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Will my daughter qualify for a state pension?

Will my daughter qualify for a state pension?

My daughter, who is 46, has hardly worked owing to illness and mental health problems. She has received very little in the way of jobseeker’s allowance or other benefits.  She is now registered disabled and has been receiving benefits but only for the past few months.

I do not think she has paid national insurance contributions (NICs) since she was young, when she did work for a while.

What is her situation regarding a state pension? Can I pay the 10 years she would need to qualify?

Michelle Cracknell
Wed, 07/01/2020 – 15:10

From
SM/via email

In order to get any state pension, she herself will need to have 10 qualifying years of NICs. A qualifying year is where an individual has:

• paid NICs because they are working;

• they received national insurance credits (NICs); or 

• they paid voluntary NICs.

You are entitled to NICs if you are on working tax credit, universal credit or carer’s allowance.

When your daughter was on jobseeker’s allowance, she would have received national insurance credits. If she is receiving employment and support allowance or unemployability allowance, she will also have received national insurance credits. If she was eligible but did not receive these allowances, she will have to apply for the credits. 

You should obtain a state pension forecast for your daughter to see the NICs that she has received. You should also speak to the Department for Works and Pensions to see if she could apply for more credits.

Michelle Cracknell is the former chief executive of the Pensions Advisory Service.

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Savings rates see biggest fall in over a decade

Savings rates see biggest fall in over a decade

Average interest rates on savings accounts fall

Brean Horne
Wed, 07/01/2020 – 11:06

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Savers face dismal prospects as rates tumble to their lowest level in over a decade, data from Moneyfacts reveals.

The average easy access account now pays 0.27%, compared to 0.59% at the start of the year.

Similarly, the average easy access cash Isa currently offers 0.37%, down from 0.85% in January.

But savings rates on longer-term deals, which Moneyfacts defines as over 18 months’ duration, have suffered the most this year.

The average longer-term fixed Isa for example, pays interest of 0.81% today, down from 1.37% seven months ago.

This is 0.4% less than the average easy access cash Isa.

Similarly, longer-term fixed bonds also saw a significant fall in interest since January, with the average rate falling from 1.48% to 0.92%.

Experts advise that savers act quickly to take advantage of good rates, as they are likely to reduce further or disappear completely.

Rachel Springall, finance expert at Moneyfacts.co.uk, says: “It is imperative that savers act quickly to acquire the top rates on the market regardless of which type of savings account they choose, as there seems no end to the downward trend.

“Due to the uncertainties that the coronavirus pandemic has instilled, it is more important than ever before for consumers to build up an emergency fund that they can dip in to should they run into any financial difficulties in the months to come.”

Why are rates so low?

Today’s low savings rates follow almost a decade of low interest.

The savings market began to deteriorate more rapidly this year following the Bank of England’s decision to reduce the base rate twice, down to 0.1%, its lowest level in history.

Most savings providers began to slash interest rates on their accounts following the base rate cuts.

This, coupled with continued uncertainty surrounding the coronavirus pandemic, has caused savings rates in the UK to plummet.

Where can you find the best rates?

National Savings & Investments (NS&I) now offers the two best easy-access interest rates, according to data from Savings Champion.

The NS&I Income Bonds account pays 1.16% and requires a minimum deposit of £500.

This is followed by the NS&I Direct Saver and the Saga Easy Access Savings Account which both pay 1% and can be opened with a minimum deposit of £1.

The next best rate is offered by Yorkshire Building Society’s Annual Access Account (Issue 4) which pays 0.95% and requires a minimum deposit of £1.

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Can I start a pension plan if I’m unemployed?

Can I start a pension plan if I’m unemployed?

I am disabled, unemployed and have no pensions. I am 57 and looking to start a 10-year pension plan until my official retirement date in June 2030.

I am interested in the pension plan for people on low incomes, where I believe you can put in a maximum of £240 a month and the Government will add £60 a month to it.

I contacted a financial adviser who wants to charge me £900 to set this up for me.

Where can I apply to do the pension and an Isa?

Francis Klonowski
Tue, 06/30/2020 – 17:08

From
RM/via email

Without earnings, you can save up to £3,600 each tax year into a personal pension or perhaps a stakeholder pension plan. The former generally offers a wider investment choice, if that is important. The latter is a type of personal pension, but with more restricted investment choices and capped charges: they are often better suited to people on low incomes.

You are correct that whatever you pay in is ‘grossed up’ by 20% tax relief – so if you pay in £240 a month, £60 tax relief is added to make a gross contribution of £300.  

However, before going down this route you need to consider what it is you are trying to achieve. For instance, do you aim to provide a regular income from the age of 65? Or perhaps just accumulate a lump sum from which to draw as and when you want? With a pension you can withdraw 25% tax-free, while any withdrawals from the remainder are potentially taxable depending on your other income.

You would also have to decide how to draw your income. You could leave the fund invested and draw as needed – though this option may be less viable, given the size of fund you are likely to accumulate – or buy an annuity to provide income for life.

Then there is the question of risk. You will not get any interest on cash in a pension, so you would have to invest your contributions in some kind of investment fund, which could fluctuate in value. 

As an alternative, therefore, you could consider an Individual Savings Account [Isa].

Just as with pensions, all returns on Isas are tax-free. Although you will not benefit from the tax relief on contributions, all future withdrawals are free of tax. You could save in either cash or stocks and shares, or a mixture of both, and you could save up to £20,000 each tax year.

If you are entitled to working tax credit or receiving universal credit, there is a third option: the Help to Save scheme. This is a government-backed savings account, which provides a bonus of 50p for every £1 saved over four years. You can save between £1 and £50 each calendar month, with your bonus added at the end of year two and year four. Your account closes after four years, but you could then put the maturity value into a pension or Isa.

You have to apply directly for Help to Save at Gov.uk/get-help-savings-low-income/how-to-apply, but for a pension or Isa you definitely do not need to go through an adviser.

Several do-it-yourself investment platforms such as Fidelity, interactive investor (Moneywise’s parent company) and Nutmeg, deal directly with investors. Most of these platforms offer both a Stocks and Shares Isa and a personal pension at very low cost, so you could have both within one account. For a Cash Isa, however, you would use a bank or building society online or in branch.

Francis Klonowski is director of Klonowski & Co.

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SAM BARKER: What no one tells you about being scammed

SAM BARKER: What no one tells you about being scammed

I thought I knew a lot about fraud, but nothing could prepare me for actually be scammed – especially not three times in one day

Sam Barker
Tue, 06/30/2020 – 12:59

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As a financial journalist I have written untold numbers of stories on fraud and scams. I’ve sat in courtrooms up and down the country reporting on fraud trials, I’ve been out with police forces when they kick down scammers’ doors at four in the morning.

In other words, I take a professional interest. But the one thing I had never experienced is the personal side of it – what it’s like to actually be defrauded.

That is, until recently. A few weeks ago, I checked my postbox only to find it unusually full of letters. Sadly, this was not due to a secret admirer or NS&I telling me I’d won a prize on the Premium Bonds.

Instead I had letters from three banks, none of which I banked with. The letters were all congratulating me on having been successful in setting up a credit or debit card, and two of the letters contained said cards.

Straight away I knew this was a deliberate fraud. The way it works is a scammer manages to find out enough information about you to convince a bank they are you.

They then apply for credit and debit cards in your name, which are sent to your home address.

A key part of this scam is something utterly mundane – what sort of postbox you have. The fraudster needs to intercept the cards before you do, which means they need to scam people with an outside postbox they can steal the cards from.

As a result, these frauds tend to happen to residents of blocks of flats with external postboxes and to country homes with isolated ones at the end of a long drive.

If successful, the fraudster goes on a spending spree with the cards, while you are none the wiser. I had inadvertently foiled the scam by getting to the letters before the fraudsters did.

When we think about scams, we tend to focus on financial loss. Quite rightly, as the sums involved can be life-changing for the victim. Fortunately, I have lost no money as a result of this and consider myself very lucky. But I was unprepared for the other aspects of being scammed that no one tells you about.

First, being defrauded meant going through a wide palette of emotions, ranging from worry  and doubt to boredom.

The worry came first. I didn’t know if I would lose money or how many more frauds might occur.

But boredom quickly followed. Being scammed means calling each bank and talking to its fraud team, which then takes on the case.

But these calls can take more than an hour each, which quickly becomes a chore. I also have to say the staff at one bank’s fraud team could not have been less interested, while others were a picture of kindness and competence.

Doubt is also part of the mix. One fraud team call handler asked me if I knew anyone who might have done this deliberately as a form of revenge.

What a question! It is not a nice thought, though I think this fraud attack was random.

There was an element of fear too. The postbox in question is by the one door in and out of the flat. If the scammer comes round, there is a good chance I could bump into them leaving my building – not an interaction I would relish.

Second, fraud has a serious impact on your credit score. Mine has fallen 300 points, from ‘excellent’ to ‘poor’, as a result of this.

The banks assure me this is temporary and that my credit score will bounce back once they have sorted the situation out.

But three weeks on from the incident and nothing has happened. If I were to apply for any sort of loan, perhaps as a result of a financial emergency, this would scupper my chances of a decent deal.

I have interviewed many fraud victims, who commonly say they feel shame that they were caught out. They also felt that there was a stigma against talking about it too widely.

I always tell them that there is nothing shameful about being tricked by fraudsters, most of whom are extremely good at what they do.

But my own experience has shown me that scams are more than just financial loss and shame.

We would all do well to show more sympathy to people who have been defrauded and help reduce the stigma around being a victim of a scam. 

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Government state pension response “woefully inadequate”

Government state pension response “woefully inadequate”

Thousands of women could be missing out on pension payments but the Government says it will not contact them

Stephen Little
Tue, 06/30/2020 – 11:39

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The Government’s response to findings that thousands of women could be getting the wrong state pension has been dubbed “woefully inadequate” by a former pensions minister.

Tens of thousands of older women are being underpaid by up to £100m for their state pension, according to a recent research paper published by pension consultants Lane Clark & Peacock (LCP).

But the Government has chosen not to contact women in this position, instead relying on them coming forward.

What is the problem?

The issue appears to be particularly acute for older married women who may not realise that they had to put in a claim for a higher pension when their husband turned 65.

Before the introduction of the new state pension system in April 2016, women could claim a partial state pension based on the National Insurance (NI) record of their husband if their own contributions did not entitle them to the married woman’s rate.

Under the old system you needed 44 years of NI contributions in order to claim the full basic state pension.

The pension that a married woman can claim based on her husband’s record of NI contributions stands at £80.45 per week, provided that their husband was receiving a full basic state pension. This is 60% of the full basic state pension rate of £134.25.

Since March 2008, married women on low pensions should have been awarded this 60% rate automatically when their husband turned 65. However, before this date they needed to claim the uplift, meaning thousands have missed out.

How much is owed?

In some cases, affected women could be owed backdated payments running into thousands of pounds and the total amount owed could be up to £100 million.

Pensions Minister Guy Opperman told the House of Commons that when individual cases were brought to the attention of the Department of Work and Pensions (DWP) matters had been corrected and encouraged others to come forward.

However, he ignored calls from Labour MPs that the DWP should actively contact women who had been underpaid.

Steve Webb, former pensions minister and partner at LCP, says: “With more and more women coming forward to report underpaid state pensions, there is no doubt that there is a systematic problem here.  It is not good enough for the DWP to ask people to come forward one by one. 

“The Government has had long enough to review this issue – it is time for action. DWP must use its own records to track down the women who are missing out as a matter of urgency. The current response to this issue is woefully inadequate.”

Have you been underpaid?

If you are worried that you have been underpaid for your pension LCP has a handy tool that can help you check.

All you have to do is enter few details about you and your husband to find out if you have been receiving too little.

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Online shoppers face extra tax under Government plans

Online shoppers face extra tax under Government plans

New delivery charge proposed to help reduce pollution

Brean Horne
Tue, 06/30/2020 – 11:25

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Online shoppers may have to pay a compulsory online delivery charge on all orders under new government plans.

The Department for Transport (DfT) is considering a new fee to combat congestion and rising toxic emissions due to an increase in online shopping during the coronavirus outbreak, the Times reports.

Internet retail sales jumped to 32.8% of all transactions in May, compared to just 18.9% in February before the UK went into lockdown, according to the Office for National Statistics (ONS).

This has caused an increase in the number of delivery vans on the road.

Scientific advisors are calling for “mandatory charge,” similar to the one levied on plastic bags, to be applied to all Amazon-style deliveries.

Shoppers have started to order more than necessary due to the number of free and next-day delivery deals advertised, their findings show.

Ministers were informed that the charges may encourage “more sustainable behaviour”.

A spokeswoman told The Times: “Cutting congestion and vehicle emissions in our towns and cities is absolutely key to improving air quality and building a greener transport network.”

“We continue to work closely with experts on the best ways to achieve that and to meet our ambitious 2050 net-zero target.”

Nitrogen oxide emmissions (NOx) have fallen by 74% between 1970 and 2018, according to recent data from the ONS.

However, NOx emissions from vans have risen by 43% between 2007 and 2017.

NOx can cause breathing difficulties and lead to conditions such as chronic lung disease.

The majority of delivery vans are also powered by diesel, which negatively impacts the environment.

The DfT currently offers grants of £8,000 to reduce the cost of companies purchasing electric vans, to cut down on emissions.

The proposals will be opened up to public consultation before a final decision is made.

Online delivery tax could be “counterproductive”

Experts warn that a levy on online shopping could be counter-productive and may in fact encourage shoppers to travel out to stores instead, increasing car pollution.

Andrew Hagger, personal finance expert at MoneyComms, says: “It would be a controversial move and a hugely unpopular one with consumers.

“The worry is that such a surcharge could turn into a cash cow like the Insurance Premium Tax which the Government keeps increasing as a way of trying to balance its books.

“You could also argue that the move may be counterproductive with people getting in their cars and driving to the local retail outlets to make their purchases instead.”

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