Britons have More Faith in Real Estate Than in Pensions

Far more Britons believe owning property is a better way of providing wealth than participating in a pension, according to a survey by the UK’s Office for National Statistics.

The ONS’ Wealth and Assets Survey, the most recent installment of which was conducted from July 2016 to December 2016, is intended to address gaps identified in data about the economic well-being of households in the UK. It collected information on level of assets, savings and debt; saving for retirement; how wealth is distributed among households or individuals; and factors that affect financial planning.

According to the survey, when considering which method of saving will make the most of an individual’s money, real estate was the most popular option, named by 49% of those surveyed. In comparison, employer pension plans were a distant second, as only 20% of those surveyed believed those will make the most of their money.

The survey also asked respondents under 60 who were not in receipt of a pension, and not currently contributing to a pension, their reasons for not contributing to a pension. Being unemployed, having a low income, or still being in school, was the most common reason for not contributing to a pension, which was named by 55% of the respondents.

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While the ONS says this has been the most frequently chosen reason since July 2010, the percentage of people choosing this option has been increasing over the past seven years.

In light of major pension reforms in recent years, the survey also asked questions to assess the respondents’ level of understanding of pensions. The ONS said it wanted to gauge the extent to which external factors influence decisions on pensions, savings, or investments.

The ONS found that 42% of adults aged under 40, or those aged 40 and over and not retired, said they knew enough about pensions to make decisions about saving for retirement. This was a decrease from the 46% reported in the previous survey, which was conducted from July 2014 to June 2016.

The percentage of people who answered that they don’t know enough about pensions rose in the most recent survey to 15%, from 11%.

When asked which was the safest way to save for retirement, 38% of survey respondents chose employer pension plans, which was down from 40% in the previous survey. More than half (54%) of those questioned said they were confident that their retirement income would give them the standard of living they hope for, which is up from 51% in the previous survey.

Respondents are questioned every two years, with each period forming a “wave.” Wave 1 covered the period July 2006 to June 2008, with subsequent waves carrying on continuously from this date. Wave 6 of the survey will cover from July 2016 to June 2018.

Tags: ONS, Pension, Real Estate, Survey, UK

To prevent Illinois from becoming the first state in US history issued junk bond status, State Treasurer and state CIO Michael Frerichs Monday gave Gov. Bruce Rauner an ultimatum in the form of a five-step plan.

This move comes after the approval of a budget package and a move by Moody’s Investors Service to place the state’s general obligation rating under review for possible downgrade.

“The credit-rating agencies have indicated that the new revenue and spending cuts alone are not enough to insulate the state against further credit downgrades, including junk bond status,” Frerichs said in the statement. “I understand that Gov. Rauner disagrees with the elected members of the House and Senate. However, should he not take these necessary steps, he is inviting the credit-rating agencies to plunge Illinois into junk bond status, the results of which will lead to higher property taxes.”

To avoid the state moving into junk bond status, Rauner must undertake the following, Frerichs said:

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Travel to New York, speak directly with the three ratings agencies, and convince them that he embraces the decision of the Legislature and will implement the budget package.

Immediately take visible, responsible steps to implement the $6 billion in bonding authority, which will yield $3 billion in additional federal dollars to pay down the $15 billion bill backlog.

Sign a funding model that ensures that local schools open on time.

Clearly and proactively communicate the new tax rates with Illinois employers to ensure that revenue estimates and cash-flow expectations are met.

Eliminate the “divisive rhetoric” that is impairing the state from moving forward. This divisiveness “counters the civility and bi-partisanship the rating agencies wish to see,” Frerichs said.

“The low rating from the rating agencies is reflective of the fact that Madigan’s 32% permanent tax increase will not solve the problems created by decades of unbalanced budgets, unfunded pension liabilities, borrowing, and high debt. Even with the tax increase, this budget remains $2 billion out of balance for fiscal year 2018,” Eleni Demertzis, a Rauner spokeswoman told CIO. “The best thing we can do is to work collaboratively to pass truly balanced budgets that pay down our debt, reform our pension system, and make the changes necessary to drive economic growth in our state. The Governor will continue to be a champion for the critical changes needed to get Illinois on a path to fiscal solvency.”

Earlier this year, Frerichs initially warned of credit downgrades and impending junk bond status for the state due to the inability to reach a budget agreement. If junk bond status is reached, the financial markets will become exasperated because some investors—including Illinois debt-purchasing entities with iron-clad constitutional guarantees—are restricted from doing business with junk bond-labeled entities.

Junk bond status will also terminate the state’s use of toxic credit-swap agreements, which will result in termination penalties of up to $107 million, as well as interest rate penalties which could be demanded by the lending agencies.

Illinois recently approved its first budget package in two years—a s$36.1 billion plan for thecurrent fiscal year, beginning July 1. The package reduces the state’s annual budget $3 billion, from last year’s annual spend of $39 billion. Up to $ billion of the bill backlog could be addressed if the cuts are combined with new revenue and federal matching dollars.

Rauner has criticized the package, blaming the legislation for many of the issues the state currently faces in an op-ed piece he wrote for Crain’s Chicago Business. “The budget package ignored everything we need and want: property tax relief for families and businesses, regulatory relief to grow our economy, and term limits on politicians to restore confidence in our political system. This budget ultimately will require even more tax increases to balance future budgets and pay down our debt,” he wrote. “This is not the future that we imagined for Illinois. This is not who we are. We are not people who see problems and do nothing. We are not people who turn away from each other.”

Since Rauner took office in January, Illinois has suffered eight credit downgrades. Each downgrade involved the state’s bill backlog—now estimated to be $15 billion—the budget impasse, and other additional factors.

“This mix of revenue and cuts is far from perfect. It is, however, now the law and, if implemented, it is a critical first step to addressing Illinois’ deep, structural challenges,” Frerichs said. “It is clear that we will not begin to climb out of this debt if the Governor does not take the necessary steps to lead us away from the abyss.”

Tags: Budget Package, Governor Rauner, Illinois, Junk Bonds