Welcome to the August 2023 Newsletter from Walsh & Co

Think tank the Resolution Foundation recently published research that suggested that interest rate rises over the past year have caused UK household wealth to fall by £2.1 trillion. According to the research, total household wealth has fallen to 650% of national income, which the Resolution Foundation warned is the biggest decrease as a share of GDP since World War Two.

Meanwhile, the Department for Work and Pensions (DWP) has warned that mothers may have been underpaid £1 billion in State Pension payments as a result of incomplete national insurance records.

Interest rate rises cause household wealth to fall by £2.1 trillion

Research carried out by think tank the Resolution Foundation has suggested that recent rises in interest rates have caused household wealth to fall by £2.1 trillion over the past year.

According to the research, UK households have experienced a 'wealth boom' in recent decades – total household wealth rose from 300% of national income in the 1980s to 840% by 2021.

However, a series of interest rate rises have caused mortgage rates to increase, house prices to fall and the prices of corporate bonds to decrease. The Resolution Foundation found that total household wealth has now fallen to 650% of national income – representing the biggest fall as a share of GDP since the Second World War.

The Resolution Foundation also highlighted that there are winners in regard to higher interest rates, mainly younger generations.

Commenting on the issue, Ian Mulheirn, Research Associate at the Resolution Foundation, said: 'Over the past four decades wealth has soared across Britain, even when wages and incomes have stagnated. But rapid interest rate rises have ended this boom and brought about the biggest fall in wealth since the war of £2.1 trillion.

'Those with significant mortgages will be hit by these major changes. But there are winners too from a shift to a world of higher rates and lower wealth. Higher returns will make it far easier for younger people to save for a pension that delivers a decent standard of living in retirement, while lower house prices will make it easier for younger generations to get on the property ladder and others looking to trade up.'

Mothers 'may have been underpaid £1 billion in State Pension payments'

Mothers may have been underpaid around £1 billion in State Pension payments, according to research published by the Department for Work and Pensions (DWP).

Some mothers' national insurance records are missing information, according to the DWP, which led to workers being underpaid their State Pension. As part of government plans to correct the issue, affected workers will receive a letter from the DWP.

HMRC will use national insurance records to identify as many women as possible who may have been entitled to home responsibilities protection (HRP) between 1978 and 2010 and currently do not have any HRP credits on their national insurance record.

A government spokesperson commented: 'Most people's records will be unaffected, and we will shortly be launching a new online tool to help people check whether they need to claim. HMRC will also begin writing to those likely to be affected from the autumn.

'Our priority is ensuring everyone receives the financial support to which they are entitled, and State Pension underpayment rates due to official error remain low at 0.5% of expenditure. Where errors do occur, we are committed to fixing them as quickly as possible.'

ESSENTIAL TAX DATES FOR AUGUST

2 August
Deadline for submitting P46(Car) for employees whose car/fuel benefits changed during the quarter to 5 July 2023.

19 August
PAYE, Student loan and CIS deductions are due for the month to 5 August 2023.

QUOTE OF THE MONTH

'We are falling as we have seen in other countries, but it still looks like we may have the highest rate of inflation in the G7, so still some way go.'

Grant Fitzner, Chief Economist at the Office for National Statistics (ONS), commenting on data published by the ONS which revealed that the UK rate of inflation fell to 7.9% in June from 8.7% in May.

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