Welcome to the October 2015 Newsletter from Easterbrook Eaton
In what has proved to be a politically turbulent month, Chancellor George Osborne has announced that he will present the 2015 Autumn Statement in conjunction with the Spending Review, on Wednesday 25 November. All eyes will be on the Chancellor as he presents his Statement opposite the newly elected Labour leader Jeremy Corbyn and shadow Chancellor John McDonnell.
As MPs voted in favour of £4.4bn of tax credits cuts, research from the Institute for Fiscal Studies suggested that the new National Living Wage will not compensate for the tax and benefit changes announced in the July Budget, with many workers likely to be worse off under the new measures. The news followed the recent unveiling of plans to introduce additional penalties for non-payment of the National Minimum Wage and the National Living Wage.
Meanwhile, pensioners are withdrawing £27 million a day from their retirement pots as a result of new pension freedoms, according to new figures from the insurance industry, with around £2.5 billion of payments being made to savers within the first three months.
New penalties for non-payment of the National Minimum Wage and the new National Living Wage to be introduced
The Government has revealed new plans to increase penalties for non-payment of the National Minimum Wage and the new National Living Wage. The National Living Wage was announced in the Summer Budget, with the new payment guidelines coming into effect in April 2016.
Under the new system, workers aged 25 and over will be entitled to receive £7.20 an hour, rising to £9 an hour towards the end of the decade. The current National Minimum Wage will rise from £6.50 to £6.70 with effect from 1 October.
Also, from April 2016, alongside the introduction of the National Living Wage, the Government plans to double the penalty for non-payment from 100% of the amount owed to 200%, unless the arrears are paid within 14 days.
The maximum fine for non-payment will remain at £20,000 per worker, with employers who fail to pay being banned from becoming a company director for up to 15 years.
Prime Minister David Cameron said that the new policy would only prove successful if it were 'properly enforced', adding that the Government would be funding a new unit at HM Revenue and Customs (HMRC) to crack down on those firms found to be disregarding the law.
The introduction of the wage means that some 3.7 million women stand to benefit from a pay rise by 2020, according to new research from the Resolution Foundation. Conor D'Arcy, the think tank's policy analyst, advises that 'because of their concentration among the low paid, women will account for the majority of the winners'.
However, the Institute for Fiscal Studies has warned that even those who enjoy a significant increase in wages as a result of the NLW stand to be worse off as a result of other tax and benefit cuts announced in the Chancellor's July Budget.
The Confederation of British Industry (CBI) has also warned that the introduction of the NLW will have a 'dramatic impact' on companies' profits and recruitment schemes. CBI president Paul Drechsler said: 'I've talked to several chief executives and been surprised by the impact on their profits of the change.'
Please contact us for more information on the National Minimum Wage and the National Living Wage.
Pensioners withdraw £27 million a day under new pension freedoms
Those saving for a pension have been withdrawing around £27 million a day from their pension pots following the implementation of new retirement freedoms, figures from the insurance industry reveal.
The new pension freedoms, announced in last year's Budget by Chancellor George Osborne, mean that people over 55 can utilise their pots however they wish, instead of being required to buy an annuity.
Within the first three months, around £2.5 billion of payments were made to savers after new pension regulations for over-55s were introduced in April, reports the Association of British Insurers (ABI).
The research, taken from figures from April, May and June, reveals that £1.3 billion was paid out in cash lump sums, with average payment sizes of nearly £15,000.
264,000 income drawdown payments contributed to around £1.1 billion being paid out, with the average payment figure reaching £4,200.
The income drawdown scheme allows savers to leave their pension pot invested but still be permitted to take an income directly from it.
For advice on a range of personal financial planning strategies, please get in touch. We would be delighted to assist you.