will benefit from a right to free and impartial guidance on how to make the most of the new pensions choices that come into effect in April 2015, Chancellor of the Exchequer George Osborne announced today. This follows the Westminster government’s consultation on how best to deliver the radical changes to how people access their pensions announced at the Budget.

In total 18 million people will be able to benefit from the changes to pensions should they wish to do so.

From April 2015 300,000 individuals a year with defined contribution pension savings will be able to access them as they wish when they turn 55 – subject to their marginal rate of tax.

This is the biggest change to how people access their pensions in almost a century, removing the effective requirement for many to purchase an annuity.

The consultation since the Budget has shown that these changes have been overwhelmingly well received, with individuals supporting greater freedom and choice, and the pensions and insurance industry ready for the challenge of creating new, flexible products, which better suit individuals’ needs.

The government’s response to the consultation today confirmed that:

the guaranteed guidance on pensions choices will be provided by independent organisations rather than pensions schemes or providers
even more people will be able to benefit from the new pensions flexibilities as the government will continue to allow individuals to transfer from private sector defined benefit schemes to defined contribution pension schemes – subject to two important new safeguards
a new override will be introduced so that pensions schemes are able to offer individuals flexible access to their savings and the pensions tax rules will be amended to allow providers to develop new retirement income products that are tailored to the needs of individual consumers

Chancellor of the Exchequer, George Osborne, said: “It’s right to support hard working people that have taken the long-term decision to save for their future and I’m pleased that the responses we had to our proposals on making pensions more flexible have been overwhelmingly positive.

“We’re making sure that people have the right support to make their own choice about how best to finance their retirement and I’m pleased to confirm that everyone with defined contribution pension savings reaching pension age will get free and impartial guidance on their range of available choices at retirement.”

The government wants to ensure that guidance is trusted by consumers, and the vast majority, including most of the financial services industry who responded, said that consumers would not trust guidance given by a person or organisation with a vested interest in selling a financial product or service. It will bring together a range of delivery partners, including the Pensions Advisory Service (TPAS) and the Money Advice Service (MAS), which already provide guidance and support to consumers.

People with private sector defined benefit savings will continue to be able to transfer to defined contribution schemes (excluding pensions that are already in payment), alongside two new safeguards to protect both pension schemes and the individuals transferring out.

Guidance will be offered through a broad range of channels, including web-based, phone-based as well as face-to-face, and to remain free to the consumer will be funded by a levy on regulated financial services firms.

The Financial Conduct Authority (FCA) have also today published a paper which consults on the elements of the guidance guarantee for which the FCA will be responsible: setting and monitoring the standards with which guidance providers will have to comply, making and enforcing rules on how contract-based schemes signpost to the guidance services, and adjusting the FCA’s existing conduct rules to support the introduction of the guidance guarantee and in response to the new flexibilities.

Two new safeguards are being introduced to protect both individuals and pension schemes in relation to defined benefit to defined contribution transfers: a new requirement for an individual to take advice from an impartial financial adviser regulated by the FCA before a transfer can be accepted; and, new guidance for trustees on the use of their existing powers to delay transfer payments and take account of scheme funding levels when deciding on transfer values.

HM Treasury also published the following guide today:

Pension Reforms: Eight things you should know

Understanding the pension system can be complex sometimes. We’ve explained how the new system will work and what it means for you.

1. We’re completely overhauling the system so you can take your pension how you like

In order to create greater choice and flexibility for people who have saved hard for their pension, we announced at Budget 2014 a series of changes to how people access their pension.

From April 2015, no matter how much you decide to take out from your pension after retirement, you will be charged the normal rate of income tax you pay on your salary (so either 0%, 20%, 40% or 45%) rather than the previous tax charge of 55% for full withdrawal.

2. 25% of your pension pot will remain completely tax-free, as it was before

You’ll be able to access 25% of your pot in one go without paying any tax.

3. We previously announced this would apply just to people with ‘defined contribution’ pensions

This is a type of pension also known as a ‘money purchase’ scheme.

This is when the money you and your employer pay in is invested by a pension provider chosen by your employers. The amount you get when you retire usually depends on how much has been paid in and how well the investment has done.

4. We’ve now announced that people who have a ‘defined benefit’ scheme will benefit too

A ‘defined benefit’ pension is typically a promise of a certain level of pension in retirement which is linked to your salary.

We’ve now announced that people in the private sector or in a funded public sector scheme will still be able to transfer from a defined benefit pension scheme to a defined contribution one if they want to, meaning they can benefit from the changes.

This means that around 18 million people will ultimately be able to withdraw their pension flexibly should they wish to do so.

5. Everyone who will be able to take advantage of the new reforms will be able to access free and impartial guidance

This will help people make confident and informed choices on how they put their pension savings to best use.

This guidance will be available through a number of different channels – via an online tool, over the phone, or face to face. Individuals will be able to choose the channel, or mix of channels, that they find most convenient.

It will be entirely impartial, so won’t be given by anyone who could be trying to sell you a product.

6. Your pension provider or scheme will be required to tell you about the guidance and how to access it

Accessing the guidance will be arranged by your pension provider, who will be required to tell you about it.

7. The changes will come into effect from April 2015

If you are over the age of 55, or will be from April 2015, you will be able to take advantage of the new system from then.

If you’re younger than 55 then you will be able to take advantage of the new system when you do reach 55.

8. You don’t need to do anything until then

If you’re thinking about retiring soon, you don’t need to do anything in the meantime, but we’ve also made other changes to help you save until then, such as our reforms to ISAs.

You can find more information about the pension reforms by reading our factsheet we published at Budget explaining the differences between the new changes and the old system, or more details on our response to the consultation.

Taxing times: Osborne ready to deliver Budget

It’s Budget Day, and there’s no shortage of advice for Chancellor George Osborne ahead of today’s financial statement. The TUC says the Budget must address the UK’s growing investment gap, while Holyrood Finance Secretary John Swinney says Osborne’s ‘last chance’ Budget will mean more cuts in Scotland.

The TUC says the gap between current investment levels (14.5 per cent of GDP) and those originally forecast by the Office for Budget Responsibility (17.8 per cent) has grown to £12.4bn a quarter – a gap of almost £50bn. They maintain this has held back the UK economy and, unless addressed, could cause permanent damage to its economic prospects. The TUC’s Budget submission calls for a number of changes to boost investment, including:

Increasing the scope of the UK Guarantees scheme to match the scale of Help to Buy (which could also be scaled back by being limited to first-time buyers)
Bringing forward infrastructure projects scheduled for the next Parliament so projects could start in the next year or two, and;
Cancelling scheduled cuts to corporation tax and reinvesting the money into capital allowances to promote business investment.

TUC General Secretary Frances O’Grady said: “For decades our economy has suffered from over-consumption and under-investment. The Chancellor promised to address this failure but instead has presided over a growing investment gap that has held back growth and which risks causing permanent economic damage. He now has the chance to put things right.

“George Osborne can start to undo the damage caused by slashing capital spending by giving greater financial guarantees to infrastructure projects. This should encourage firms to crack on with the construction of much-needed homes, schools and transport routes.

“The Chancellor should also admit that the billions given away in corporation tax cuts have failed to spur investment. Future cuts should be cancelled and reinvested in more generous capital allowances. After four years of ineffective initiatives, now is the time to start making good on the government’s promise to rebalance the economy.”

With working people still suffering the longest real wage squeeze in over a century, the TUC Budget submission also calls on the Chancellor to halt the squeeze on working families and encourage firms to give their staff a pay rise. The TUC argues that the Chancellor should abandon shifting the personal allowance and higher rate tax thresholds and instead reverse cuts to tax credits and universal credit that are hitting working families on low and middle incomes.

Frances O’Grady went on: “The Chancellor has made Britain’s living standards crisis even worse for working families by cutting vital tax credits and child benefit at the same time as time as wages have shrunk in real terms.

“He has shown contempt for public sector workers by prolonging their wage squeeze even as the economy recovers. Damaging welfare cuts are also adding to the financial woes of hard-pressed working families and must be reversed.
“The one thing guaranteed to cheer working people would be a bigger salary. The Chancellor must do all he can this week to encourage firms to give Britain a pay rise. One way of doing this would be to encourage greater take-up of the living wage.”

This is the last UK Budget before the referendum on Scottish independence, and Scottish Finance Secretary John Swinney said: “This is Westminster’s last chance to seriously tackle inequality and turn away from a budget of continued cuts and austerity before Scotland votes in the referendum.

“Scotland is a wealthy country and we can more than afford to be independent. In each of the last 33 years Scotland has paid more in tax per head than the UK and in the last five years Scotland would be £1600 per head better off than the UK – money that could have been invested in the economy, in public services and reducing debts.

“Instead under Westminster we have seen capital spending cut by almost 27% and our overall discretionary spending power cut by 11% in real terms over the five years to 2015-16.

“We know that we are not even halfway through the cuts planned by Westminster, and that the Chancellor plans a further £12bn of cuts to welfare after the next election. It is also clear that if Scotland sticks with the UK system we could see the scrapping of the Barnett Formula which could result in a further £4bn cut specifically from Scotland’s public services.

“In just under six months’ time the people of Scotland will vote to decide whether budget decisions should continue to be made by Westminster governments Scotland didn’t elect or whether decisions about spending, taxes and public services in Scotland would be better made by the people and parliament of Scotland. Following a vote for independence we can end Westminster’s austerity agenda, tackle the economic challenges Scotland faces and build a fairer more prosperous country.”

Will George Osborne be listening? All will become clear – well, maybe clearer – when the Chancellor delivers his fifth Budget speech at 12.30 today.

New secure £1 coin on the way

A new £1 coin – which will be the most secure coin in circulation in the world – has been announced by the government. Older readers in particular may recognise the design of the new coin – it will have the same shape as the old 12-sided 3d, or ‘thrupp’ny bit’.

The current £1 coin has been in circulation for over thirty years – much longer than the normal life cycle of a modern British coin. Its technology is no longer suitable for a coin of its value, leaving it vulnerable to ever more sophisticated counterfeiters.

The government will consult on the new coin in detail, focusing on the impacts on business, and expects to introduce it in 2017.

As with all our coins, the Queen’s effigy will be on the ‘heads’ side, but the Treasury has announced today announced that there will be a public competition to decide the design for the reverse, or ‘tails’ side of the coin.

The most secure coin in circulation in the world

In figures released today, the Royal Mint estimates that about 3% of all £1 coins are now forgeries. In some parts of the United Kingdom country, it is as high as 5%. Over the past few years, around 2 million fake £1 coins have been removed from circulation each year. This is a direct cost to the banks and cash handling centres, and to the economy.

In addition to these costs, increasing rates of counterfeiting could in the future, pose a challenge to the integrity our currency which is so important to the resilience of our economy.

Whilst law enforcement agencies are successfully cracking down on counterfeiting groups, the only sustainable solution to ensure that we stay ahead of the criminals is to introduce a new, highly secure coin, reducing costs to business and the taxpayer.

About the new coin

The proposed new coin will be roughly the same size as the £1 coin, and has a number of features which the Royal Mint confirms will make it the most secure coin in the world. These features include:

a bi-metalic construction, of two colours
12-sided design
the inclusion of the Royal Mint’s new iSIS technology, (Integrated Secure Identification System), which incorporates three tiers of banknote-strength security and can be authenticated via high-speed automated detection at all points within the cash cycle

The proposed new coin represents a great success for UK science and manufacturing. The new, world leading iSIS technology has been entirely developed in-house at the Royal Mint’s headquarters in South Wales.

The threepenny bit

The new £1 coin also pays a fitting tribute to Britain’s heritage. It is the same shape as the 12-sided threepenny bit, which was in circulation from 1937 until decimalisation in 1971.

The threepenny bit was in the first group of coins ever to feature the portrait of HRH Queen Elizabeth II.

The new version coined in 1953 bore a design of a Tudor chained portcullis, which was inherited by the 1p piece after decimalisation and remains on the coin today, as well as being the badge of the Palace of Westminster. The Threepenny bit was the first British coin to use a 12-sided shape which enhanced its popularity during the Second World War, as its distinctive size and shape made it the easiest coin to recognise during the blackout.

By the time of decimalisation 1.2 billion had been issued for circulation.

I wonder what £1 will buy in 2017?