Economic analysts see that China’s crashing markets aren’t really crashing. In fact, they’re just correcting themselves. Some analysts are confident the Chinese government will step up to stabilise the economy.
China, a major global economy driver since the 1990s, has faced a great slowdown for three years. China entered a period of adjustment after two and a half decades and now is correcting itself. Its economy is definitely maturing.
Analysts see Chinese authorities have a huge role to play in managing the transition and preventing a recession or financial shock whereas available. If they don’t do well, China’s financial markets and real economy could definitely crash. Clearly, the sell-off shows that some, not all of China’s investors are losing confidence in the Chinese government’s capability.
It is clear that the Chinese authorities do not have the ability to control the stock market. However, current sell-off this week had seen the Shanghai Composite surge by 125% from a record low last October 2014.
But it doesn’t mean a sharp correction will do miracles immediately. There will be immediate pains and damages, but there will at least be no crashing Chinese economy that would send the world into a Bear winter.
The bloodbath in the stock market yesterday had plunged UK’s FTSE 100 to its lowest level in three years. British pension funds lose out as disastrous trading in China sent shockwaves through global markets.
Panic selling due to real estate bubble concerns had sunk the index of plenty of FTSE companies. This had reduced their value by 3 per cent, equivalent to £60 billion. It is now at a low 5768.22 upon market closure yesterday.
If the index does not recover today, the FTSE 100 index will face its largest fall since 2008, which brought on more than £160 billion gone from the value of UK stock markets.
Monday’s troubles came after China’s worst trading day since 2007. The country’s main indexes had dropped by 8 per cent, the largest in the 21st century. Investors were worried over the country’s slowing economy and the unreliability of the Chinese government. Falling oil prices and political instability in other parts of the world contributed to the mess.
The re-emergence of another Greek crisis had also spooked investors as elections come after Prime Minister Alexis Tsipras resigned from position. Spanish and Portuguese elections are also weighing on investor decisions.
The Pension Reforms had introduced new ways to pass retirement wealth to younger generations. Without a punitive “death tax” if you died before age 75 and had not touched the funds, creating a good estate plan in the UK is easier.
Wide-ranging reforms introduced in April allowed a less punitive tax rate if the wealth is passed on to beneficiaries. Wealth managers said inheritance tax planning is now much easier.
The new rules allow pension fund holders who die before age 75 to give their beneficiary some or all of the fund as a lump sum. They may also receive it as an income from drawdown, tax free, up to the current Lifetime Allowance of £1.25m.
If the fund holder dies at or after the age of 75, any beneficiary receiving a lump sum has to pay 45 per cent tax until the following tax year or tax at their marginal rate if the fund is from an income drawdown. The following tax year, the inheritance will be taxed at the beneficiary’s marginal tax rate.
Financial advisers claim that the changes allow savers to cash in their desired benefit without much trouble.
The changes mostly cover pensions with income drawdown policies, including self-invested personal pensions, capped drawdown or flexi-access drawdown. They only partially extend to annuities.
If you’re an average saver, skip this post. If not, then you have some good news waiting for you.
People who have been accessing their pension funds for personal use despite the heavy amount of taxation involved gave the UK an economic boost. Average savers over 55-years-old have withdrawn £36,500 from their pots since Chancellor George Osborne had approved the new pension rules last April.
Economists and pension experts welcomed the spending bonanza as a great economic boost. The Treasury had confirmed that it has reached £2.7 billion overnight.
Co-founder and Chief Executive of lending company Zopa Giles Andrews said ‘silver savers’ had turned the pound into silver. Consumers with greater freedom to use their pensions as disposable income had spent their money on holidays and home improvements. Some have spent the amount on cars and home improvements.
Pension experts confirmed these were driving Britain’s economic recovery. But some called pensioners not to rush taking out their pots to the sun because they could get stung with heavier tax charges.
Research showed that in addition to state pension over the age of 55, 31 per cent of respondents have cashed in some or all of it. Some six per cent planned to cash everything out. About 10 per cent had cashed in the maximum tax-free lump sum of 25 per cent. The average sum taken for most pensioners was about £36,500.
According to a Scottish Widows Retirement Report, about 56% of people are saving enough money for their retirement in Scotland and Britain. This means more pension savers are creating a comfortable retirement for themselves in the last decade.
About 56% of over-30s are saving enough for their retirement. This is a mark-up from last year’s 53% and is the highest level recorded since its record started in 2005. However, one out of five people across the UK are still not saving anything for their retirement.
Men are likely to save more money for their later years at 60%. Women are expected to save about 52% for their later years.
Adequately saving is when a person has a salary of at least £10,000 and are putting aside at least 12% of their income for their retirement, which includes employer contributions. A gold-plated pension scheme offering a guaranteed level of income such as a final salary pension. People who save adequately are also considered those who are likely to experience a fall in their living standards during their retirement years.
The research also found “strong evidence” that an improvement in the future retirement funds of 30 to 49-year-olds is imminent as 54% of the age group is now saving what they need.
Being self-employed in the country means you’re the one to take care of your personal financial responsibilities. This isn’t far from the responsibilities of those in the workforce, except that their employers contribute something for their retirement. Many say that the self-employed army is lagging because there are only few saving for old age.
So what do we need to do?
Long Term Savings
Saving in a long term mixture of ISAs and pensions allow you instant access to your money without much trouble. Your pension allows you to have government relief on your contributions equal to the amount of income tax you have.
But How Much, Really?
Think of it this way, if you’re saving £100 monthly for 40 years, you’re the same as someone saving £200 monthly for 20 years. If you’re still a millennial that would need more than £190,000 to survive the last years of your life, you could save this much for forty years and earn lots for yourself.
Just go with a self-invested personal pension (SIPP), which allows you to have different levels of charges you have to pay, the flexibility when you could save and your investment choices to grow your savings pot.
New Standard Life Chief Executive Keith Skeoch calls on government ministers to stop changing pension rules consistently. New rules introduced every term make it difficult for workers to save money for retirement. Skeoch said everyone and the industry needed “some stability and clarity” and considered it as “incredibly important.”
Meanwhile, some recent pension changes had benefitted Standard Life than any other insurance company. Auto-enrolment allows employees to be automatically signed up for their workplace retirement schemes and brought SL more than 120,000 new consumers. It had also fuelled a 15 per cent increase in regular contributions.
Skeoch said that the annuities were “not relevant to where the business is operating today.”
Shifting from capital-intensive insurance into fee-earning asset management, the CEO said on Tuesday that they will follow a “steady as she goes” strategy. The revenue for the company was up by 17 per cent to £761 in the second quarter of 2015.
Skeoch’s call comes after officials said they will report in December on a wider review of pensions that could result in the end of relief to retirement contributions. The new pension rules may put a system with bias towards individual savings accounts (Isa).
Upon Skeoch’s step up into the company, Shares in SL had fallen by 2.8 per cent to 442p on Tuesday.
Financial analysts advise this almost every year. Our friends great with money definitely see the sense in checking our pension accounts yearly. And for what? We often think paying our pensions is enough because we’ve been looking through the contract over and over. But then, we might be wrong.
Double-checking your pensions yearly allows you to know:
If your pension still works for you
The government granted pensions freedoms in April to allow almost-retirees and retirees to get all their pensions and place them somewhere that would help re-align the pension fund to aid their situation. About 75 per cent of pension troubles during retirement stem from poor planning and the inability to see the risks involved if pensioners stayed in their funds for longer.
If you could reduce those tax troubles
Withdraw pension early and you get some income tax on the way. Withdraw pension later and you work a longer life. The consequence of withdrawing pensions later because you did not inspect your account means 5 or 8 more years working post-retirement. If this doesn’t bother you, then you won’t need to check much on pension.
The bottom line is that if you never check if you could have enough funds on your retirement, then you’ll have to continue working. Checking your account annually to see if things are working out according to plan is crucial for your pension funds’ success.