Weekly Update July Monday 19th 2021
State pension UK: How to check on your free bus pass eligibility as qualifying ages rise
State pension aged retirees can get an older person’s bus pass, also known as a free bus pass, which provides free travel for the elderly. These bus passes can be received from a specific age but the rules on this will be changing in the coming years.
Free bus passes can be received by people in Scotland, Wales and Northern Ireland when they reach the age of 60 but retirees in England will have to wait a bit longer. Those in England will only be able to get a free bus pass when they reach the female state pension age, regardless of whether they’re a man or woman.
Fortunately, people can check on exactly when they can claim a free bus pass using a free-to-use tool on the Government’s website.
On the Government’s website there is a “Check your State Pension age” tool which allows users to check on when they’ll reach their state pension, pension credit and free bus pass qualifying age.
When using this tool, users will be asked if they’d like to calculate their state pension or bus pass age.
Once the bus pass option is selected, users will be asked for their date of birth
Lifetime Isa withdrawal charges triple during lockdown
Lifetime Isa early withdrawal charges have more than tripled in a year to reach £33m, official data has shown.
A Freedom of Information Request, submitted by Quilter, found early withdrawal charges for the Lifetime Isa (Lisa) hit £33m in the 2020-21 tax year, compared with £10m in 2019-20.
Over the previous three years, a total of £48m has been charged against Lisa holders for taking their money out early.
In 2018-19 and 2019-20 early withdrawal charges were set at 25 per cent before they were dropped to 20 per cent from March 2020 to April 2021 to allow people impacted by the Covid pandemic to access their funds.
Rachael Griffin, financial planning expert at Quilter, said the figures showed how many people had to raid their savings in order to cope with financial strain brought on by the pandemic.
Griffin said: “Clearly, reducing the withdrawal charge to 20 per cent and thus ensuring savers weren’t unfairly penalised during this difficult time was sensible. However, these figures also reveal that the Lifetime Isa has some significant flaws in its design.
“The pandemic has shown the nation that financial strains can be just around the corner for almost everyone. The government should realise that while we are hopefully not going to experience another event like the Covid crisis, other personal and financial crises will still happen each day and the 25 per cent Lisa withdrawal charge penalises savers who simply can’t predict their financial future.”
In the Budget in March chancellor Rishi Sunak reinstated the 25 per cent charge.
This penalty is in place to disincentive people from using a Lisa for any other means than buying a first house or saving for retirement.
A withdrawal charge does not apply when a withdrawal is made to buy a first home or the investor has a terminal illness.
DB transfers fall as contingent charging ban bites
A combination of lockdown and the contingent charging ban has contributed to a record low rate of pension transfers, according to LCP.
Data from the consultancy, published this morning (July 12), found fewer people are requesting defined benefit transfer value quotations and of those that do, fewer are going forward with the transfer.
The data found in the fourth quarter of last year 116 members out of every 10,000 requested a quotation, almost half the rate seen in the summer of 2017.
In addition, only 15 per cent of those who received a quote in Q4 2020 went on to complete their transfer.
This take-up rate of around one in seven quotes turning into a transfer compares with one in three in the middle of 2017.
LCP said the low rates were likely linked to the Financial Conduct Authority’s ban on contingent charging, which means members now have to pay for transfer advice whether a transfer is recommended or not.
There’s also a link to Covid as numbers from 2021 show some recovery as lockdown gradually eased.
However, transfer rates have been falling over the past couple of years as the number of advisers offering advice in this area has continued to drop.
Bart Huby, partner at LCP, said: “A range of factors has combined to drive down volumes in the DB transfer market. Lockdown has clearly reduced activity, but even where people do ask for a transfer quote they are now far less likely to turn that into a pension transfer.
“The new rules on charging for transfer advice have only been in force for a few months, but there are already signs that people may be reluctant to pay thousands of pounds for transfer advice with the risk that they are advised not to transfer”.
Andrew Pijper, associate consultant at LCP, added: “Whilst regulators rightly stress the value of staying in a defined benefit pension, it will be important to ensure that those for whom a transfer may be a good idea can continue to access high quality and affordable advice.
“Pension schemes may have to do more in future to help members to access advice if these trends continue.”