Connect with us

Business

Afghanistan — a country on the edge

Published

on

This is an audio transcript of the Rachman Review podcast episode: ‘Afghanistan — a country on the edge’

[MUSIC PLAYING]

Gideon Rachman
Hello and welcome to the Rachman Review. I’m Gideon Rachman, chief foreign affairs commentator of the Financial Times. This week’s podcast is about Afghanistan. My guests are Saad Mohseni, chairman of Afghanistan’s largest television station and co-author of a new book, Radio Free Afghanistan. And Fatima Gailani, a board member of the Afghan Red Crescent and women’s rights activist.

The future for women in Afghanistan looks extremely bleak and hunger is widespread in the country. So is it time for the outside world to change its approach to Afghanistan?

Advertisement

News clip
Desperate to flee Taliban rule, Afghans are resorting to this: grasping at US military aircraft and risking their lives. Some hung on to the wheels and fell to their death.

Gideon Rachman
In August 2021, Kabul — the capital of Afghanistan — fell to the Taliban. In the aftermath of the chaotic and humiliating withdrawal of American, British and other foreign troops, many in the west wanted to forget the country. But for those who still pay attention, the news out of Afghanistan is bleak and worrying. The Taliban have severely restricted the rights of women to work and girls to be educated. And the country suffers from a severe shortage of food and shelter. So I began the conversation by asking Saad to give a brief summary of the major developments in Afghanistan since the Taliban regained power.

Saad Mohseni
Well, Afghanistan is an estranged place. For us Afghans, we expected things to be a lot worse. The economy has stabilised. Inflation seems to be under control. The currency has been one of the strongest in the region. And the Taliban have managed to, you know, raise revenues through taxes. The amnesty declared early on has ensured that thousands of Afghans have not lost their lives. But at the same time, the humanitarian situation is pretty dire. Half the country doesn’t have food security. A third of the country doesn’t have access to shelter that would protect them in these coming winter months. We have something like 65 or 70 per cent of the population that doesn’t have access to clean water.

The country is on the edge and basically, in terms of humanitarian crises that Afghanistan has faced, nothing has changed. If anything, the situation’s worse. At the same time, we have hundreds of thousands of Afghans being pushed out of Iran and Pakistan, forced to return to the country, and the country is not prepared to look after them. So three years on, where do we stand? The sanctions imposed in Afghanistan have not changed the Taliban. The Taliban are here to stay. So I’ve been advocating for at least a reassessment in terms of the way the world deals with Afghanistan.

Advertisement

Gideon Rachman
Well, we’ll come to that in a moment. But Fatima, some of the few headlines that have come out of Afghanistan that have made it to the west have been about women’s rights. And it looks like the Taliban have been becoming progressively harsher on that front. What have the Taliban actually done against women? I mean, if you could outline the steps they’ve taken.

Fatima Gailani
The first six months, even one year, it was quite optimistic that things for women could continue. Probably some changes in appearance, but not a drastic change. But now it is outrageous that the only country in the world and the only country in the Muslim world that a girl after the secondary cannot go to school, cannot go to university.

Gideon Rachman
So, they get chucked out of school, what, at 11?

Fatima Gailani
The schools are closed for secondary and high school. It’s just closed. At the beginning, private schools were still open, but now even private schools were restricted. And there’s a state of confusion also because after a dramatic earthquake in Herat, which was very tragic, they found out that they need women social workers, they need women nurses, they need women aid workers and especially doctors. So now it is possible for girls to study medicine, nursing or midwife and all that. But where? And if you don’t finish school, then how could you jump all of a sudden to university? For women, it’s not just a very difficult time. It is also confusing time.

Advertisement

Gideon Rachman
What about women in the workforce? People who are already working, you know, before the Taliban took over — what’s happened to them?

Fatima Gailani
Some of them are staying at home, especially teachers. But if you go to the police force, they need them. They have to work. Doctors do work, nurses work. If you go to an airline, you will see women issuing tickets for you. And if you land in the Kabul airport, you see women officers. That’s why it is a state of confusion, because they should understand that these decrees is not practical. They cannot continue like that. And above all, it’s not Islamic. It is not right. From every angle you see, this is wrong.

Gideon Rachman
Yeah. And I mean, you make the point that it’s not Islamic. And I mean, your father was part of the Islamic resistance against the Soviet invasion of Afghanistan, but also, I think, quite a firm advocate of women’s rights.

Fatima Gailani
Yes, I grew up in an Islamic family. My father was one of the most important religious leaders. But we grew up with this in our head that what is practical, what is fair, what is right. And I was about to start my PhD here in Cambridge but my father told me — it was at the beginning of war against Soviet Union — that I have something much important for you. And he actually asked me to stop my education and be in politics of the mujahideen. And at that time, I was not sure that it was the good thing. Now, I think this was the absolute right thing to do because you cannot talk about women’s rights and human’s rights if you don’t practice it yourself.

Advertisement

Gideon Rachman
But Saad, I mean, you run television stations in Afghanistan. And as I understand it, you still have women reporters.

Saad Mohseni
Yes. As a matter of fact, we have increased the number of women working for us. Our news team used to employ eight women, now we have 20 women. And something like 25 per cent plus of all our employees are women. We’re very actively trying to hire and train women, and they’re very keen to work. I mean, it’s important for them to be able to earn an income, especially in these difficult times. What’s interesting is that the Taliban 2.0 in terms of decreeing directives is not dissimilar to Taliban 1.0. But in terms of implementation, there’s a huge difference. For example, NGOs have been banned from hiring women. But, you know, our friends at the NRC and other organisations, including the UN, will tell you that they continue to hire women.

And that’s because at the local level, they’re able to negotiate with local Taliban leaders to secure their rights to work. So, you know, the movement itself is not a monolithic movement, and individuals have different approaches or different interpretations of Islam. So as a result, the situation on the ground is a lot more nuanced than what meets the eye, especially if you’re looking at it from the outside. So we’re advocating for engagement because I think some of these more pragmatic, practical Taliban need to understand what the world expects of them and vice versa. I think there is a path. The problem is the humiliation of August of 2021. I joke that if the American administration could expunge the word Afghanistan from the dictionary, they would because it was such a traumatic experience for them. I mean, I met with so many of them after August and they just could not face Afghanistan. So the hope is that the new administration, whether Kamala Harris or Trump, that they reassess their Afghan policy.

Gideon Rachman
We’ll come back to the diplomacy and the international engagement in a bit. But I’m just intrigued by the practicalities of running your television station. So you’ve expanded the number of women staff, but can they appear on air? Can they work alongside men? How do you do that?

Advertisement

Saad Mohseni
All of the above. I mean, they’re very courageous — the women who work for us. They’re in front of the camera. They’re behind the camera.

Gideon Rachman
Has their dress changed?

Saad Mohseni
Well, the only thing that they have to do is cover their faces. And they do it by wearing a surgical mask. Technically then their face are covered. But they go out and they go to ministries. They’re on the field and they report from different parts of the country. I mean, some parts of the country, the local authorities are a lot more restrictive. But, you know, they push, they push the boundaries on a daily basis. So we now have a lot of education programs. We have female teachers. We have female students in the classrooms. We tend to . . . 

Fatima Gailani
And very successful, too.

Advertisement

Saad Mohseni
Well, the education programs are exceptional.

Gideon Rachman
And is that partly to fill the void left by them closing the secondary schools?

Saad Mohseni
Yeah. They can go up to sixth grade. And from then on we’ve introduced four subjects — maths, chemistry, physics and biology. You know, the idea was it would just keep things going. But actually we’re noticing that it’s having an impact in terms of girls and boys learning more. Of course, nothing replaces real schools, but nonetheless, it’s a sort of a band-aid solution for now.

Gideon Rachman
And what about entertainment? Because you used to have, you know, recognisable in the west, popular entertainment shows, Afghan Star, etc, that kind of thing. Can you do any of that any more?

Advertisement

Saad Mohseni
No music, no soap operas. But we do a lot of other things — chat shows, game shows, sporting events, cooking shows and so forth. But Afghans have access to the internet now and Afghans have access to satellite networks, so they’re able to consume everything. And the key thing is that Afghanistan changed in the 20 years of occupation. Afghans changed. It’s the youngest country outside of sub-Saharan Africa. Median age is 18, 18.5, population of 42mn people. Something like 80 per cent of the population is under the age of 30. Most of these kids were not around when the Taliban last ruled over the country. The other reason for the world to continue engaging or to perhaps re-engage is that we have to sustain some of the gains of the last 20 years.

Gideon Rachman
Yeah, I mean, Fatima, you obviously go back to Afghanistan. What’s your sense about how much the Taliban — beyond the issue of women’s rights, although that’s central to everything — have been able to sort of take the country back and erase the last 20 years?

Fatima Gailani
No one can take this country back. This country never had so many educated women and so many educated young people in the history of Afghanistan. I was born and brought up in the time of the peace in Afghanistan. This is the Afghanistan I want for the youngsters. That they were aware of their tradition, aware of their religion, but still they have the liberty to live like any young person. Today in Afghanistan, you cannot cage these vibrant women. They want to be part of Afghanistan. Twelve years in a country with conflicts, I was in the Red Crescent and I saw that without women, we cannot carry on our programs in the remotest villages. We need women to be part of every work, if it is in media or if it is in medical field, every field you need them.

Gideon Rachman
Is that, do you think, widely accepted, though, because presumably when the Taliban come in and try to restrict women’s rights, there must be a large part of the country that agrees with that?

Advertisement

Fatima Gailani
Well, it is not a question of agreement. One has to be realistic. I give you the example of Moraa university. This Moraa university was created at the time of Karzai, and it was opened when President Rouhani was there. And this university is located in the land of the Red Crescent. So they pay the Red Crescent rent. Why it was created? Because so many young girls were not allowed to go to be educated in the mixed university. And the doctor who started this university, his mother died because his father wouldn’t allow the mother to be treated by a male doctor. So this university, even the gardener and the plumber are women. And this was the most popular university before Taliban. They had a huge waiting list. This university has permission to work, but because people can’t afford it, it’s almost empty.

Gideon Rachman
And people can’t afford it brings us to the economic background. I mean, you painted this mixed picture, the kind of macroeconomic stats that might make a central banker say, oh, this is going OK. But the reality is that people are living incredibly close to the edge.

Saad Mohseni
Well, the international community continues to litigate against the Taliban at the expense of the Afghan population. Our central bank reserves have been frozen because of the sanctions, although technically companies could actually go and operate. But a lot of people are reluctant because logistically it’s hard to transfer money into the country and transfer money out. You know, I’ve met with US Treasury officials and they say, well, there are no sanctions per se for institutions to go invest in the country, but in reality, it’s much more difficult than that.

So we have major challenges. Now the Taliban also have to move on things like inclusivity and women’s rights and so forth. But I think there is a path. It’s a narrow one, and it’s important for this country. You know our population growth is 3 per cent per annum. We’ll be at 100mn by 2060, 2070, and still a very young population. How do we ensure that hundreds of thousands of people don’t starve to death?

Advertisement

But the problem also is that for you, Europeans, the fallout will be felt here in Europe. Afghanistan is two countries away from Europe. You’ve got Iran, Turkey and Europe. So hundreds of thousands of Afghans who may be forced to flee Afghanistan, end up in Europe. Drug production, terrorism. What happens in Afghanistan rarely stays in the country.

Gideon Rachman
Well, you’ve been one of the country’s most successful entrepreneurs. What would a successful Afghan economy look like? I mean, given the war, devastation, the problems with education, etc, what’s the path to more prosperity?

Saad Mohseni
There are lots of successful Afghan entrepreneurs, a lot more successful than me and they benefited mostly from the vibrant economy that partially helped with international engagement in the country — foreign troops and so forth. But Afghanistan has huge reserves in terms of minerals. We are a transit country where we can connect central Asia to the Arabian Sea. Its own growing population, it’s sufficient for investment in the country, 40mn people — it’s not a small country. And every sector you look at, there is potential for that economy to grow. We just need the environment to be able to attract these types of investments.

Fatima Gailani
Even quick investments like agriculture. I mean, there are very few countries in the world which could have the best fruit and vegetables that we can have. It could easily be the fruit and food basket of the Gulf. And in one year, you can see the result. Food security is no joke any more. And Afghanistan could do that. It is very important for people to understand that, yes, if there is aid for Afghanistan, investment in Afghanistan, Taliban will benefit from it. It is no doubt. But if you look at it from the other side, that if there is restriction on Taliban, how many millions of people will go into starvation and have horrible life? I saw it with my own eyes that the middle class is in a huge financial trouble.

Advertisement

Saad Mohseni
You know, I joke that over the last three years, I have not seen one Talib lose weight. They’re all putting on pounds and they’re looking pretty healthy. So sanctions certainly is not gonna impact the Taliban.

Gideon Rachman
I mean, Fatima, I remember when I went there during the period when the Americans, the British were all there, a lot of their effort and Nato’s effort was to eradicate the drugs trade. That seems to be like a central thing. Is that still a problem for the Afghan side or the Afghan economy and is it still flourishing?

Fatima Gailani
Well, they had restriction on it and they were quite successful. But if there isn’t any alternative for the agriculture side, for a person who has this amount of land, what could they do? I mean, I have seen that instead of poppy, agriculture of rose and rose oil, which is much more expensive than heroin, they would do much better than poppies. But who will do it and how?

Gideon Rachman
And in a sense, I suppose if legal forms of trade are very hard, illegal trade becomes that much more attractive.

Advertisement

Saad Mohseni
I mean, one of the things which is important for people to know is that there is still aid in terms of humanitarian assistance. The problem is it’s like you’re facing the same set of challenges every 12 months. And it’s important for the world to engage also in terms of development, basic needs, you know, to work with the private sector, to work with the farmers. So then that would make the economy much more resilient. But because of the sanctions, the World Bank and the likes have challenges.

Gideon Rachman
But there were warnings that there was actual famine threat in Afghanistan. Is that still the case?

Fatima Gailani
In some areas it still is.

Saad Mohseni
In some areas? Yeah. I mean, I think that challenge has not gone away. The BBC did this documentary. In Jalalabad, they had 18 babies to a bed. Malnutrition impacts 3.5mn kids in the country. That’s 10 per cent of the population.

Advertisement

Gideon Rachman
I guess one of the countries that one might have thought that the Taliban would get on with might have been Pakistan. You know, who had helped them, maybe slightly unofficially, but throughout the war. But Pakistan-Afghan relations are terrible. What’s going on there, Saad?

Saad Mohseni
Well, I think the Pakistani state, in particular its military, probably had a sense of entitlement post-August of 2021, expecting the Taliban to roll over and become a kind state. That was not the case. And furthermore, the Taliban actually helped negotiate a peace deal with the TTP, which is the Pakistani Taliban. And somehow the Pakistani government reneged on that deal. As a result, the relations have soured. The TTP continues to become stronger in the country. So Pakistan is facing a whole series of challenges, including the TTP in the sort of north-west parts of the country, the Balochi separatist movement in Balochistan and even Isis.

Gideon Rachman
So ironically, the Pakistanis are now accusing Afghanistan of sponsoring terrorism . . .

Saad Mohseni
And providing sanctuaries to the TTP. Exactly the same, you know, accusation that we levelled at the Pakistanis.

Advertisement

Gideon Rachman
So Fatima, before the final sort of climax and the Taliban coming into Kabul in 2021, there have been attempted peace negotiations between the Afghan government and the Taliban with some involvement by the Americans in Doha in Qatar. You were involved as part of the negotiations. Can you just explain what was going on and what your role was?

Fatima Gailani
Well, our role — women’s role, we were four of us — we didn’t only concentrate on women’s issue. For example, I was in rule of law because I studied Islamic jurisprudence. So when we were talking about the future of Afghanistan under Islamic law, we were involved also. My other colleague, a woman, was involved in the future of civil society and what will be the human rights position. So we were engaged in everything, not just women’s issue. And the same way men were also engaged in women’s affairs and the future of women.

Gideon Rachman
And when you have had your dealings with the Taliban, their image obviously here in the west is of these crazy fundamentalists, completely unsophisticated. Were there people you dealt with where you thought, OK, well, this guy or this faction of people you can make progress with?

Fatima Gailani
It was not easy, but it took only weeks that they look into the four women negotiators as only negotiators. I mean, gender didn’t matter at all. With great respect to all of us.

Advertisement

Gideon Rachman
And you were four out of 20. Is that right?

Fatima Gailani
21, yeah.

Gideon Rachman
And looking back, do you think those negotiations were a waste of time or could they have succeeded?

Fatima Gailani
It could have succeeded. The thing was that before the announcement of unconditional withdrawal, the Republic’s side were dragging their feet. They were not very interested in this talk. As soon as the unconditional withdrawal announcement came . . . 

Advertisement

Gideon Rachman
From Washington.

Fatima Gailani
From Washington. Then it flipped. The Republic side wanted to reach an agreement and have a political settlement. But the Taliban thought that, why should we? And every day we woke up, one area was falling in their hand. But the reality was that a successful political agreement would have been good for both sides, even for the Taliban’s side.

Gideon Rachman
How do you think they’ll be thinking about their international position and are they making any progress? I saw that they’ve just opened up in the UAE, an embassy.

Fatima Gailani
I think even for Taliban, when they were looking into the future, they would look with great enthusiasm and optimism that we will be the government and eventually we will be recognised and everything goes into normal. This is not the case, but I have always been very much pro-engagement. It may not be very popular. What did I say? That engagement without presence in Afghanistan, in Kabul, it will be an engagement only with the government. But if you have presence, like Japan, like Turkey, if you have meetings with the Taliban once a week, every day you have meetings with the rest of Afghanistan, with women’s group, the human rights’ group, with doctors’ association, with nurses’ association, so you will have a real engagement with the people of Afghanistan. That’s why I am a strong believer that the problem of Afghanistan cannot be solved without engagement, and real engagement comes with presence.

Advertisement

Gideon Rachman
So, Saad, I mean, you said that the Americans you knew, still know, the last thing they wanted to talk about after the sort of terrible scenes in Kabul was Afghanistan. And they’ve now got a whole host of other problems to worry about. Do you think there is any prospect of effective western re-engagement with Afghanistan?

Saad Mohseni
Well, I’m hoping there is. You know, Afghanistan really is a changed country. But what’s interesting also is that three years on, the new Afghanistan is also managing to change the Taliban. As Fatima mentioned, you know, they can now deal with women. They have meetings with female diplomats. They’re taking their families to restaurants. They’re becoming more sophisticated even in terms of dealing with the city dwellers. There’s a certain sophistication. So this new Afghanistan — and this is what I’ve written in my book in terms of the characters that helped us create this media group — this is what gives me hope. And this is what I’ve been telling people in Washington, both sides, the Trump side, as well as the Harris side, that you cannot ignore Afghanistan.

People who’ve been occupants of this White House who did forget Afghanistan eventually had to re-engage because Afghanistan can be the source of so many problems for the region. I am slightly optimistic. I think that we will have that opportunity. But given what the White House is facing today, it may not be a priority. And I think that’s why it’s important for us Afghans, Fatima and myself and so many other Afghans to continue to insist that they do so. America was engaged for a long time and a lot of Americans were involved in Afghanistan. It’s not something that’s gonna go away too soon.

Gideon Rachman
What about, finally, the argument that, well, maybe it’s not America or the west that will bring Afghanistan back into the international community. It’s kind of generally accepted that western influence is either slowly or quickly declining in the world. And, you know, they’re in Asia, which has many sort of booming economies. Could it be — I mean, Fatima, you mentioned Japan still has an embassy there — east Asians or south Asians or Chinese or the Russians who actually play the key role in getting Afghanistan reintegrated into the world economy?

Advertisement

Saad Mohseni
The problem is that because they’re continuing to litigate against the Taliban, no one else can actually go and engage. You know, no business would like to look at investing in Afghanistan. The country’s reserves are frozen, so they can’t print money. They can’t fulfil their functions as a central bank, for example. It just makes it very, very difficult for people to do business.

Gideon Rachman
And the litigation is based on what?

Saad Mohseni
Well, you know, most of these sanctions have been grandfathered then. They’re not new sanctions. Those sanctions from the ’90s and the early 2000s against individuals and the Taliban as a movement. So these sanctions need to get lifted. I mean, there’s pseudo-recognition from about three or four countries where they’ve accepted ambassadors. But really, these UN sanctions make it very, very difficult for anyone to do business in the country. But I think regional integration is important. But US leadership, we’ve discovered three years on, US leadership is key.

Fatima Gailani
America is the key. I saw it for the last 46 years that whatever is decided for Afghanistan, whether the Europeans agree or disagree, eventually they will follow the American policy. My hope is that, if not for the sake of Afghan people, for the sake of the Europeans and for the Americans themselves to have a safer life, to have another look in Afghanistan and find a way that Afghanistan, its people could be looked after, engagement could stay. And I am a great believer that with conversation, with engagement, we will find a way.

Advertisement

Gideon Rachman
That was Fatima Gailani ending this edition of the Rachman Review. You also heard from Saad Mohseni. Thanks for listening. And please join me again next week.

Source link

Continue Reading
Advertisement
Click to comment

You must be logged in to post a comment Login

Leave a Reply

Business

Taboos take a back seat in a new Europe

Published

on

Fewer voters are put off by the roots of some far-right parties

Source link

Continue Reading

Money

How product providers should offer advice

Published

on

How product providers should offer advice
Shutterstock / By Tithi Luadthon

Reading about M&G’s troubles, I can’t help putting them down to the obsession with running an expensive fund platform. But what do I know?

What I do know about is 21st century advice – something I believe is built on the shoulders of giants, such as the Man from the Pru.

These advisers door-knocked, cold called and worked evenings to get families started on a lifetime of saving and self-preservation.

So, why is offering advice so hard these days?

It’s a real shame such a historical institution as M&G cannot remain committed to solving the challenges of advice regulation while making a profit.

Advertisement

It’s a real shame such a historical institution as M&G cannot remain committed to solving the challenges of advice regulation while making a profit

There remains a huge advice gap opportunity for any company who can de-mystify the world of investment and help the man in the street access the wonder of compound interest, just like they used to.

Providing advice seems to terrify those around the board table. Is it impatience from shareholders, short termism on the part of directors or just fear of liability? Probably all three.

I have previously voiced support for a simplified advice regime which could be a gateway to the markets for low value investors taking advice.

To those providers pondering on leaving or entering the advice market, here are my suggestions for making it work:

Advertisement
  • Reduce the hurdle of cash savings: Three months spending in cash can take five to seven years for people to save and it is not mandatory as emergency provision. This restriction serves the anxiety of compliance staff more than it serves the interest of investors, and it can be done better.
  • Know the outcomes of what you are offering: Charges need to be competitive, and easily justified. Funds need to be liquid, transparent and dependable in their expected returns. Projections need to be realistic and not woefully cautious.
  • Think about the liabilities: How will they arise? How is the compensation calculated? Which investors complain? What triggers the complaint? By looking at this in full detail, you can inform the quality of your messaging and have more investors with confidence.
  • Get the box tickers out from their desks: Give them sales training, teach them to advise, make them talk to clients.
  • Focus on service: Of £198,798 complaints to the Financial Ombudsman Service in 2023/24, £1,459 (0.7%) of them were against advisers. Why fixate so much on the nuances of suitability? With a simple and reliable product proposition, 90% of advice can be algorithmic – making it both efficient and profitable.
  • Know your target market and sell to them: Financial services have been a huge contributor to prosperity in the UK. We should believe in the benefit of what we do.

The regulation of financial services in the UK has been a been a huge success in improving the rights and security of consumers. But it is nothing to fear. Our faith in delivering advice to all must endure alongside the products and the markets that will deliver for investors.

Greg Neall is chartered financial planner at Wake Up Your Wealth

Source link

Advertisement
Continue Reading

Business

dummy, holding greater length in trumps, becomes master hand

Published

on

Unlock the Editor’s Digest for free

Few pairs bid the slam on this deal, and two who did failed. Can you find a better line than the 75 per cent chance of taking two finesses and hoping that one is right . . . ?

Bidding
Dealer: South
N/S Game

Advertisement

In this auction, North’s 2D response promised at least an ace or king in his hand, so South jumped to game over North’s 3H transfer, showing a liking for the suit. North leapt to the slam and West led 9♠.A singleton trump is often a poor choice but, here, leading around into South’s strong hand, it worked well. With both red-suit finesses losing, it was as well that declarer created a superior line. One diamond discard from dummy will be sufficient for success, so this is what South sought.

He drew three rounds of trumps, before cashing K♣ and leading to A♣. A low club was ruffed in hand, and then the heart finesse attempted. When this loses, West returned another heart.

Winning this in hand perforce, allowed declarer to ruff a second low club in dummy, drawing West’s Q♣. Now, the diamond finesse could be spurned. Instead, 6♦ was led to A♦, J♣ was cashed, discarding 10♦ from dummy, and the table is left high with a trump and J♥.

Source link

Advertisement
Continue Reading

Money

State pension warning as hundreds of thousands ‘edge closer’ to having money knocked off payments

Published

on

State pension warning as hundreds of thousands ‘edge closer’ to having money knocked off payments

HUNDREDS of thousands of retirees are set to pay tax on their state pension for the first time next year.

This is due to a combination of hefty state pension rises and frozen tax thresholds.

Hundreds of thousands are expected to have to pay tax on their pension for the first time

1

Hundreds of thousands are expected to have to pay tax on their pension for the first time

It is expected that more than 300,000 pensioners will be told that they need to pay tax when the state pension rises by £473 in 2025.

Advertisement

The figures released this week have confirmed that the state pension is now expected to rise from £11,502.40 to £11,975 per year under the triple lock.

With tax thresholds frozen until 2028, this increase will drag even more pensioners into paying tax for the first time, it has been warned.

This is because the total annual amount of income they receive will be more than their personal allowance.

The allowance is the amount of money you can earn before you have to pay tax on your income.

Advertisement

Under the current rules, this is up to £12,570 each tax year.

It was previously expected that around 140,000 pensioners would receive a letter for the first time this year.

But because of the proposed increase in the state pension, more than 300,0000 people are now likely to get one.

Alice Haine of Bestinvest said: “Add in frozen tax thresholds, with the full new state pension gaining ground on the standard personal allowance of £12,570 and pensioners are edging closer to the point at which their state pension income becomes liable for tax.

Advertisement

“Retirees already receiving a higher state pension may already be paying tax on the benefit, while those receiving a private pension income will see more of that swallowed up by tax.”

What Does My Tax Code Mean? A Simple Guide to Your HMRC Letter

Helen Morrissey, head of retirement analysis, Hargreaves Lansdown also pointed out that while rising state pensions are good news, the tax threat is “a hidden sting in the tail”.

She said: “While the full new state pension is currently set at £11,502 and is set to get close to £12,000 from next April it’s conceivable that in the next two years we could see it breach the £12,570 threshold and see pensioners landed with a tax bill.

“It’s also worth saying that many pensioners on the basic state pension system receive more than this as they get a top-up to their income in the form of the state second pension so receive a tax bill even if they have no other income.”

Advertisement

Many pensioners have other pensions – personal or workplace – and HMRC will usually take the income tax due through these pensions, Helen pointed out.

She said: “Those pensioners wholly reliant on the state pension who face paying tax will receive a simple assessment letter from HMRC telling them how much they owe.

“There have been concerns about pensioners being chased for small amounts of tax though HMRC has said they would not look to chase tax amounts that would cost more to collect than is actually owed.”

Why is this happening and is there anything I can do to avoid it?

High inflation rates mean more people in work are getting pay rises to try and keep pace with rising prices.

Advertisement

However, with income tax bands frozen, it means many are being pushed into the next tax bracket.

Laura Suter, director of personal finance at AJ Bell, previously told The Sun: “Pensioners looking to reduce their tax bill need to think about how they can maximise their tax-free income.

“For example, any withdrawals made from their ISAs will be free of any tax. so they can use that pot of money to boost their income without impacting their tax bill.”

An ISA is a type of savings account in which you can save up to £20,00 a year tax-free.

Advertisement

Laura also suggested that couples can organise their finances so they ensure they are each making use of their tax-free allowances, which might involve moving money or assets between themselves.

Helen also added that pensioners might want to use some of their pension to top up their income.

She said: “Most people can access 25% of their pension as a tax-free lump sum so they may decide to use this to top up their income without pushing up their tax bill.”

However, she also warned that pensioners below the personal allowance are going to find it increasingly difficult to avoid paying income tax in the coming years.

Advertisement

The finance expert added: “A full new state pension hits just over £11,500 per year and even relatively modest 3.5% annual increases would see people pushed over the threshold by the time the threshold freeze ends.”

How does the state pension work?

AT the moment the current state pension is paid to both men and women from age 66 – but it’s due to rise to 67 by 2028 and 68 by 2046.

The state pension is a recurring payment from the government most Brits start getting when they reach State Pension age.

Advertisement

But not everyone gets the same amount, and you are awarded depending on your National Insurance record.

For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings. 

The new state pension is based on people’s National Insurance records.

Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension.

Advertisement

You earn National Insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit.

If you have gaps, you can top up your record by paying in voluntary National Insurance contributions. 

To get the old, full basic state pension, you will need 30 years of contributions or credits. 

You will need at least 10 years on your NI record to get any state pension. 

Advertisement

Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.

Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories

Source link

Advertisement
Continue Reading

Business

UK small-cap stocks face ‘existential threat’, report warns

Published

on

Stay informed with free updates

Asset manager Abrdn has called for stamp duty tax on shares in smaller British companies to be scrapped following a warning that the sector faces an “existential threat” as it continues to shrink rapidly.

The fund group said measures should be brought in to protect and support small and midsized listed companies in the UK, including “immediately abolishing” stamp duty on the purchase of FTSE 250 shares.

Advertisement

Stamp duty is levied at 0.5 per cent for investments in most UK stocks. London’s junior Aim market is exempt from stamp duty, but Abrdn said this exemption should be extended for all companies — or at least all of the companies outside of the largest 100.

The asset manager’s call comes as New Financial, a think-tank, released a report on the state of UK smaller stocks, noting that about 600 companies with a market value of less than £1bn have delisted over the past two decades.

Policymakers are attempting to galvanise the UK’s capital markets amid concerns that businesses are seeking to leave the London market and list in the US in search of a higher price tag.

The report by New Financial said that one of the key reasons for the drop in UK small-caps has been the collapse in demand from UK pension funds. Just one local government scheme has a specific holding in UK small-caps — compared with 18 schemes just over a decade ago.

Advertisement

“Smaller listed companies are an integral part of the UK economy,” said Sir Douglas Flint, chair of Abrdn. “They drive innovation and generate wealth and jobs across almost every corner of the country.

“If policymakers consider what can be done to boost investment in the UK generally, we cannot afford to ignore UK small-caps.”

William Wright, founder and managing director at New Financial, said: “Our report argues that UK smaller companies are facing an almost existential threat.

“There are many factors behind the decline but the collapse in demand from UK pension funds — which have increasingly switched to globalised portfolios — and the decline in demand from retail investors have been the main drivers.”

Advertisement

However, the report noted that over 25 years, UK smaller companies including London’s junior stock market Aim actually generated an annualised total return of 7.4 per cent — in line with the US S&P 500 and nearly 50 per cent higher than the wider UK market.

Abrdn said it wanted the Mansion House compact, in which major pension funds made a voluntary pledge to put more money into private markets, broadened to include listed small-cap stocks in the UK.

The fund group noted other measures that could encourage investors, such as pension funds, to back the UK more generally, including increasing the minimum contribution to workplace pension schemes via auto-enrolment, which currently stands at 8 per cent.

Abrdn also suggested a campaign to “get the UK investing” and a simplification of Britain’s tax-free individual savings account (Isa) industry to make it easier for people to invest.

Advertisement

Other companies, such as investment platform AJ Bell, have called on the government to simplify the Isa market by reducing the several products available to just one, within which investors can switch between cash and stocks.

In a separate report, Barclays also suggested reviewing stamp duty on UK stocks, which raises about £3.8bn a year for the Treasury.

“If we want the UK’s public markets to revive, be strong and sustainable in the long term and be internationally attractive, we need to find firms that are currently at a growth stage that are going to be the next big firms,” said Katharine Braddick, Barclays’ head of strategic policy.

However, other think-tanks believe the Aim market, which lists companies with a market value of less than £30mn, is not fit for purpose.

Advertisement

A report from the Tony Blair Institute for Global Change and the centre-right think-tank Onward said that Aim should be scrapped as it has “failed in its stated purpose of providing a home for scaling businesses”.

“It should be fully merged with the LSE’s main market, with a special route to listing specifically for high-growth firms in emerging technology sectors,” the report added.

Source link

Advertisement
Continue Reading

Money

Kennedy Wilson appoints Harris to oversee industrial and logistics investment

Published

on

Kennedy Wilson appoints Harris to oversee industrial and logistics investment

He joins from Paloma Capital, where he deployed capital from value-added funds and its UK industrial joint venture.

The post Kennedy Wilson appoints Harris to oversee industrial and logistics investment appeared first on Property Week.

Source link

Continue Reading

Trending

Copyright © 2024 WordupNews.com