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UK household disposable income has dropped below pre-pandemic levels even as state support helped reduce inequality, underlining the impact of rising prices and higher interest rates on personal finances.

Median household disposable income was £34,500 in the fiscal year ending March 2023, down 2.5 per cent on the previous year and down from £34,700 in the year to March 2020, the Office for National Statistics said on Tuesday.

Disposable income — defined as the amount of money households have available for spending and saving after taxes — fell by an annual average of 0.3 per cent between 2020 and 2023, the ONS said, although it rose by 0.8 per cent a year between 2013 and 2023.

Disposable income inequality declined to 33.1 per cent in the year to March 2023 from 35.5 per cent the previous year on the back of government measures to ease the cost of living crisis.

The figures highlight the impact of the recent surge in inflation and reflect the rise in mortgage rates as the Bank of England increased borrowing costs.

After consumer confidence fell sharply in September, they also underline the challenge facing Sir Keir Starmer’s government to deliver its promise of higher living standards across the country.

Inflation stood at 2.2 per cent in August, well below the 42-year high of 11.1 per cent in October 2022 but above the BoE’s 2 per cent target.

Tomasz Wieladek, chief European economist at investment company T Rowe Price, said the jump in energy costs after Russia’s full-scale invasion of Ukraine in 2022 had led other essential goods and services to rise in price at a time when households were facing higher mortgage costs and consumer debt.

But he added that “the effects would have been much larger” had successive governments not subsidised household energy bills or raised the minimum wage by almost 10 per cent.

Britain’s poorest households benefited from a 2.3 per cent increase in disposable income to £16,400 in the past year, helped by government support measures, the ONS said.

By contrast, disposable income among the richest households fell 4.9 per cent to £68,400, while there was a 2.5 per cent fall to £34,500 across the entire population.

Despite lower income inequality, the richest and poorest one-fifth of households were worse off than before the pandemic, with their disposable income down 4.3 per cent and 2.4 per cent respectively.

In a letter this month, 17 groups including the Salvation Army warned ministers that many Britons were “resorting to desperate measures” to cope with living costs and higher energy bills this winter.

Chancellor Rachel Reeves on Monday reiterated the government’s commitment to boosting economic growth, striking a more upbeat tone than in previous months and paving the way for more public investment.

She also set out an accelerated timeline on a pledge to roll out free breakfast clubs to every primary school in the UK.

Household disposable income has grown much more slowly since the 2008-09 financial crisis than in past decades, ONS data shows, highlighting the impact of slower growth.

In the 15 years to 2023, median disposable income rose only 7 per cent, compared with a 41 per cent increase in the previous 15 years.

Economists forecast that household income will rise again in 2024 as real wages are now rising and mortgage costs falling.

In August, the BoE cut interest rates for the first time in more than four years, leaving them at 5 per cent. Another reduction is expected in November.

Paul Dales, economist at research company Capital Economics, said there would “be an extra drag on real household disposable income” if Reeves raised taxes in the October Budget. But he added that it was likely “to grow faster [in the year to March 2024] mainly due to inflation having fallen faster than wage growth”.

It may be surprising, but it appears more people have considered becoming a senior paraplanner than a financial adviser.

Research from recruitment platform Indeed, with the St. James’s Place (SJP) Financial Adviser Academy, found just 4% of respondents had considered becoming a financial adviser, while 9% had considered becoming a senior paraplanner.

The research looked at attitudes towards careers among over 4,000 UK workers, highlighting a good salary, work/life balance and the opportunity to work from home as factors that create the ideal role.

This data was combined with job searches to produce a list of 10 of the best careers people have never considered. Senior paraplanner was second on the list, while financial adviser was fourth.

Broad appeal

This may go against the grain of expectations, as you would think advisers would have a higher profile among the general public as they are more client facing.

However, Gee Foottit, senior manager, partnerships, at the SJP Academy, points out we cannot draw conclusions about the level of public awareness for either role, as the research only shows whether respondents had considered these careers for themselves.

Foottit acknowledges the common perception is that advisers have the dominant career but people also have out-of-date perceptions of advisers as male economics graduates in suits who work in the City.

“Women make fantastic financial advisers,” she says. “The skills required can be more difficult to train people in – things like emotional intelligence, being inquisitive and feeling at ease to ask questions.”

Foottit says that while men – who outnumber women as advisers 80/20 – can certainly have these attributes, more women tend to already possess them.

It is widely accepted paraplanning has more of an equal gender split and commentators suggest this is because there are elements that appeal to everyone.

People whose main focus is to drive their career forward have pathways to follow, perhaps moving into financial advice.

Versatility and flexibility

The versatility of paraplanning also enables people to flexibly juggle work with the demands of bringing up children, while still having job satisfaction and options to progress in the future, when their families are more self-sufficient.

Although being an adviser also offers many of these benefits, there is a feeling the advice role is more defined, while paraplanning can be moulded around the needs of businesses and individuals.

Liam Chapman-Lyes, senior paraplanner at Succession Wealth, believes this is why the gender split is more balanced in paraplanning relative to advice.

“Paraplanners have worked from home since Covid – technology has opened up the role across the whole country rather than locally. And you don’t have to worry about client calls and working out of hours,” he says.

“You can do your hours, switch off at the end of the day and it’s less stressful.”

That is not to say men do not appreciate the flexibility and versatility that paraplanning offers. Chapman-Lyes has spent the last seven years building a career in paraplanning.

At Succession Wealth, there are different roles within paraplanning, such as associate paraplanner and senior paraplanner. This enables the firm’s paraplanners to occupy ‘light advice roles’ where they combine technical work behind the scenes with client engagement or cashflow planning.

“Paraplanning didn’t really exist 20 years ago but it has developed so much in the last 10 years. Now there are pathways for qualifying as a financial planner or staying in a paraplanner role – you can choose,” says Chapman-Lyes.

“I have bit of client contact – I speak to clients over email, assist on drafting the advice and cashflow modelling – but there’s lots of scope to do more.”

A growing profession

While hosting the Personal Finance Society’s (PFS) Purely Paraplanning Conference in April, Altus Consulting platforms consulting director Amira Norris was struck by the realisation that the paraplanning community is ‘growing and thriving’.

“Once seen as a stop gap to becoming an adviser or a way to promote administrators, paraplanning has evolved over the last decade or so to become a respected and valued career in its own right,” she says.

“The main institutes now all recognise paraplanning as a career path, with dedicated qualifications pathways and initiatives, such as the PFS Paraplanning Panel and the CISI paraplanner award.

“The role of a paraplanner has become invaluable to advice businesses, as the need to keep up with the regulatory and technical complexity of financial planning increases,” she says.

“We are also seeing offshoots of specialisations in areas such as cashflow planning, complex pension reviews and intergenerational wealth expertise.”

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Nasdaq and Deutsche Börse have been raided by EU officials investigating whether the exchange groups may have been involved in antitrust violations related to financial derivatives.

Late on Monday, the European Commission said it had carried out unannounced inspections at the offices of companies in two countries within the bloc for potential anti-competitive practices.

The EU’s executive arm is focused on financial derivatives, which are contracts that track the price of an underlying asset, such as a bond, equity or interest rate.

“We confirm the EU Commission’s investigation and we are fully co-operating,” Deutsche Börse said in a statement on Tuesday.

“We are aware of an investigation initiated by the European Commission involving the derivatives market,” Nasdaq said in a statement to the Financial Times, adding that the company “is committed to fully co-operate with the European Commission and support the relevant authorities with the investigation”.

The EU said the raids were aimed at determining whether the companies had broken EU law by engaging in “restrictive business practices”. The commission declined to comment when asked by the Financial Times on the identity of the companies targeted.

A person close to Deutsche Börse said the EU was looking at a “very limited area of the financial derivatives business” and that the company’s lawyers had decided there was “no need” to make provisions for potential fines.

EU investigators said the raids did not necessarily mean that the companies were engaged in anti-competitive practices and set no specific deadline to end the probe.

“The duration of the investigation depends on a number of factors, including the complexity of each case, the extent to which the companies concerned co-operate with the commission and the exercise of their rights of defence,” the commission said on Monday.

Nasdaq’s US parent is one of the world’s biggest stock exchange groups and the company’s EU stock exchanges include the main markets of Sweden, Denmark and Finland. It also offers trading and clearing of equity, fixed income and commodity derivatives.

Deutsche Börse is the largest exchange group in the EU by market value, running the Frankfurt Stock Exchange and Eurex — the region’s biggest derivatives trading venue.

Eurex trades equity, commodity, debt and currency derivatives, and more than 154mn contracts were traded on the Eschborn-based exchange last month, according to the company’s data.

Deutsche Börse also owns a 75 per cent stake in the European Energy Exchange, which is based in Leipzig and allows investors to trade power, gas and other commodities derivatives.

Last year, Swedish authorities investigated Nasdaq Stockholm, looking into whether the exchange failed to report insider trading.

Financial services is not the only sector that has been under scrutiny from Brussels regulators. In July 2021, the EU fined BMW and Volkswagen €875mn for colluding to prevent the deployment of clean emissions technology.

The last time the Federal Reserve, Bank of Japan and Bank of England all met in the same week, it was the BoJ’s hawkish hike that made the weather in markets over the days that followed.

This time, the Fed’s decision to start the cutting cycle with a half-point bang last week largely overshadowed the BoE and BoJ’s prudent holds, propelling the S&P 500 to new highs.

As is customary, the central bank’s chair Jay Powell took questions from journalists at the post-statement press conference. Yet the Federal Open Market Committee’s about-face on its previous guidance raises a host of other, harder-to-answer, ones.

Here are a few of the most important.

1. What does data dependency really mean?

Self-possessed and relaxed, Powell conveyed confidence, even optimism, as he explained the rate decision. “Nothing to see here,” he seemed to be saying. It worked: investors reacted positively, dispelling previous fears that they would read a large cut as a sign of panic from policymakers.

But his framing was a little disingenuous. With the half-point cut, the FOMC backtracked on earlier indications that it would start the easing cycle with a regular 0.25 percentage point move. Even more importantly, the new Summary of Economic Projections quietly introduced a major reassessment of what the central bank needs to do to keep the US economy on track for a soft landing.

The new GDP growth forecasts were basically unchanged from June. Inflation forecasts were lower and unemployment forecasts higher, but they did not indicate a substantially different economic environment to forecasts three months ago.

But the rate path that Fed policymakers think is required to get there is now much lower.

Powell would probably say that this is simply data dependency in practice: policymakers change their view as the data changes. “We took all of those [data] and . . . concluded that this was the right thing for the economy,” he said. Had he been challenged about the dot-plot revisions, he would have presumably given a similar answer.

But there are issues with this narrative.

The change between the June and September dot plots is big. Earlier this year, it took several months of bad inflation data for rate-setters to notch down their projected number of 2024 cuts from three to one. By contrast, the past few months’ labour market data, even if slightly disappointing, is not flashing red. “The labour market is actually in solid condition . . . you’re close to mandate, maybe at mandate, on that,” Powell said during the press conference.

It doesn’t sound like a solid basis to justify the major dovish shift that took place below the SEP’s surface. Was Powell accurate in saying that the Fed is responding to the data, or were other considerations in play?

2. Is the Fed losing the markets — if so, is that a bad thing?

The markets had seen the cut coming. Investors started seeing some chance of a half-point rate cut as far back as July, despite policymakers’ insistence that the Fed would, in all likelihood, ease only gradually. Ultimately, the traders’ call prevailed.

Believers in the Fed put clearly feel vindicated — and are doubling down. Markets currently expect it to reach its forecast terminal rate of 2.9 per cent in September 2025, more than a year ahead of the median rate-setter’s forecasts. In other words, they expect the Fed to deliver around eight cuts over the next 12 months or so. The Fed itself is projecting only six.

What might that mean for the Fed?

It could be that markets no longer believe the rate-setters. That would be rational, given how bad the dot plot has been at accurately predicting the Fed’s subsequent rate path. That raises the question of whether, if its decision-making truly is data dependent, the dot plot might not be ditched. Far from communicating policy clearly, it may be hurting policymakers’ credibility.

But overly dovish markets might be helpful in other ways. Powell said emphatically last Wednesday that the bank was not yet declaring victory over inflation. If markets keep financial conditions loose beyond the Fed’s own indications, the central bank can have it all: a stance that is “roughly balanced” between the two sides of its dual mandate, coupled with the stimulative effect of lower borrowing costs in the real economy.

The risk is that the reckoning, in the form of a big market correction, will eventually come. On a more positive note, anyone who is not bored with knife-edge 25-or-50 debates has plenty to look forward to.

3. How politically dangerous was the decision?

Presidential candidate Donald Trump is, to put it mildly, unusually attentive to Fed decisions. It surprised no one that he weighed in on the rate cut.

“It shows the economy is very bad . . . assuming that they are not just playing politics,” he said. Some, though not all, GOP lawmakers took the same view. Trump’s running mate JD Vance was uncharacteristically circumspect.

On the Democratic side, President Joe Biden called it a “declaration of progress” and attempted to link inflation’s decline to his administration’s policies. Vice-president and Trump rival Kamala Harris simply called it “welcome news”.

Powell has a strong record of defying political pressure on rate moves. Though his 2019 spat with Trump is most memorable, some Democrats have also unsuccessfully attempted to sway the Fed’s rate decisions.

But Trump has made overt threats to the Fed’s independence before. The decision to start the easing cycle on the eve of an extremely tight election is very unlikely to curry the central bank any favour with the volatile former president.

Something more to worry about if Trump wins in November.

The view from overseas

The Fed cut has also featured heavily in central bankers’ comments beyond US shores.

Start with the BoJ, which held rates on Friday. The central bank is on a gradual journey to normalisation, and markets have long considered Fed rates play a key role in its pace through their effects on the yen. The Japanese currency had long been seen as too weak, but following a flash market crash and rapid appreciation of the yen in early August, markets unwound bets on further BoJ increases next year.

At Friday’s press conference, governor Kazuo Ueda acknowledged that the BoJ would be watching developments in the US closely. “One factor we’d like to look at is whether the US economy will achieve a soft landing, or whether the slowdown could be a bit more severe,” he reportedly said, while reiterating that the BoJ would increase rates again if its economic forecasts were realised.

But markets did not really react, perhaps believing that the BoJ is worried about excessive yen strengthening as well as weakening.

At the European Central Bank, Italy’s Fabio Panetta, a dovish member of the governing council, seized on the US’s jumbo cut as a reason to deliver more easing in the near term. This argument is unlikely to have traction, not least because earlier this year Panetta had argued that the ECB should cut faster if the Fed’s stance proved tighter than expected.

The ECB arguably has little to fear from the spillover effects of a faster US cutting cycle: it would boost export demand for European products, driving growth, and strengthen the euro, which is disinflationary. If the Eurozone economy does not rebound as the governing council currently expects, the ECB may well accelerate its own cutting cycle in the coming months. But the Fed probably won’t have much to do with it.

What I’ve been reading and watching

• Craig Coben’s fascinating article on how the German government mismanaged the sale of its Commerzbank shares, allowing UniCredit to swoop in and JPMorgan to earn a hefty fee.

• This handy article from Politico unpacks which countries are up and which are down in Ursula von der Leyen’s new team of commissioners — and what her picks signal about the EU’s priorities over the next five years.

• Should the Bank of England change its name? This is one of several provocative proposals about how to reform the Old Lady that Tony Yates would like Rachel Reeves to consider. FT readers can join in on the poll.

• Lionel Barber’s profile of Masayoshi Son, investor and inveterate risk-taker whose career spanned 1980s Japan, the 2000s dotcom boom and the golden years of venture capital in the 2010s, but whose record has been blighted by a poor sense of timing (among other reasons). His bets are now on AI. But has he missed the train?

A chart that matters

Between profit warnings, botched forced labour audits and mass lay-off plans, European carmakers have had a terrible month. Once an engine of export revenue, employment and economic growth, the sector is now stalled, buffeted by competition from Chinese carmakers at home and abroad.

The EU is gearing up to raise tariffs on Chinese electric vehicle imports. A decision is expected in the next few weeks. But whether investors’ minds about the sector will change is another matter. The EU’s biggest auto names have been a major drag on the European stock index in the past few months, as the chart below shows.