Sunday, 29 November 2015


The new rates for social security benefits from April were quietly issued on Thursday 26 November in a written statement in the House of Lords by Pensions Minister Baroness Altmann. It linked to fifteen pages listing every DWP payment, what it is this year and what it will be for 2016/17. And the two columns are almost identical. Every single benefit paid to people under pension age is unchanged.

In other words all benefits – with the exceptions below – are frozen. No rise at all in April. Zero. Zip. Zilch.

There are two reasons for that. One group of benefits such as jobseeker’s allowance, income support, and child benefit are unchanged because the Chancellor announced in his Summer Budget that they would be frozen for four years saving £4 billion a year by 2019/20. The rest, such as disability living allowance, carer’s allowance, maternity allowance, and widow’s benefits, are unchanged because inflation is effectively zero. The September CPI showed a slight fall in prices of -0.1% and negative inflation counts as zero. So between these two rules all working age benefits are frozen. Children, disability, illness, widowhood, caring , unemployment - none of those merit even a 1p a week rise.

Pensioners gain
How different it is when we come to that magic word ‘pensioner’. People over the age of 63 – when women will be entitled to state pension from April – will generally find they get more from April.

Their benefits and allowances will rise. The basic state pension will go up by the rise in earnings of 2.9% from £115.95 to £119.30, an extra £3.35 a week. But, and it is quite a big but for some, all the extras paid with the state pension – SERPS, State Second Pension, extra pension earned by deferring or by paying Class 3A contributions, and graduated pension – will all be frozen. A point not mentioned by the Chancellor in his Autumn Statement speech.

The full rate of the new State Pension was fixed, as predicted here a while ago, at £155.65 a week, though for transitional reasons most new pensioners will get less than that rate in the first years of the new state pension. Many will get what they would have had under the old system or a little more, especially women. Click for the full story of women doing worse than men from the new state pension.

Pension Credit for the poorest pensioners will also rise by 2.9% - up by £4.40 from £151.20 a week to £155.60 for a single person and up £6.70 for a couple from £230.85 £237.55. That will benefit 1.1m people. But most of that rise will be clawed back from the 1.4m who are slightly above the poorest level who get savings credit as well. That will leave them with only about £2.02 a week out of the £3.35 of the state pension rise. The figure for couples is keeping £3.21 from an extra £5.35. Overall the maximum income to get any pension credit is frozen at £188 single and £274 couple.

Housing benefit which helps pay for rent distinguishes between those under and over state pension age. No rise for those under - single, couple, disabled, children - all frozen. But there is a rise of 2.9% for those over pension age and even higher amounts for those over 65. Pensioners are not subject to the hated bedroom tax either.

The same rises will be found in local council tax support schemes where older people are fully protected against the cuts imposed on working age people.

Winter Fuel Payment is frozen again as expected.

But the few niggles about minor items not changed cannot hide the fact that the big social security winners are older people. As the Chancellor made clear in his speech

“The first objective of this Spending Review is to give unprecedented support to health, social care, and our pensioners.”
Perhaps that is why he gave these fifteen pages of bad news on benefits for everyone else to the Pensions Minister to quietly slip out in the House of Lords on a Thursday afternoon.

1 March 2016
Version 1.10

Friday, 27 November 2015


Stamp Duty Land Tax (SDLT) is charged at a higher rate from 1 April 2016 on what is called an 'additional' home. Broadly that means a home that is not the one you live in. 

The rates charged on each band in England Wales and Northern Ireland will be

£1 to £125,000
£125,001 to £250,000
£250,001 to £925,000
£925,001 to £1,500,000
Above £1,500,000

SDLT1 is the tax when you the home you live in (main residence)
SDLT2 is the tax when you buy an additional home (not your main residence)

There are some properties that are exempt including caravans, mobile homes, and houseboats. Homes sold for £40,000 or less are also exempt. But for homes over that price the 3% tax will apply to the first £125,000 - there is no exempt band. Here are some examples.

SDLT2 applies to a home which is bought but which you do not immediately live in as your main residence. So if you purchase a buy-to-let property - including furnished holiday lets - or a second home for holidays or weekends then SDLT2 will apply. 

If you buy a home to live in but for some reason cannot or do not sell your previous residence at the same time, SDLT2 will be charged. If you sell the original residence within 36 months the extra tax - the difference between SDLT2 and SDLT1 - can be refunded by HMRC. This rule and timetable applies even if the new purchase is not fit for human habitation and has to be done up to live in. But SDLT2 does not apply if the property purchased is not a residential property at the time you buy it - for example a barn, a church, or an industrial unit.

If you own the home you live in and also own a second home - a holiday home or weekend retreat for example or a property you rent out - you will not pay SDLT2 if you sell the home you live in and buy another to live in immediately. But you will be liable to SDLT2 if you sell your holiday home or rented property and buy another which is not your main residence. You will also be liable to SDLT2 if you buy another home to live in, move into it, but do not sell the home you left within thirty six months. That period normally runs from the day you bought the second home. But a concession means that if you bought your new main residence before the SDLT2 announcement was made on 25 November 2015 then the 36 months runs from that date . So you have until 26 November 2018 to sell your old main residence. 

If a home is bought jointly and one buyer owns another main residence but the other does not then SDLT2 will apply to the whole purchase price. So for example if a parent who owns their own home helps a child with a property purchase that will trigger SDLT2 on the whole cost if the parent is registered as a joint owner. SDLT2 will apply to the whole of the purchase price not just the share of it owned by the person with another main residence. 

Main residence
The home you live in is called your 'main residence'. It is not like Principle Private Residence for Capital Gains Tax where you can nominate a property to be your PPR. Nor is it decided simply on days of occupation. It is a matter of fact - where you and your family spend your time, where your work is, where your children go to school, where you are registered to vote, where correspondence from government or businesses is sent. 

Couples who are joint owners of the home they share will pay SDLT2 if they buy a second property and keep the first. But if one of them wholly owns the home they share the rules are different depending on whether they are married/civil partnered or not. 
  • If they are not married/CP'd then the partner who is not an owner of the home they live in can buy a separate home without paying SDLT2 as long as one partner will live there as their main residence. 
  • If they are married/CP'd then they will pay SDLT2 on a separate home they buy. But if they are separated and their relationship is ending this rule will not apply.
There is no concession for a person who buys a separate home for work. For example their family lives in one part of the country but they buy a flat which they live in four nights a week for work. That second home will be subject to SDLT2.

Landlords who rent
Someone who owns one or more homes which they rent out to tenants but lives in a home which they rent from someone else will pay SDLT2 if they then buy a home to live in. This odd anomaly means that a landlord who rents the home they live in pays SDLT2 when buying a main residence but one who owns the house they live in and buys another to replace it does not. 

However, this rule may not apply to a landlord who rents but who has owned their main residence in the past. A landlord who lives in a home they own, then sells it, and temporarily rents their main residence has 36 months from selling the first to buy a replacement. 

However, the three years runs from the day the new SDLT rules were announced on 25 November 2015. So as long as the landlord replaces his main residence by 26 November 2018 they will not have to pay SDLT2 on their new main residence. This concession means that a landlord who has ever owned their main residence but who now rents their main residence from another landlord has until 26 November 2018 to buy a main residence free of SDLT2. 

Solicitors may be unaware of this loophole and charge SDLT2 on the home that is purchased by a renting landlord. If so, then the excess tax can then be recovered from HMRC. 

SDLT2 applies from 1 April 2016. Completion must have happened on or before 31 March 2016 to avoid it. The one exception is if contracts were exchanged on or before 25 November (Autumn Statement day) but completion is after 31 March then SDLT2 will not apply. That may help with off-plan purchases made well in advance of the building being finished. 

From 1 April purchasers have to fill in a declaration that they do or do not own another home. The conveyancer or solicitor will use that to decide which rate of SDLT applies.

SDLT applies in England, Wales, and Northern Ireland. It does not apply in Scotland which has its own property tax called Land & Buildings Transaction Tax (LBTT). It also charges an extra 3% tax on each band from 1 April 2016.

SDLT2 will apply equally to people who live outside England, Wales, and Northern Ireland and buy property here. They will have to fill in the same declaration on property ownership. A Scottish resident who bought a second home in England would pay SDLT2 on the purchase. As would a resident of Dubai, Germany, or Australia. 

This blogpost is based on detailed discussions with HM Treasury and the law as published and passed by Parliament. I believe it is correct. However, you should treat this blogpost as a guide only and take professional advice before acting on the information contained in it. I accept no liability for any losses incurred by using it.

28 July 2016
Version 2.5

Monday, 23 November 2015


In the first five years of new state pension between 45,000 and 60,000 new pensioners (2% to 3% of the total) living in the UK will get no state pension due to having fewer than ten years of National Insurance Contributions. 

In addition to those living in the UK, a further 30,000 to 40,000 people living overseas who reach state pension age in the first five years of the new State Pension will be caught by this rule and get no state pension. That is about one in five UK overseas residents who reach state pension age in that time.

Under current rules people in the UK or abroad who have paid at least one year of National Insurance and who reached state pension age from 6 April 2010 get 1/30th of the basic state pension for each year paid, which is around £200 a year.

By 2040 it is estimated this new rule, which will deprive up to 20,000 people a year of any pension, will be saving the Government £650m a year.

It is reasonable to suppose that the majority of those who get no pension will be women. They will suffer twice as under new State Pension rules they will not be entitled to a reduced pension on their spouse's contributions. Under the current rules they could claim £69.50 a week on their spouse's contributions if their own entitlement was less than that amount.

These figures from the May 2014 Impact Assessment (para.95) are approximate. No breakdown into men and women is available and the Government has refused a Freedom of Information request for them - see below. I have asked for a review of that decision. 

Thursday, 19 November 2015



Millions of women had their state pension age delayed - in some cases twice and by up to six years in total - without proper notice.

That is the only conclusion to be drawn from the details of how they were informed of the changes which has now been obtained from the Department for Work and Pensions. It reveals
  • The Government did not write to any woman affected by the rise in pension ages for nearly 14 years after the law was passed in 1995.
  • More than one million women born between 6 April 1950 and 5 April 1953 were told at age 58 or 59 that their pension age was rising from 60, in some cases to 63 
  • More than half a million women born 6 April 1953 to 5 April 1955 were told between the ages of 57 and nearly 59 that their state pension age would be rising to between 63 and 66.
  • Some women were told at just 57½ that their pension age would rise from 60 to 66. 
  • Women were given five years less notice than men about the rise in pension age to 66
  • The Government now says that in future anyone affected by a rise in state pension age must have ten years' notice. None of these women had that much notice nor did the men affected by the change.
Rising age
The first increase in women's state pension age was introduced by the Pensions Act 1995. The change would not start until April 2010 and would take ten years to complete. By 6 April 2020 women's state pension age would have been 65 and equal to that of men.

There was little mention of this momentous change at the time - perhaps because the process would not start for 15 years and it would be 25 years before women had the same state pension age as men. A press cutting search by me of the 1990s found very few mentions of the pension age increase and those were almost exclusively in the business and money pages of broadsheet newspapers.

However, more detailed research by Financial Times Pensions Correspondent Josephine Cumbo found more mentions of the rise. She sent her research to the Select Committee. It is not clear how easy to find or understand most of these pieces were nor how clearly they explained the impact on the women whose pension age would be put off by five years. Some examples were given by the Select Committee in its March 016 report Communication of State Pension Age Changes.

Certainly many women did know about the changes. But very many did not. The women affected were then aged 40 to 45. It is understandable that many of them, even if they read the newspapers, would have put it in the 'too far away to worry about' box.

In newly obtained Freedom of Information answers the DWP claims that it placed "advertorials" in women's and TV listings magazines in 2000. It also claimed there was a press advert "specifically about the equalisation of state pension women's magazines and national newspaper supplements". But when asked for details of these adverts the DWP refused to do so. It admitted it "may hold" this information but finding it would cost more than £600 so it was entitled not to provide it. It also says the change was mentioned in some leaflets produced in the early 2000s.

But its crucial and damning admission is that it did not write a letter about the change to any woman affected for nearly 14 years after the Act was passed.

Writing a letter is not of course the same as informing people. The DWP admits that it could only write "using the address details recorded by HMRC at the time" and that the mailing was "subject to the accuracy of their address details with HMRC". Even those which did reach the correct destination may not have been read - "more bumph from the government" is a common reaction to such things.

Many women involved in the campaign group Women Against State Pension Inequality (WASPI) have told me they have never received a letter about changes to their state pension age even now. Many found out from friends relatives, work colleagues, or the media. Many learned about it through Facebook or Twitter.

One reason for that may be revealed in a new global study of data quality expected to be published shortly. I have been told by sources close to the report that 23% of customer or prospect data - including names and addresses - contains errors. That does not mean that nearly a quarter will not arrive. But it does show that sending one letter is the beginning of informing people not the end.

The DWP has now admitted that letters returned undelivered by Royal Mail were destroyed and no further attempt was made to contact the women - see Pension Secrecy Lifted.

Detailed dates
Information released through Freedom of Information requests by WASPI reveals that it waited fourteen years after the law was passed, until April 2009, before it began writing individually to the women affected. 

The first group were 1.2 million women born between 6 April 1950 and 5 April 1953. These women expected to reach state pension age at 60 between 6 April 2010 and 5 April 2013 and were written to in turn by date between April 2009 and March 2011. The DWP figures show that the letters were sent to women when they were 58 or in some cases 59 to tell them their pension age of 60 had been delayed. On average they were given one year and five months notice before they reached their expected state pension age of 60. Some had less than one year's notice; none had more than two.

The letter writing was stopped in March 2011 because the Coalition government was considering speeding up the equalisation of state pension age. Those changes, in the Pensions Act 2011, were finally passed by Parliament on 3 November 2011. The letter writing began again in January 2012.

Second wave
The group affected by the speed up - women born from 6 April 1953 - had not been written to as part of the first wave of letters. They were now included in a second "mailing to individuals...due to reach State Pension Age between 2016 and 2026 [which] was completed between January 2012 and November 2013".

Approximately 650,000 women worst affected by the speed up - those born 6 April 1953 to 5 April 1955 - were written to in January and February 2012.

That means they got their letters between the ages of 57 and almost 59 that their pension age would not be 60. In many cases that would have been the first they knew about the original change and they were now told that their state pension age was to be raised again to just over 63 years and in some cases to as much as 66.

Some of these women, of course, may have discovered themselves that their pension age had already been extended once. For them the letters sent in 2012 arrived only between four and eight years before that revised pension date. It told them that their state pension age was to be extended further by between two and eighteen months.

Worst affected
The very worst affected were the 300,000 women born between 6 December 1953 and 5 October 1954 who faced that maximum extra 18 month rise in their state pension age. We know now that they were first written to about the changes between the ages of 57 years 5 months and 58 years 1 month before they reached 60, giving them just 22 to 30 months to rearrange their lives.

Among that group too some had worked out that their state pension age had already been raised once. They were told between five and half and seven years before their state pension date that a further change would push it another 18 months into the future - in all cases to beyond 65 and for some as late as 66.

It is important not to forget another group some of whom got very little notice that their state pension age would be 66. They are the women born from 6 October 1954 to 5 April 1960. Most of these women only heard about the changes at the age of 56 or 57, two or three years before they expected to reach state pension age at 60. Even the very youngest got no more than six years' notice.

The WASPI campaign covers the women affected born up to the end of 1959. It is seeking transitional compensation - which it has not defined - for the whole group.

Men were also affected by the Pensions Act 2011 which raised their traditional state pension age of 65 to 66. Those born 6 December 1953 to 5 April 1955 were written to in February 2012 when they were 57 or 58, giving them between six years nine months and seven years seven months notice before their 65th birthday. They were informed of a delay of up to one year in their pension age.

DWP wrote to people born 6/12/53 to 5/4/59 about their state pension age rising. Women were told on average 2 years 7 months before expected pension age of 60; men were told on average 7 years 6 months before their expected pension age of 65.

Notice now
The Government's latest plan for reviewing and increasing state pension age was published in December 2013. It set out the principle that people should spend no more than a third of their life adult life (measured from age 20) on the state pension. A review would be held once every five years to work out what state pension age should be. It also promised "The review will seek to give individuals affected by changes to their State Pension age at least ten years’ notice."

None of the individuals mentioned in this blogpost have had ten years' notice. Some have had less than one year. None has had more than eight for the second delay.

The WASPI campaign wants some transitional protection for the women who are the worst affected. On 2 January 2016 its online petition to Parliament has gathered more than 100,000 signatures. At 10,000 signatures the Government must respond. It said it "will not be revisiting the State Pension age arrangements for women affected" after rather disingenuously claiming that "All women affected have been directly contacted following the changes."

The call for some transitional protection was specifically ruled out by Pensions Minister Baroness Altmann on Money Box on 26 September 2015.

WASPI claims that if the MPs who voted in 2011 for the further rise in state pension age had known they were given such short and inadequate notice of the 1995 changes they may well have voted differently. The Bill was passed by 287 to 242 votes after amendments about the changes were rejected by 291 to 244 votes.

Parliamentary debates
The issue has been debated on several occasions in the House of Commons and the House of Lords.

1. It was debated at length by MPs in Westminster Hall, the House of Commons second chamber, on 2 December 2015 led by Barbara Keeley MP. The debate was replied to by junior DWP and Justice Minister Shailesh Vara.

2. A further debate in the House of Commons main chamber was held on 7 January 2016. That was authorised by the Backbench Business Committee.

MPs devoted three and a half hours to debating the issue on the Motion by the youngest ever woman MP Mhairi Black

That this House while welcoming the equalisation of the state pension age is concerned that the acceleration of that equalisation directly discriminates against women born on or after 6 April 1951, leaving women with only a few years to make alternative arrangements, adversely affecting their retirement plans and causing undue hardship; regrets that the Government has failed to address a lifetime of low pay and inequality faced by many women; and calls on the Government to immediately introduce transitional arrangements for those women negatively affected by equalisation.

The Motion was passed by 158 votes to zero. But as a backbench motion it has no force to make the Government act and junior DWP and Justice Minister Shailesh Vara, who responded made it clear there would be no change.

The full debate in Hansard starts at col.454.

3. The matter was raised in Questions in the House of Commons on 1 February 2016.

4. Later that day 1 February 2016 there was a debate in Westminster Hall at 4.30pm. The debate was approved by the Petitions Committee after the WASPI petition was signed by more than 100,000 people. The Motion was

 “That this House has considered e-petition 110776 relating to transitional state pension arrangements for women born in the 1950s”

Helen Jones MP, Chair of the Petitions Committee, moved the motion. No vote was held.

5. Three weeks later on 24 February 2016 Labour used one of its days to get the Commons to debate the matter again. This time the motion was more substantive and "calls on the Government to bring forward proposals for transitional arrangements for women adversely affected by the acceleration of the increase in the state pension age."

The motion was defeated by 289 to 265.

The issues have also been debated twice in the House of Lords.
  • There was a short exchange between Baroness Bakewell and Pensions Minister Baroness Altmann in the House of Lords on 23 November 2015.
  • Baroness Bakewell obtained a short debate in the House of Lords on 3 December 2015. Baroness Altmann responded.

The DWP failed to inform millions of women about the changes to their state pension age until a year or two before they were 60. It gave inadequate notice to those affected by the further extension of their pension age leaving it to between four and eight years before that further rise was implemented. In many cases those women did not know then that their pension age age had been increased once already.

More information 
WASPI on Facebook
The WASPI petition
WASPI on Twitter
Pensions Minister Baroness Altmann on Money Box
Pensions Minister responds to Baroness Bakewell in House of Lords
Official site to calculate your state pension age

Sources: DWP Freedom of information VTR3902 (5 October 2015); VTR 3439 (8 September 2015); VTR3231 (17 August 2015).

15 March 2016
version 1.75

Monday, 16 November 2015


National Insurance contributions will be going up by an average of 15% for around six million people in April. The lower the earnings the bigger the percentage rise. Technically this does not break the Government’s election pledge – made four times in the Conservative Party Manifesto 2015 – that “we will not raise VAT, National Insurance contributions or Income Tax”. The Treasury told me that the pledge only applied to main tax and National Insurance rates and in any case this increase had been announced by the previous government and so was outside the pledge.

The rise is part of the introduction of the new State Pension. From 6 April new contributions to State Second Pension (S2P or as it used to be called SERPS) will end. So no one will be able to ‘contract out’ of S2P in favour of their own pension at work. Until April those who do contract out of S2P get a rebate of 1.4% off their National Insurance contributions (NICs) bringing them down generally from 12% to 10.6%. (NB the exact calculation is complicated - see Note for Nerds below). When S2P disappears in April so will the rebate. 

The people affected all pay into a final salary (or career average) pension – nowadays called ‘defined benefit’ or DB schemes. These have been cut back by employers in recent years and around one million workers employed by about 2500 private sector firms pay into one. About 5 million do so in the public sector.

How much?
The rebate is 1.4% of a band of earnings between £112 and £770 and when it ends someone on average earnings of £25,000 will pay an extra £5.16 a week in NICs. That will put up their net weekly contributions from £33.93 to £39.09 an increase of 15.2%. Someone on minimum wage will see their NICs rise from £11.38 a week to £13.56 – an increase of £2.18 or 19.2%. The £2.18 extra NI will take them 20 minutes to earn.

The maximum NI rise is £479.02 a year (£9.21 a week or £39.92 a month) which applies to anyone earning more than ££770 a week or £40,040 a year.

The change will wipe out the 1% pay rise scheduled for many of the 4.5 million public sector workers from April. Anyone with current gross pay of £22,436 or more will end up worse off. For example, someone paid £30,000 a year will get a pay rise of £300. They will gain from the change in the personal tax allowance leaving them paying £20 less tax in the year. But the extra £36 NI on their pay rise and the loss of the £374.46 contracted out rebate will leave them £54.46 a year worse off despite the pay rise. That is a cut in their net pay of 0.23%.

Someone earning £15,000 gross will get a pay rise of £150 a year and pay £50 less tax. But the NI rebate loss and their higher pay will see NI contributions rise by £146.46. So they will keep just £53.54 of their £150 pay rise. That is a rise in their net pay of just 0.4%.

The biggest loss will hit someone earning £40,040 a year. They will get a pay rise of £400.40 but will end up £126.68 worse off - a cut of 0.41% in their net pay. Above £46,059 a 1% pay rise would lead to a net gain in pay.

These calculations do not take account of pension contributions or any changes which may be due in them from April.  Nor do they take any account of benefits or tax credits.

Will it change?
These calculations are based on 2016/17 NI rates and thresholds announced on 25 November 2015. Normally the lower thresholds go up each year with CPI inflation. As that is around zero there was no change. So the prediction I made some weeks ago remains – National Insurance for 5.5 million people is going up in April by an average of 15% compared with what it would have been if the new scheme had not been introduced.

Employers too
The change will not just affect employees. It will also mean higher NI payments by employers who have a contracted out salary related pension scheme. The rebate is currently 3.4% off a standard 13.8% rate. That will end from 6 April and employers will face a rise in the NI they pay on average salaries of more than one third. Private sector employers can make changes in the pension scheme to recoup the cost of the rise in NI contributions by reducing scheme benefits or increasing employee contributions. They can do that without consulting scheme trustees using what is called a 'statutory override'. To find out more search that term in Google. Some have already said they will do that. Employees of British Airways have told me that it will recoup the whole extra NI cost by raising their contributions inn its pension scheme, costing them about £100 a month. 

Public sector employers however must bear the cost. The Treasury estimates (p.64 line 18 in table 2.1) it will add £3.3 billion in 2016/17 to the pay bill of the whole public sector. The NHS Confederation in particular expects the NHS in England and Wales to face £1.1 billion a year in extra expenditure. The Local Government Association estimated the change would costs local authorities in the Local Government Pension Scheme an extra £700 million a year. 

The Government says that the rise will be more than paid for by the higher rate of state pension which is earned. Every year of National Insurance which is paid will earn almost £4.45 a week in new State Pension compared with £3.97 a week under the old (current) system. But even that is only true until the full new state pension is reached, normally after 35 years contributing under the new system. After that there could be another 15 years or more paying National Insurance and gaining nothing. In that sense NI is just a tax on earned income. And for six million it is going up in April.

Note for nerds
The main standard rate of National insurance is paid on a band of earnings from £155 to £815 a week. But the contracted out rebate of 1.4% is calculated on a different band from £112 to £770 a week. Don’t ask! That complicates the calculation of the effects. The figures in versions of this blogpost lower than 1.50 understate the effect.

A shorter version of this blog was first published in the Money Box newsletter for 23 October 2015. Subscribe to the newsletter.

28 March 2016 
version 1.75 earlier versions may contain inaccuracies

Monday, 9 November 2015


The great thing about déjà vu is that if you wait a year or two it happens again.

The FCA wants a 'shopping around point' to make sure that customers are not sold poor value drawdown schemes when they exercise their pension freedom. 

Here are the eleven occasions from 2001 to 2014 that the Association of British Insurers promoted 'shopping around' to ensure people got a better annuity deal. They all failed.
  1. 8 August 2001 ABI Code of good practice on pension maturities. Tell customers they can shop around.
  2. January 2006 ABI issues a revised statement of good practice on pension maturities. Tell customers more clearly they can shop around.
  3. 10 July 2008 Improved customer information “highlights the potential benefit of shopping around”.
  4. 26 May 2009 ABI guide: People Need Pensions. Includes information on the importance of shopping around.
  5. 17 January 2011 ABI publishes a new guide – to help customers shop around.
  6. 20 December 2011 Consultation on providing a statement on benefits of shopping around.
  7. 7 November 2012 Consultation on annuity rate transparency to help people shop around.
  8. 5 February 2013 – ABI publishes – a guide to shopping around for retirement income
  9. 1 March 2013 – Code of Conduct on retirement Choices includes publishing the information people need to shop around.
  10. 21 August 2013 – publishes specimen annuity rates to give some idea of the benefits of shopping around.
  11. 10 March 2014 – ABI Minimum standards including A Conversation, A Comparison of quotes, Health and lifestyle information – oh and shopping around.
The regulator was no better. More than a decade spent relying on customers shopping around to do its job for it. 

  • August 2001 FSA Buying a pension annuity disclosure must say “by shopping around policyholders may get a better deal."
Twelve and a half years later
  • 1 February 2014 FCA Thematic Review of AnnuitiesChapter 2 The benefits of shopping around.
These plans were all put out after evidence revealed - if you can reveal the same thing a dozen times - that people were getting the wrong annuities and, guess what, they were the most profitable ones for the firms that allowed customers to drift into buying them.

After more than a decade of failure by the pensions industry to avoid widespread mis-selling of inappropriate annuities, George Osborne cut through the Gordian knot and announced pension freedoms in his March 2014 Budget. That happened just after the latest doomed attempts to promote that empty journalistic trope 'shopping around'.

Instead of innovation, the industry has just replaced expensive annuities with drawdown which comes with no guarantees and is often even more expensive.

So instead of mis-selling of annuities we have blanket 'non-advised' selling of expensive drawdown products.

And now the regulator wants 'a shopping around point' to solve the problem of expensive drawdown, as this report shows 

'Speaking at the Westminster Employment Forum in London last week, FCA director of competition Mary Starks said: “We’re very conscious that if we see a significant increase in  people not moving around in retirement, and in buying drawdown from existing providers we will have to look very hard at how we can make comparisons easier and step in to break the link between the provider and the retirement phase by prompting a shopping around point.”' (Money Marketing 9 November 2015)

Wow. A shopping around point. Something that didn't work in 2001 (twice), 2006, 2008, 2009, 2011 (twice), 2012, 2013 (thrice), or 2014 (twice). Now retrod for 2015 by the regulator. The financial firms will earnestly agree and nod wisely while they grin from ear to ear.

This time it is not a mis-selling scandal but a mis-buying one as financial firms carefully distance themselves from offering anyone advice. 

So ultimately those exploited will be blamed. And the pensions industry will be left alone to count its profits.

9 November 2015
vs. 1.00


Up to three million married couples and civil partners are missing out on a new tax allowance that is worth £220 this year and £230 in 2017/18.

The Marriage Allowance allows a spouse (or civil partner) to transfer up to £1100 of their 2016/17 tax allowance to their partner if 
(a) their income is below the tax threshold (currently £11,000 a year) and 
(b) their spouse does not pay higher rate tax which begins on incomes above £43,000 a year. 

Both must also be born after 5 April 1935 because older couples get a bigger tax break - see Marriage Tax Breaks.

The latest figures show that 1.4 million have claimed it successfully leaving 2.8 million eligible couples who have still to claim.

How it works
If a couple qualifies then the non-taxpayer can transfer £1100 of their unused personal allowance to their spouse. That will save the taxpaying spouse basic rate tax on that amount which is £220 a year (£18.33 a month).

The future
In future years the Marriage Allowance will rise. It is fixed at 10% of the personal tax allowance. So it will be £1150 in 2017/18 then on present plans £1250 by 2020/21.

Claiming and payment
You can claim the allowance online or through the income tax helpline 0300 200 3300. You will need National Insurance numbers and dates of birth for you and your spouse. Lines are open 0800-2000 Mon-Fri or 0800-1600 Saturday. You can also claim by sending a letter with your details to Pay As You Earn, HM Revenue and Customs, BX9 1AS. That might take longer.

Once the transfer is done the spouse receiving the extra allowance will have a suffix M added to their tax code The one making the transfer will have a suffix N and their tax code will be lower. 

It will be backdated to the start of the tax year and then reflected in a reduced amount of tax each month. If you qualified last tax year you should claim for that too. That rebate of £212 will be paid by check or bank transfer. 

HMRC says that the process is now simple and quick and that is confirmed by many on my twitter timeline who have successfully claimed the allowance. 

The transfer can only be for the full amount of £1100. That can be done even if the person transferring the amount has an income close to their personal tax allowance. So someone with an income of £10,500 who is a non-taxpayer can transfer the full £1100 leaving themselves with a personal allowance of £11,000-£1100=£9900. So they will start being a taxpayer and pay basic rate tax on £10,500-£9900=£600 ie a tax bill of £120. Their spouse will save £220 leaving the couple £100 better off.*

HMRC has confirmed that people can also claim the Marriage Allowance if they both pay tax at the basic rate. However in that case they will not be better off as a couple. One will pay less tax, the other an equal amount more. The online claim allows the claim to be made. If you call the helpline they should point out that you will be no better off before allowing it to go ahead.

The Marriage Allowance is only available to married couples and civil partners. It is not available to couples who are not married or civil partners.

If either partner was born before 6 April 1935 then they cannot claim Marriage Allowance because they can claim the higher Married Couple's Allowance. More in Marriage Tax Breaks including allowances for older couples and blind people.

The information and explanations in this blogpost are broadly correct. Accountants will tell you things are not quite that simple and some claim that HMRC is not implementing the law accurately. However, I believe the information here is as accurate as it needs to be and can be relied on by the vast majority to make a successful claim. There is more information about some of the fiddly bits in Marriage Tax Breaks. But they will not be relevant to the vast majority of readers.

30 January 2017
vs. 2.2

Monday, 2 November 2015


Fewer than one in four women who qualify for the new state pension in 2016/17 will get the full amount. Right up to 2054 fewer women than men will qualify for the full standard pension.  
Year one 2016/17
The new DWP figures show that out of 90,000 women reaching state pension age in 2016/17 only 20,000 (22%) will get the full new state pension or more. The full rate will be £155.65 a week. However, more than three out of four women will get less. Out of the 70,000 who do so, 40,000 will get the same as they would have got under the old state pension scheme – which by then will be £119.30 a week.

The figures are better for men. Out of 320,000 reaching State Pension Age in 2016/17, half (160,000) will get the full new state pension or more. Almost all of the other half – 140,000 out of 160,000 – will get the same pension they would have got under the old system.

Combining men and women for 2016/17 a total of 410,000 people will reach state pension age. Out of those 230,000 – more than half (56%) – will get less than the full amount of the pension. And the great majority of them – 180,000 (78%) – will get exactly the same pension they would have got under the old system.

The first five years
In the first five years of the scheme, 2016/17 to 2020/21, 690,000 women will reach state pension age but only 280,000 (41%) will get the full new State Pension or more. And 410,000 – about six out of ten (59%) – will get less. More than a third of those who get less will have their pension reduced because they have fewer than the 35 years of National Insurance contributions needed to get a full one. Nearly three quarters will have their pension cut because they paid into a pension at work. Some, of course, lose through both reasons. More details below under Causes.

This group are the WASPI women - named after their organisation Women Against State Pension Inequality - who campaign for compensation for women whose state pension age was raised twice. The most recent increase was announced only in 2011 and added up to 18 months to the state pension age of this group of women and they all got less than ten years' notice of the change.

They were born from 6 April 1953 to 5 April 1955 and will reach State Pension Age from 6 July 2016 to 5 April 2021.

Women born later than that will reach state pension age at 66 adding a year to the five years already planned since 1995. In theory they had at least 10 years notice of the change announced in 2011, though many only learned about it more recently.

For men the figures are 1,300,000 reaching pension age and 610,000 (47%) who get the full new State Pension and just over half (690,000 or 53%) will get less than the full amount.

Over ten years from 2016/17 to 2025/26 the position improves slightly. 63% of men and 55% of women get the full new state pension or more. From 2021/22 half of newly retired women or more will get the full new state pension. By the end of the ten years - those who reach state pension age at 66 in 2025/26 - almost a third (32%) of women and a quarter of men will get less than the full new state pension.

There are more men reaching state pension age in the period because women’s state pension age is being raised at an accelerated rate to equalise it with men's. So each year fewer women reach state pension age as it moves further into the future.

For the first time the figures allow us to see the numbers of men and women affected by the two reasons which cause so many to get less than the full new state pension.

First, in its early years the new state pension will be reduced for people who were 'contracted out' of State Second Pension and SERPS and paid instead into a private or company pension. Contracting out ended in April 2016. For those who were contracted out an amount is deducted from their entitlement to new State Pension. If that reduces the amount of the new State Pension to less than they would have got under the old system then they get that old pension amount instead. Hence the large number who will get the same or little more than the old pension.

In the first five years of the new scheme 1,020,000 will reach state pension age but get less than the full new pension and 830,000 (81%) will do so partly because of a contracted out deduction. Among men 85% of those getting less are affected by a contracted out deduction. For women - the WASPI group - the figure is 73%.

Second, the new state pension requires 35 years of National Insurance contributions to get a full pension. Since 2010 the old pension only needed 30 years. It will be harder for women than men to achieve this higher number. Missing the 35 year target is at least part of the reason for the reduced pension for one in five men (21%) and more than a third of women (37%) in the first five years of the new state pension - the WASPI women.

Some will have their pension reduced for both reasons About 7% of men and 10% of women lose some pension from both causes.

The longer term
The Department for Work and Pensions has resisted publishing a gender breakdown for the new pension. These new figures, obtained through a Freedom of Information request, not only show major discrimination against women in the early years but show that it will continue as far forward as the figures go – 2054. In the 2030s 15% of men but 19% of women will get less than the full standard new state pension. In the 2050s this settles down to 10% of men and 15% of women. Every year 60,000 women and 40,000 men will get less than the full pension. These are people currently in their late twenties or early thirties.

In those  years the only reason for getting less than the full state pension is failing to have at least 35 years of contributions. That is a condition that women will always find harder to fulfil than men.

No pension
In first five years of new state pension between 45,000 and 60,000 new state pensioners (2% to 3% of the total) will get no state pension due to having fewer than 10 years National Insurance Contributions. Under current rules they would get 1/30th of the pension for each year's contributions. By 2040 it is estimated this rule will be saving £650m a year.

In addition 30,000 to 40,000 people living overseas who reach state pension age in the first five years will be caught by this rule. That is about one in five UK overseas residents who reach state pension age in that time.

These figures from the May 2014 Impact Assessment (para.95) are approximate. 

Further information was given by DWP on 14 January 2016 in Impact of New State Pension (nSP) on an Individual's Pension Entitlement (p.17). It shows that from 2016 to 2050 a total of 110,000 people will have fewer than ten qualifying years of NICs. 30,000 (27%) of them are men and 80,000 (73%) are women. It does not break the numbers down into those in the UK and those living in other countries. The women who are denied a pension will not be entitled to a reduced pension on their spouse's contributions as they would be under the current rules.

SOURCES: The original data is from FOI 2015-4147 and 2015-4344 dated 29 October 2015. The figures provided are estimates based on the DWP’s ‘dynamic forecasting model’ Pensim2 and estimates by the Office for National Statistics of the number of people reaching State Pension Age each year. They take account of the latest laws about when State Pension Age will change. The figures are rounded to the nearest 10,000, which means that numbers and percentages may not add up to 100%. Although they are approximations, they are the best we will have and give a clear indication of the trends and likely outcomes.

You can read the full data here.

19 January 2016
vs. 1.60


This blogpost is the full data from FOI 2015-4147 and 2015-4344 dated 29 October 2015. The data is analysed in my blogpost NEW STATE PENSION CONTINUES TO DISCRIMINATE AGAINST WOMEN.