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Views on the News

04 May 2021

4 minute read

A weekly round-up of the leading business, personal finance, investment, savings and pensions stories in the press from the past week, including analysis and opinion from our experts.

Who's it for? All investors

The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

What you’ll learn:

  • UK: more than 20m living in areas with zero Covid deaths
  • President Biden pitches “once in a generation investment”
  • Pension poverty warning

UK: more than 20m living in areas with zero Covid deaths

About 22 million people in the UK are living in areas that have not reported any Covid-19 deaths during April, according to BBC News analysis. By comparison, in a four-week period during January's peak, fewer than 50,000 people lived in such places. The BBC's data analysis reveals the extent of the improvement since January's peak. 

Fewer than 600 deaths within 28 days of a positive test have been reported so far this month, compared with more than 30,000 in the first four weeks of January. The figures suggest the UK's pandemic is moving into a new phase with many areas seeing low levels of coronavirus. The latest lockdown, together with the vaccination programme, have successfully reduced cases and, as a result, deaths1.

Our view: That cases have continued to fall despite the significant easing of restrictions from 12 April, bodes well for the UK’s next stage of reopening. So far, public announcements from the authorities suggest that the UK remains on track for a further easing of restrictions on 17 May. We should expect a further boost in discretionary consumer spending by then, as consumers resume spending in the indoors hospitality sector.

Overall, the current situation points to another quarter of strong growth in summertime, assuming that new variants don't significantly threaten the progress being made by vaccinations. (Hao Ran Wee, Senior Investment Strategist)

President Biden pitches “once in a generation investment”

US President Joe Biden has laid out a sweeping investment plan for jobs, education, and social care in his first speech to a joint session of Congress. Delivered on the eve of his 100th day in office, the Democrat pitched some $4 trillion (£2.9trn) in spending – the largest overhaul of US benefits since the 1960s, analysts say. He called it a "once in a generation investment in America itself".

But the plans face a battle in Congress before they can become law. There has been widespread opposition to undoing the 2017 tax law from Congressional Republicans and to spending on projects that fall outside of ‘hard infrastructure’ (roads, bridges, airports, broadband, etc.).

And while there is a slim Democratic majority in both houses, there has been some division between progressives and centrist Democrats over whether and how much to negotiate with Republicans. The American Jobs Plan and the American Families Plan would be funded by tax rises on corporations and the wealthiest Americans2.

Our view: Investor attention is now shifting to President Biden’s proposed infrastructure spending. Worth ~$2.25trn, the ‘American Jobs Plan’ will focus on upgrading and repairing America's physical infrastructure, investing in manufacturing, research and development, and expanding long-term health care services. President Biden has proposed to fund it by an increase in corporate tax rates.

The ‘American Families Plan’, the second part of his infrastructure plan which covers childcare, paid leave and other education policies, could result in a further $1trn in spending and $800bn in tax breaks. President Biden is expected to propose increasing the top marginal tax rates as well as capital gains tax rates to pay for the plan.

While these measures come with enormous price tags, they would be paid for over 15 years (and spent over eight years). Coupled with an already strong recovery in inflation expectations, we think these measures are unlikely to meaningfully drive long-term inflation expectations higher from here. (Luke Pearce, Investment Strategist)

Pension poverty warning

Britons relying on workplace pensions may end up with significantly less income in retirement than expected and perhaps even find themselves in poverty, governance services provider PTL has warned. The independent trustee and governance services provider claimed that most workplace pension plans were being built based on defined contribution adequacy models that were outdated and overlooking some major factors.

As a result, many more members than previously thought may be heading toward retirement with inadequate savings. According to PTL, the key factors being overlooked include the decline of home ownership, the tilting of the inheritance scale, educational debt, long-term health costs, and financial fragility. While auto-enrolment can help, the contribution rate remains too low for it to fix all the problems3.

Our view: Whilst many of the clients that we look after at Barclays Wealth have sufficient savings and investments outside of their pensions, which means that they are unlikely to need to rely upon their pensions, we should remain advocates of the importance of our clients saving what they can into pension accounts.

This should also include reminding our clients that they can save not only in their own names, but potentially be making contributions on behalf of their spouse, significant other, children, or grandchildren.

Regardless of income levels, anyone under the age of 75 can save up to £3,600 gross per annum into a pension and receive tax relief on this contribution. This means that our clients could start to save into their children’s or grandchildren’s pensions from a young age, gradually building up a healthy nest egg for future generations which will have the benefit of compounded returns over several decades.

We should remain equally vigilant of our own pension savings to ensure that we are all putting enough money away for our own retirement years. The more that you can save now, the more that you can enjoy later in life.

As with many sides of Wealth Planning, there are many aspects that should be considered when reviewing pension savings and, as ever, engaging early with our clients and involving a qualified Barclays Wealth Planner can help to make a real and tangible difference to our client’s future pension accounts. (Toby Coombes, Wealth Planner)

These are our current opinions but the future, as ever, is uncertain and outcomes may differ.

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