This week’s topics:
What will be the impact of the Government’s new fund to help vulnerable communities manage climate change?
Talk Money Week - gender and ethnicity pension gaps, ‘free money’, risk appetite, ESG concerns, and other pensions matters
Bank of England’s decision to keep interest rates on hold
How will the UK government's new support of up to £290m strengthen the resilience of vulnerable communities, economies and the environment against the impacts of climate change?
Kiran Sura, sustainability and climate change expert at PwC UK, said:
The announcement by the UK government is a big step in the right direction. Efforts needed to increase significantly to enhance adaptation of more sustainable action while building resilience globally to manage the impacts of climate change.
For those countries on the frontlines, which are least able to adapt, there was a call for adaptation finance to be on balance with mitigation financing.
The Climate Change Risk Assessment delivered a stark message that shows the imminent risks we face if we do not take action to adapt to the changing climate.
The IPCC report echoed this when it issued the very real warning that the impacts are more severe than previously predicted and likely to get worse with every fraction of a degree of warming.
World leaders must heed what climate science is telling us. We need other leading economies to pledge their commitment, show solidarity and live up to the promises made - capital is needed in the billions and trillions to help mitigate these ever-growing risks.
Talk Money Week - raising awareness of pension savings plays key role in ensuring fairness
Talk Money Week (8-12 November) is an annual campaign by the Money and Pensions Service (the arm’s length body, sponsored by the Department for Work and Pensions) to encourage more people to open up about their finances.
Commenting on gender and ethnicity pension gaps, Victoria Tillbrook, pensions partner at PwC, said:
Here in the UK, we have a much less talked about pension gap - linked to the gender pay gap, which is often compounded by relationship and family decisions, and other life events. The average pension pot of a 65 year old woman in the UK is a fifth of the size of the average 65 year old man’s - at just £35,800. There is also an ethnicity retirement income gap, with figures published in 2020 reporting a 25% gap, or £3,350 a year, between pensioners of a white ethnicity compared to pensioners who belong to an ethnic minority group.
Encouraging people to talk about pensions, money and savings is an important step to close these gaps. There are also steps that employers can take to drive better inclusion and engagement when it comes to pensions, from analysing their data to spotting differences in savings rates between employees.
Employers should review the products and options available to employees to ensure variety, as it’s clear that one size cannot fit all.
A pensions industry which is more representative of the wider UK population will also lead to better outcomes for society as a whole.
Commenting on the need for employees to consider their workplace pensions, Raj Mody, Global Head of Pensions at PwC, said:
Pensions can be very complicated but savers can boil it down to two main decisions: how much to save and how to invest your money?
There's no substitute for saving as much as you can reasonably afford, as early in your working life as you can. Of course, people also have other financial pressures and have to balance long-term savings against short-term needs.
One definite area for employed people to pay attention to is to see if you are getting the most out of any matching of contributions which your employer might add. Sometimes, the more you contribute as an employee, the more the employer will match. That's potentially ’free money’ so worth taking advantage of, if you can afford it.
The other area is how you invest your money. There is no universal answer and you should pick the right fund which matches your risk appetite. Also look at how your investment choices stack up against ESG considerations. It may be worth reviewing your funds to check whether they match your personal philosophy on climate investments, and other social and governance preferences. You don't have to stick with your default fund, even though the vast majority of people do so. Increasingly there are cost-effective alternative choices.
While the self-employed don’t share the same benefits from auto-enrolment of employer top-up contributions, it’s still worth remembering the tax incentives which can make long-term savings worthwhile as part of a balanced financial approach. The effect of compounding over a long period can be significant so again it pays to think about pension savings earlier rather than later, especially with the current Annual Allowance regime.
PwC comments on Bank of England’s decision to keep interest rates on hold
Hannah Audino, economist at PwC UK, comments:
The Bank of England’s decision to keep interest rates on hold may have come as a surprise to financial markets. But because it takes time for monetary policy to have an impact on inflation, the Bank will only raise rates when it considers there is a medium-term risk of high inflation. And currently, there is not enough evidence that this is the case.
Many of today’s inflationary pressures are expected to gradually ease as supply bottlenecks normalise and energy prices stabilise.
Keeping interest rates on hold gives the Bank at least two more months of inflation data. Given how many irregular factors are feeding into the monthly CPI rate right now, more data is crucial to understanding how high underlying inflation really is.
A rise in rates could also have put the UK’s economic recovery at risk, especially given mounting risks to the economic outlook, including supply chain issues and the huge disparities we are seeing in the labour market. With some sectors in stress due to shortages and others in slack, it is difficult for the Bank to know which way to turn with monetary policy.
Something to listen to:
What will shape the UK’s evolving anti-money laundering regime and what will it mean for financial services and cryptoasset firms? Hannah Swain, leader of PwC’s Financial Services Regulatory Insights team joins Haydn Jones, PwC’s crypto and blockchain expert, to cover the challenges of creating a future-proof money laundering regime in a rapidly evolving market.
Something to read:
With new and evolving risks challenging insurers, and investment at historic lows, cutting costs has become imperative. As new entrants come into the market, competition adds to the existing challenges facing incumbents in the sector. Christine Korwin-Szymanowska, Strategy&’s Insurance lead, examines why cost reduction should explicitly start with corporate strategy.
Something to watch:
Catch up on all the news coming from this week at COP26 with live and on demand webcasts covering news from on the ground and practical steps organisations can take today to deliver long-term value and sustainability. Register to watch.
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