- The average private pension wealth for people with multiple jobs nearing or in retirement (aged 55 to 69) who earn less than £10,000 in each role, is £12,400 – just 6.1% of the average man’s at £203,200*
- For those who are self-employed, private pension wealth is higher at £121,200, but still only 77% of the average man’s
- However, while 71% of multiple job holders now save into a private pension, only 15% of the self-employed do
New research commissioned by NOW: Pensions, the pension provider for 1.8 million people, has found that multiple job holders face huge barriers to saving, resulting in a private pension pot just 6.1% of the UK average.
This research by the Pensions Policy Institute (PPI) will be published in December and demonstrates that multiple job holders earn 39% less than the UK average population. This means average earnings of £16,750 in comparison to the UK average of £27,380 which impacts pension saving. Even when state pension and other benefits are taken in account multiple job holders still have 46% less than the baseline population’s pension income, just £210 a week compared to £390 a week.
These low levels of earnings mean many people with multiple jobs are excluded from Automatic Enrolment (AE). AE is only triggered once a worker earns over £10,000 a year in a single job. Even those that are earning more than the £10,000 threshold in a job and are enrolled still miss out on potentially significant contributions from each of their employments due to the Lower Earnings Limit. The lower limit is set at £6,240 meaning that only earnings over that amount are pensionable. Instead of saving 8% into a pension, those earning £10,000 are only contributing 3.8% of that total figure.
The self-employed picture is just as gloomy
Five million people in the UK are self-employed, contributing an estimated £305 billion to the UK economy. The majority of the self-employed are men. Among those who have been self-employed for two years, 65% are male, of those who have been self-employed for 20 years, 71% are male.
The report by PPI reveals that 85% of the self-employed do not save into a private pension and this figure has grown from 73% in 2008/09. The remaining 15% of the self-employed who do manage to save into a pension have 77% of the pension wealth of the average population.
This is partly because lower than average incomes and the need for financial liquidity can make it difficult to save consistently. However, it is also down to attitudinal and other barriers as, even amongst the highest paid self-employed workers, pension participation rates are still at just 19%.
The self-employed group is excluded from accessing the benefits of AE because they do not have an employer who must automatically enrol them and provide contributions. The report identifies that after being self-employed for 20 years pension savings really begin to suffer with retirement incomes dropping to 53% of the UK average. This drops further for those who have been self-employed for longer.
The self-employed and multiple job holders are the groups most likely to sound alarm bells around low levels of pension participation and saving. This is going to be made worse by the continuing economic downturn resulting from the Covid-19 crisis.
Mike, 33 from Leeds, is married with one child and has another on the way: “Pre-COVID, I worked multiple jobs – a delivery driver for local businesses and a part-time job bar-tending. My wife does occasional cleaning work but as she goes further into her pregnancy this is becoming less of an option.
“Before COVID 19, as a family we had made enough money to live, but not save. I was more focussed on providing for the day-to-day, and whilst I occasionally thought about a rainy-day fund I not only didn’t think about pensions, but I wasn’t aware that they were something I had to concern myself with. I assumed that when I reached a certain age a state pension would be enough to see me through my old age.
“COVID has changed my work life and consequently my perspective on savings and pensions. My second job, bar tending, is no longer there to give me an income stream – meaning I have had search for more full-time driving jobs. It made me realise how precarious my finances were, and that I needed to start planning to ensure that I could provide for my family now and in the future.”
The report also found that neither the level of income nor the closer you are to retirement have a material impact on the likelihood of being member of a pension scheme if you are from either of these groups. Less than a quarter (23%) of self-employed 60-64-year olds are members of a pension scheme – which is defined as a scheme from a previous employer or a personal pension.
Multiple job holders and the self-employed both have lower incomes than traditional, full-time, employees
Average annual full-time earnings for the self-employed is £19,560, almost a third (29%) less than the baseline population (£27,380). However, this does increase the longer someone is self-employed.
The average total income for those who have multiple jobs that each pay less than £10,000 is £16,750 – 39% less than the baseline population. This has a significant impact on a person’s ability to save for the future.
Joanne Segars, Chair of Trustees at NOW: Pensions comments: “Auto enrolment has proved to be a huge success in getting vast numbers of working people in the UK saving for their later life, with just over 10 million now enrolled. However, there is an additional 5 million self-employed workers who are locked out of workplace savings and given no support, or incentive, to start saving for their retirement.
“NOW: Pensions is calling on the government to make significant policy changes to improve the later life outcomes for the self-employed and multiple job holders, especially as the Coronavirus pandemic is set to vastly increase the number of people working multiple part-time jobs. One key policy change would be to scrap the £10,000 AE trigger. If auto enrolment were to start from £1 of earnings and include cumulative income from multiple jobs this would allow 106,000 people to benefit and increase pension wealth by 175%.”
Andy Chamberlain, Director of Policy at IPSE (the Association of Independent Professionals and the Self-Employed), said: “This research is both very valuable and very concerning, chiming with our own past findings about the lack of pension saving among the self-employed. The reality is that the fluctuating incomes of the self-employed (particularly amid the financial turmoil of the pandemic) mean that rigid pension schemes such as the auto-enrolment programme simply do not work for them.
“The self-employed need flexible pension plans that allow them to draw down on their savings when they need them. For both the self-employed and workers holding multiple part-time jobs – and anyone else whose style of work is not suited to rigid pension plans – it’s important that more flexible, accessible savings options are made available.”
The report, published in December, will look at six under-pensioned groups and the reasons for not being able to save sufficiently for later in life.
Not company earnings, not data but vaccines now steering investor sentiment
By Marc Jones and Dhara Ranasinghe
LONDON (Reuters) – Forget economic data releases and corporate trading statements — vaccine rollout progress is what fund managers and analysts are watching to gauge which markets may recover quickest from the COVID-19 devastation and to guide their investment decisions.
Consensus is for world economic growth to rebound this year above 5%, while Refinitiv I/B/E/S forecasts that 2021 earnings will expand 38% and 21% in Europe and the United States respectively.
Yet those projections and investment themes hinge almost entirely on how quickly inoculation campaigns progress; new COVID-19 strains and fresh lockdown extensions make official data releases and company profit-loss statements hopelessly out of date for anyone who uses them to guide investment decisions.
“The vaccine race remains the major wild card here. It will shape the outlook and perceptions of global growth leadership in 2021,” said Mark McCormick, head of currency strategy at TD Securities.
“While vaccines could reinforce a more synchronized recovery in the second half (2021), the early numbers reinforce the shifting fundamental between the United States, euro zone and others.”
The question is which country will be first to vaccinate 60%-70% of its population — the threshold generally seen as conferring herd immunity, where factories, bars and hotels can safely reopen. Delays could necessitate more stimulus from governments and central banks.
Patchy vaccine progress has forced some to push back initial estimates of when herd immunity could be reached. Deutsche Bank says late autumn is now more realistic than summer, though it expects the northern hemisphere spring to be a turning point, with 20%-25% of people vaccinated and restrictions slowly being lifted.
But race winners are already becoming evident, above all Israel, where a speedy immunisation campaign has brought a torrent of investment into its markets and pushed the shekel to quarter-century highs.
(Graphic: Vaccinations per 100 people by country, https://fingfx.thomsonreuters.com/gfx/mkt/azgvolalapd/Pasted%20image%201611247476583.png)
SHOT IN THE ARM
Others such as South Africa and Brazil, slower to get off the ground, have been punished by markets.
Britain’s pound meanwhile is at eight-month highs versus the euro which analysts attribute partly to better vaccination prospects; about 5 million people have had their first shot with numbers doubling in the past week.
Shamik Dhar, chief economist at BNY Mellon Investment Management expects double-digit GDP bouncebacks in Britain and the United States but noted sluggish euro zone progress.
“It is harder in the euro zone, the outlook is a bit more cloudy there as it looks like it will take longer to get herd immunity (due to slower vaccine programmes),” he added.
The euro bloc currently lags the likes of Britain and Israel in terms of per capita coverage, leading Germany to extend a hard lockdown until Feb. 14, while France and Netherlands are moving to impose night-time curfews.
Jack Allen-Reynolds, senior European economist at Capital Economics, said the slow vaccine progress and lockdowns had led him to revise down his euro zone 2021 GDP forecasts by a whole percentage point to 4%.
“We assume GDP gets back to pre-pandemic levels around 2022…the general story is that we think the euro zone will recover more slowly than US and UK.”
The United States, which started vaccinating its population last month, is also ahead of most other major economies with its vaccination rollout running at a rate of about 5 per 100.
Deutsche said at current rates 70 million Americans would have been immunised around April, the threshold for protecting the most vulnerable.
Some such as Eric Baurmeister, head of emerging markets fixed income at Morgan Stanley Investment Management, highlight risks to the vaccine trade, noting that markets appear to have more or less priced normality being restored, leaving room for disappointment.
Broadly though the view is that eventually consumers will channel pent-up savings into travel, shopping and entertainment, against a backdrop of abundant stimulus. In the meantime, investors are just trying to capture market moves when lockdowns are eased, said Hans Peterson global head of asset allocation at SEB Investment Management.
“All (market) moves depend now on the lower pace of infections,” Peterson said. “If that reverts, we have to go back to investing in the FAANGS (U.S. tech stocks) for good or for bad.”
(GRAPHIC: Renewed surge in COVID-19 across Europe – https://fingfx.thomsonreuters.com/gfx/mkt/xegvbejqwpq/COVID2101.PNG)
(Reporting by Dhara Ranasinghe and Marc Jones; Additional reporting by Karin Strohecker; Writing by Sujata Rao; Editing by Hugh Lawson)
BlackRock to add bitcoin as eligible investment to two funds
By David Randall
(Reuters) – BlackRock Inc, the world’s largest asset manager, is adding bitcoin futures as an eligible investment to two funds, a company filing showed.
The company said it could use bitcoin derivatives for its funds BlackRock Strategic Income Opportunities and BlackRock Global Allocation Fund Inc.
The funds will invest only in cash-settled bitcoin futures traded on commodity exchanges registered with the Commodity Futures Trading Commission, the company said in a filing to the Securities and Exchange Commission on Wednesday.
A BlackRock representative declined to comment beyond the filings when contacted by Reuters.
Earlier this month, Bitcoin, the world’s most popular cryptocurrency, hit a record high of $40,000, rallying more than 900% from a low in March and having only just breached $20,000 in mid-December.
Bitcoin tumbled 10.6% in midday U.S. trading Thursday.
Other U.S.-based asset managers will likely follow BlackRock’s lead and add exposure to bitcoin in some form to their go-anywhere or macro strategies as the cryptocurrency market becomes more liquid and developed, said Todd Rosenbluth, director of mutual fund research at CFRA.
“It’s easy to see how strong the performance has been of late and look at a historical asset allocation strategy that would have included a slice of crypto and how returns would have been enhanced as a result,” he said. “Large institutional investors are going to be able to tap into the futures market in a way that a retail investor could not do.”
There is currently no U.S.-based exchange-traded fund that owns bitcoin, limiting the ability of most fund managers to own the cryptocurrency in their portfolios.
BlackRock Chief Executive Officer Larry Fink had said at the Council of Foreign Relations in December that bitcoin is seeing giant moves every day and could possibly evolve into a global market. (https://bit.ly/2XXFHrB)
(Reporting by David Randall; Additional reporting by Radhika Anilkumar and Bhargav Acharya in Bengaluru; Editing by Arun Koyyur and Lisa Shumaker)
Bitcoin slumps 10% as pullback from record continues
LONDON (Reuters) – Bitcoin slumped 10% on Thursday to a 10-day low of $31,977 as the world’s most popular cryptocurrency continued to retreat from the $42,000 record high hit on Jan. 8.
The pullback came amid growing concerns that bitcoin is one of a number of financial bubbles threatening the overall stability of global markets.
Fears that U.S. President Joe Biden’s administration could attempt to regulate cryptocurrencies have also weighed, traders said.
(Reporting by Julien Ponthus; editing by Tom Wilson)
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