Thinkpiece

26 Jun Thinkpiece

In this update: 

• • Financial fireworks
  • State Pension Top-Ups deadline extended
  • Pension Credit

Financial fireworks

With the Bank of England reporting last week that core inflation has continued to rise, it’s difficult to see a way out of this current inflation spiral.

Like a firework, you light the touch paper and stand back (quantitative easing). Nothing happens for ages. Sometimes it takes ages for the firework to ignite and shoot up into the sky (2009 – 2023!).

You daren’t go back to the firework, as it may go off at any time (like adding more credit to markets).

When it does eventually go off, it soars quickly upwards, and explodes, raining across the night sky.

………..but then it falls to darkness again. This firework is staying brighter for longer. 

So whilst it is taking a long time for inflation to fall, and indeed many will face an extended period of considerable financial pressure, the current measures are subject to a long time lag. The danger here for the Bank of England is that, like our firework, inflation can quickly fade and then the economy could decline.

The Bank of England wants to stem demand by causing people to tighten their belts. The degree to which that occurs depends upon individual circumstances. This is a blunt instrument, as much of our inflation is imported through food and energy costs. 

For all their critics, due to this lagging factor, it is almost impossible for the Bank of England to accurately determine how and when to increase or decrease interest rates. 

As a recent economist once told me, ‘I’m different to other economists. I know that my predictions are 100% wrong!!’ This gives you an idea of the difficult of managing interest rates to stem inflation.

State Pension Top-Ups deadline extended

The government is giving people more time to pay National Insurance contributions towards their State Pension.

Taxpayers now have until 5 April 2025 to fill gaps in their National Insurance (NI) record from April 2006 that may increase their State Pension – an extension of nearly two years.

Extending the voluntary NI contributions deadline means that people have more time to properly consider whether paying voluntary contributions is right for them and ensures no-one need miss out on the possibility of boosting their State Pension entitlements.

The original deadline was extended from 5 April 2023 to 31 July 2023 and tens of thousands of people have taken advantage to pay voluntary contributions to HMRC since then. The revised deadline is expected to enable tens of thousands more to do the same.

All relevant voluntary NI contributions payments will be accepted at the rates applicable in 2022/23 until 5 April 2025.

Paying voluntary contributions does not always increase a person’s State Pension. Before starting the process, eligible individuals with gaps in their NI record from April 2006 onwards should check whether they would benefit from filling those gaps.

Individuals can usually only pay voluntary NI contributions for the previous six tax years and after 5 April 2025 the usual six year deadline will resume.

The government news bulletin has further details and a number of useful links.

Pension Credit

The government is calling on pensioners to check if they are eligible for Pension Credit.

The Department for Work and Pensions (DWP) has announced a forthcoming ‘Invitation to Claim’ initiative which will see potentially eligible households who receive Housing Benefit across 10 local authorities in Britain sent letters encouraging them to apply for Pension Credit.

Pension Credit is worth over £3,500 a year on average and is designed to help with daily living costs for people over State Pension age and on a low income.

The benefit tops up a person’s income to a minimum of £201.05 per week for single pensioners and to £306.85 for couples – or more if a person has a disability or caring responsibilities.

Currently, nearly 1.4 million pensioners in Britain receive Pension Credit and take-up is at the highest level since 2010. However, many are still not claiming this extra financial help.

Even a small Pension Credit award can open doors to other benefits – including help with housing costs, council tax, heating bills, as well as up to £600 in extra Cost of Living payments later this year too.

The Week of Action will see DWP joining forces with charities, stakeholders, broadcasters, and a whole range of partners to highlight the help available and encourage pensioners to check their eligibility and apply.

Minister for Pensions Laura Trott MBE said:

‘During the Week of Action, we will be out and about spreading the word – and you can help too. Speak to your older loved ones about Pension Credit and get them to check if they could be eligible for this vital extra support, worth an average of £3,500 per year.’

Further details are available in the government news item.

If you’ve not yet put in place a sound financial plan and you’d like to know more, please feel free to contact us on
01626 305318 or via email here.

The views expressed are not to be taken as financial advice. Professional advice should be sought before proceeding.