Good morning. Today, our Berlin correspondent reports on Germany’s new naval port on the Baltic — and what it means for Nato deterrence — and I have news of other issuers joining the EU in chipping in to the G7 loan to Ukraine.

Baltic fleet

Germany has stepped up its efforts to beef up Nato’s eastern flank with the opening of a new multinational naval headquarters in the Baltic coastal city of Rostock yesterday, writes Laura Pitel.

Context: In the wake of Russia’s February 2022 full-scale invasion of Ukraine, Nato unveiled plans to ramp up its presence in eastern member states. Baltic countries have warned repeatedly in recent months of growing aggression by the Russian navy in the region.

Germany’s defence minister, Boris Pistorius, flew in by helicopter to inaugurate the new Commander Task Force Baltic headquarters. It will be led by a German admiral with deployments of naval officers from 11 other countries.

The headquarters aims to protect key supply routes, trade routes and critical infrastructure. It could lead operations for Nato during a conflict with Russia, which has heavily militarised ports in the Baltic exclave of Kaliningrad and around the city of St Petersburg.

Pistorius said the new facility was a testament to Germany’s resolve in the wake of the Zeitenwende in defence and security policy that was proclaimed by Chancellor Olaf Scholz after Russian President Vladimir Putin launched his attack on Ukraine.

“Our message to our partners and to those who threaten our peace is simple: Germany stands firmly by its commitments,” he said.

Germany is also building a new military base in Lithuania, where a German brigade of almost 5,000 soldiers will be based in the country’s first permanent foreign deployment since the second world war.

Those efforts have been welcomed by Germany’s neighbours and its Nato allies, although large doubts persist about the combat readiness of the German navy and the wider Bundeswehr after decades of under-investment.

In a reminder of the thorny political territory for Pistorius in a country where support for pro-Russia parties has been rising, those attending the inauguration were greeted by demonstrators holding placards opposing western support for Kyiv. 

Pistorius at one point interrupted his English language speech to break into German so that he could refute a claim — circulated widely on social media — that the new headquarters would lead to Nato troops being stationed on German soil. 

Chart du jour: Bitter divide

Moldova on Sunday voted to reaffirm its commitment to joining the EU in a referendum decided by less than 15,000 votes. In the pro-Russian region of Gagauzia, just 5 per cent backed Brussels.

Cash flow

The UK has said it will contribute $3bn to a G7 loan of $50bn to Ukraine, joining the EU and Canada in making clear their share of the initiative and leaving just the US and Japan to make up the difference.

Context: The G7 agreed this summer to assemble the loan, to support Kyiv’s financial, military and infrastructure needs, as it fights back against Russia’s invasion of the country. The loan will be paid back using profits skimmed from Kremlin sovereign assets immobilised by western sanctions.

The UK government said overnight that it would chip in $3bn (£2.3bn) for “essential military equipment.” Other G7 countries have said their money will be earmarked for various purposes.

The EU, which includes G7 members France, Germany and Italy, has said it will contribute up to €35bn ($38bn) of the loan. But if US officials are able to fulfil their intention to provide $20bn themselves, as the FT reported last week, Brussels would only also chip in the same amount.

With $20bn each from the US and EU, $3bn from the UK and $3.6bn from Canada, that would leave Japan needing to find just over $3bn to make up the $50bn total.

The aim is to get the whole package tied up in a bow this week, during the IMF and World Bank annual meetings in Washington, officials said.

That would bring it on stream before both the November 5 US election, and the onset of what many expected to be an especially brutal winter for Ukraine, as Russian bombing of the country’s remaining heating and power facilities seeks to cripple its civic infrastructure.

What to watch today

1. Slovakia’s Prime Minister Robert Fico hosts Hungarian Prime Minister Viktor Orbán and Serbian President Aleksandar Vučić in Komarno.

2. Nato secretary-general Mark Rutte visits Estonia.

3. Russia hosts a summit of the BRICS group in Kazan.

Now read these

Can you borrow from your Supplemental Security Income or SSI? The short answer is no. But while you can’t borrow from your SSI, the good news is that loan options may be available for people receiving SSI payments from the Social Security Administration. This article will look at some personal loan options you may qualify for.

What Loan Options Are Available for People Who Receive SSI?

While many people assume they may not be able to qualify for a loan if they are on SSI, there are several options available. Qualifying, in some cases, maybe a bit more challenging, but it’s certainly possible. In some instances, SSI benefits and Social Security payments could count as income for personal loan applicants. This, of course, depends on the type of loan and the lender.

Here’s a look at some options that might be easier to qualify for if you’re receiving SSI:

Secured Personal Loan

These loans require collateral, which is something of value, like a car; because of this, they carry a lower risk for the lender. You may be able to qualify for a secured loan even if you’re on a limited income or have a low credit score. Keep in mind that these loans carry their risks for the borrower. If you fail to repay the loan, you may lose the asset you used as collateral, such as your vehicle.

Credit Card Cash Advance

With a cash advance, you withdraw cash with a credit card from an ATM. Getting funds this way is easy, but there is a downside to this. You may be charged a cash advance fee, which is either a flat rate or a percentage of the amount you borrowed.  You may also be charged an ATM fee for the transaction, and the interest rate on cash advances is much higher than if you were making a typical purchase with your credit card. It’s also important to note that interest starts from the day of the transaction for the cash advance, and there is no grace period.

Home Equity Loan or HELOC

A home equity loan and a home equity line of credit (HELOC) are options that allow you to borrow funds by using the equity you have in your home. A home equity loan provides a lump sum of money with a fixed interest rate, which you pay back in monthly instalments. A HELOC functions like a credit card and gives you access to a revolving line of credit with a variable interest rate that you can borrow from as you need to. With a HELOC, you’ll make interest-only payments during the draw period, followed by payments that include both the principal and interest during the repayment period.

Can a Loan Impact SSI Benefits?

If you take out a loan, the money you receive isn’t considered income and won’t affect your SSI benefits. However, if you get a loan and don’t use it all within a month, it will count toward your SSI resource limit for the following month.

If you’re still unsure about how a loan may impact your SSI benefits, you should check with the Social Security Administration (SSA) for more information before taking the loan.

The Bottom Line

If you’re looking to obtain a loan, it’s good to know that there are options available and that, in some cases, SSI can count toward your income. Just make sure you assess your available options and read the terms and conditions carefully before you sign on the dotted line to ensure that the loan you’re getting is right for you.

Notice: Information provided in this article is for information purposes only and does not necessarily reflect the views of finance-monthly.com or its employees. Please be sure to consult your financial advisor about your financial circumstances and options. This site may receive compensation from advertisers for links to third-party websites.

MILLIONS of households are being urged to claim a little-known DWP benefit, which could boost their state pension by up to £328 a year.

This warning is directed at unpaid carers who do not earn sufficient income to make National Insurance contributions, thereby risking their entitlement to a full state pension.

1

To qualify for any state pension, you need a minimum of 10 years’ worth of NI contributions, and 35 years are required to receive the full amount worth £221 a week.

Career breaks, such as those taken to raise children or care for relatives, can result in gaps in your NI record, potentially reducing your state pension entitlement.

Fortunately, you can claim free credits to fill these gaps before voluntarily buying back any missing years.

Experts at Mobilise, a community for unpaid carers, is urging the nation’s 10million carers to apply for ‘carer’s credit’ to ensure households they can get the full new state pension.

Carer’s credit fills the gap between caring and work.

It ensures any years where you’re not paying national insurance because of time spent caring are still counted.

It doesn’t require any payments to be made and helps unpaid carers continue to build up towards that 35-year target.

Each annual credit missed could cost you 1/35th of the value of your state pension, according to wealth manager Quilter.

So, by claiming the credit, you could potentially increase your state pension by £328 annually – adding up to over £6,000 over the course of a typical retirement.

Suzanne Bourne, care expert at Mobilise, said: “If you start work at 21 and stop working at 51 to care for your partner, you will only receive a partial state pension when you turn 66.

“This could come as a huge shock and could have been avoided with the carer’s credit.

“We’re encouraging everyone to check whether they are eligible as soon as possible.

“Carer’s credit can be backdated to the start of the previous tax year, even if the person we were caring for no longer has care needs or has passed away.

“So it’s vital that you don’t leave it too long to submit your application, if you think you’re eligible.”

Before making a claim, it’s worth checking your NI record.

CHECK YOUR YEARS

If you think you’re missing National Insurance years, the first thing to do is check your state pension forecast.

You can check this and your state pension age through the government’s new ‘Check your State Pension’ tool online at gov.uk/check-state-pension.

The tool is also available through the HMRC app, which you can download free on the Apple App Store and Google Play Store.

You’ll need to log in using your Personal Tax Account login details. If you don’t already have an online HMRC account, you can register at gov.uk.

It shows you how much your state pension could increase by and what NI years you’ll need to buy or free credits to apply for to achieve this.

CHECK YOUR ELIGIBILITY FOR CARER’S CREDITS

Before making a voluntary contribution, it is important to check if the gaps in your contributions can be filled with free NI credits.

For example, carer’s credits can help fill in gaps in your NI record if you’re an unpaid or low-paid carer.

To get carer’s credit you must be:

• Aged 16 or over
• Under state pension age (66)
• Looking after one or more people for at least 20 hours a week

The person you’re looking after must get one of the following:

• Disability living allowance care component at the middle or highest rate
• Attendance allowance
• Constant attendance allowance
• Personal independence payment (PIP) daily living part
• Armed forces independence payment
• Child disability payment (CDP) care component at the middle or highest rate
• Adult disability payment daily living component at the standard or enhanced rate
• Pension age disability payment

Thousands are thought to be missing out on these NI Credits, leaving them worse off in retirement.

You can check the full list of people eligible to claim credits by visiting www.gov.uk/national-insurance-credits/eligibility.

It explains the circumstances where you’ll need to claim and when you’ll get it automatically.

TOP UP YOUR NATIONAL INSURANCE YEARS

If you don’t qualify for free NI credits in some cases, buying back missing years can be really valuable.

Voluntary contributions come at a price.

If you fill gaps between 2006/07 and 2015/16, you’ll pay the 2022/23 rates for contributions.

It is worth £15.85 a week, which means it costs £824.20 to buy one year of contributions.

As the state pension was £185.15 per week in 2022/23, this boost would add £5.29 per week or around £275 per year. 

Although you’d have to pay £8,242 (10 lots of £824.20), the annual state pension boost would be around £2,750.

Someone who was retired for 20 years would get back around £55,000 in total (before tax).

Anyone under 73 can make voluntary pension contributions, as it’s assumed everyone under this age will claim the new state pension.

If you’re below the state pension age, you can check your state pension forecast by visiting www.gov.uk/check-state-pension to determine if you’ll benefit from paying voluntary contributions.

You can also contact the Future Pension Centre by calling 0800 731 0175.

If you’ve reached state pension age, contact the Pension Service to find out if you’ll benefit from voluntary contributions.

You can contact this service in several different ways by visiting www.gov.uk/contact-pension-service.

You can usually pay voluntary contributions for the past six years.

The deadline is April 5 each year.

For example, you have until April 5, 2030, to compensate for gaps in the tax year 2023 to 2024.

The deadline has been extended for making voluntary contributions for the tax years 2016 to 2017 or 2017 to 2018.

You now have until April 5, 2025, to pay.

Find out how to pay for your contributions by visiting gov.uk/pay-voluntary-class-3-national-insurance.

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A UK-based activist fund has taken a stake in one of Japan’s biggest property groups and is calling for divestments and a strategy overhaul, as foreign investors continue to pressure the country’s boardrooms.

Palliser Capital has taken a position in Tokyo Tatemono to become a top-15 shareholder, according to people familiar with the fund.

The real estate company, founded in 1896 and owner of some of the country’s most prominent buildings, including Otemachi Tower in the capital’s business district, is the latest in a lengthening line of property groups targeted by activists. Japanese companies have been under growing pressure to improve market valuations, raise corporate governance standards and increase returns on equity.

People familiar with Palliser’s thinking said the fund saw a yawning discount between Tokyo Tatemono’s intrinsic value, which Palliser put at $6.4bn, and its market capitalisation of $3.3bn. It recognises some attempts by the property group to address this discount but aims to press for an acceleration.

Palliser is said to want a clear road map for identifying non-core assets, disposing of unnecessarily held properties and unwinding a significant portfolio of equity stakes in other listed companies. The largest of those cross-shareholdings is a roughly 5.3 per cent stake in Hulic, a Japanese property group with close ties to Tokyo Tatemono.

Palliser is expected to unveil its investment at the 13D Monitor annual activist investor gathering on Tuesday in New York. The fund, said the same people, has compared Tokyo Tatemono’s position to that of Japan’s biggest property group, Mitsui Fudosan, targeted by US activist Elliott Management this year.

Palliser believes the two companies share similarities in terms of asset mix, low asset turnover and potentially unrealised gains, but Mitsui’s valuation has increased since Elliott’s campaign and the company’s decision to launch a new strategic plan and a shareholder capital return programme.

Despite the public pressure being brought to bear, contact between the Palliser and Tokyo Tatemono’s top management has been constructive, said the people familiar with the activist investor.

It is the fund’s second big investment in Japan in the past 12 months, after it targeted Keisei Electric Railway, which runs trains in Tokyo, including one of the main lines from Narita airport into the city centre.

In a recent report on the continuing rise of investor activism in Japan, CLSA’s chief Japan equity strategist Nicholas Smith noted that in the first three months of 2024, the number of activist events was 156 per cent higher than in the same period a year earlier. Crucially, there had been a qualitative change in activism, he said.

“Activism is . . . now about unbundling directionless conglomerates and agitating for mergers in mature sectors with diffuse market share,” said Smith. “Both are critical issues for the Japan turnaround story. Prominent activists have demonstrated leaving companies in better condition than they found them, so have government support.”

Palliser declined to comment on the stakebuilding. Tokyo Tatemono did not immediately respond to a request for comment.

I went to see a band called The National at the Eden Project with my sister, brother-in-law and their friend in the summer.

We’d booked standing tickets months before. Then my sister and brother-in-law found out they were expecting (very exciting), so my sister would be five months pregnant at the gig.

At around the same time, I found out I had narcolepsy (see my online Weekend Essay, 3 May 2024). It also so happened that the friend we went with had mild schizophrenia.

For all firms, large or small, the challenge is to try and relate things to each customer

I remember my brother-in-law telling me about the call he had to make to the Eden Project to get us into the accessible area: “Er, yes, my wife is heavily pregnant, my sister-in-law has narcolepsy and my friend has schizophrenia…. Can we have seats, please?”

I bet they were looking forward to our arrival.

I tell this anecdote because it highlights how quickly vulnerabilities can present themselves. We had booked our tickets in April and, just three months later, my sister and I both needed accessible seating.

It also highlights the extent to which vulnerabilities such as disability can be invisible.

Recognition

It’s easy, when one hears the word ‘vulnerability’, to say, ‘That’s not me.’ My dad has asthma, Type 2 diabetes and high blood pressure, but he still insisted he should take his turn to make a trip to the supermarket during the Covid-19 lockdowns.

This is just one of many issues advisers face when identifying vulnerability in their client base.

We encounter many situations when a client might need support but there isn’t a PoA in place

The Financial Conduct Authority’s definition of vulnerability refers to customers who, due to their personal circumstances, are “especially susceptible to harm”, particularly when a firm is not acting with “appropriate levels of care”.

The regulator has also emphasised the fact people should be referred to as being “in vulnerable circumstances” rather than as “vulnerable clients”.

In its guidance it says: “Firms should think about vulnerability as a spectrum of risk. All customers are at risk of becoming vulnerable and this risk is increased by characteristics of vulnerability related to four key drivers: health, life events, resilience and capability.”

Even with this definition in mind, however, there are so many ways a person can display vulnerability. Plus, life events and health issues affect people in different ways.

There is a knowledge base and a gap that can be filled

“The problem with discussing vulnerability is that it’s quite difficult to define,” says Evelyn Partners head of investment management Chris Kenny.

“Rather than having a series of very clear benchmarks or KPIs [key performance indicators], the industry is trying to find its way, to some extent.”

And, he says, it is not just about defining vulnerability but also about recording and showing that you’re “doing the right thing”.

Struggling firms

Financial services firms of all sizes are “struggling” with several areas, adds Kenny.

“One is the issue of consent,” he says. “What is it that we can get, and how can we do it?”

For all firms, large or small, the challenge is to try and relate things to each individual customer

There is also the question of identification as it is very unlikely that clients will self-identify.

The FCA says that, to deliver good outcomes for vulnerable customers, firms should understand their needs and circumstances. Therefore, the regulator expects firms to “actively encourage” customers to share information about their needs or circumstances, where relevant.

It also expects firms to develop their own method of identifying vulnerability where appropriate, through the data they hold or other means such as external research, customer surveys or panels.

And, as if that weren’t enough to contend with, vulnerability is not a permanent state.

“Advisers need to think: is there a period of time during which there’s a risk of vulnerability, as opposed to it being a state that a client is always in?” says Kenny.

“It could be during a divorce or a short-lived illness, for example.”

Regular and in-depth contact allows the advisers to assess when things are changing and evolving in an individual’s life

Then there is the matter of recording vulnerabilities.

“In our regulated industry, if something isn’t recorded it essentially doesn’t exist,” warns Kenny.

“And finally there’s the question of support — what should we be doing? This causes some concern for advice firms because, even if they manage to clear the first three hurdles, they wonder, ‘Am I doing the right thing?’”

The FCA is keen to get firms up to scratch on all of this. It is expected to make a speech on the matter later this month.

It flagged vulnerability as an issue at the beginning of the year when it launched a review of firms’ understanding of consumer needs, the skills and capability of staff, product and service design, communications and customer service, and whether these supported the fair treatment of customers in vulnerable circumstances.

The industry is trying to find its way, to some extent

This followed a Dear CEO letter to wealth managers and stockbrokers in November 2023 — telling them to reassess the vulnerability of their customers — after the regulator had found that 49% of portfolio managers and 69% of stockbrokers had not identified any vulnerable consumers in their customer bases.

FCA head of department in consumer investments Nick Hulme says: “Vulnerability spans all four of the Consumer Duty outcomes, so getting it right is fundamental to firms ensuring their customers ultimately get a good outcome.”

The Lang Cat consulting director Mike Barrett says: “For all firms, large or small, the challenge is to try and relate things to each individual customer.

“Having a blanket tick-box approach doesn’t achieve that. That’s the poor practice the regulator is trying to stamp out.”

Barrett suggests small firms naturally have more in-depth relationships with clients.

“Regular and in-depth contact allows the advisers to assess when things are changing and evolving in an individual’s life,” he says.

‘Firms should think about vulnerability as a spectrum of risk,’ says the FCA

But smaller firms may lack the capacity to recognise vulnerability.

Kenny says there is a lot more that larger firms and providers can do to help smaller advice-led businesses do “a great job for their clients”, above just trying to compete on price.

He says: “There is a knowledge base and a gap that can be filled.”

Royal London director of policy Jamie Jenkins agrees. He says the need to support vulnerable customers is, rightly, getting more attention, but vulnerability can be difficult to recognise and quantify.

“We work closely with advisers to help them identify situations that might indicate vulnerability, including offering regular webinars,” he says. “We also provide pension and protection insights through our business development managers network.”

Jenkins suggests that advisers can help by putting a power of attorney (PoA) in place with clients “sooner rather than later”.

The problem with discussing vulnerability is it’s quite difficult to define

He adds: “This will really help them to help their clients navigate their finances when they aren’t able to do so themselves.

“We encounter many situations when a client might need support but there isn’t a PoA in place and there is no authority to deal with the third party trying to manage their finances on their behalf.”

Finding the answer

There is no easy answer to identifying and serving clients in vulnerable circumstances. But it is, arguably, one of the most important things a financial planner can do.

After all, if you cannot serve the most vulnerable in society, how can you expect to be trusted by anyone else?

This article featured in the October 2024 edition of Money Marketing. 

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