Aurelia Butler

The UK insurance sector has called on ministers to consider allowing savers to dip into their pension pots before they reach retirement age if they are facing acute financial hardship.The Association of British Insurers, the trade body for the pension industry, made the appeal to the government as tens of millions of savers grapple with the biggest cost of living crisis in decades.The ABI said it had received frequent calls from customers in acute financial hardship who were “desperate” to access money from their pensions, including to pay for overseas medical care or avoid home loan foreclosure.“Although not the intention of a pension product, there are extreme cases where the use of these funds could be life-changing for their owners,” said the ABI in a paper on automatic enrolment pension reforms, published on Tuesday.However, financial hardship is not currently recognised as a legitimate reason for accessing a pension before the age of 55, according to the trade body. Under current rules, early withdrawals count as unauthorised payments and typically result in a 55 per cent tax charge from Her Majesty’s Revenue & Customs. “Most pension providers do not allow unauthorised access for this reason,” said the ABI.In 2011, after a call for evidence on early access, the Treasury dropped a proposal to allow early pension access, citing “limited evidence” that the reform would have a positive impact on pension saving. However, other countries have shown flexibility in this area, including Canada and Australia, which allow early access in clearly defined cases of disability or terminal illness, and severe financial hardship.The ABI acknowledged the potential pitfalls of granting early withdrawals, including reducing later life savings and the adverse impact of releasing lump sums could have on means-tested benefits.But the ABI said the Treasury should rethink the reform and look to introduce early access alongside wider pension reforms from 2025.“Given the potential benefit of introducing such a policy, and the challenges that would need to be weighed up and worked through, we recommend the government launch a green paper looking at whether people should be able to access their pension savings before the normal minimum pension age if they face significant financial hardship that reasonably outweighs any loss to their future retirement income,” said the ABI.Tom Selby, head of retirement policy with AJ Bell, an investment platform, said the idea could be worth exploring provided early access was limited to those facing genuine financial difficulty. “There will likely be extreme circumstances where someone might be better off having their money out of their pension early — for example, if they were facing losing their home,” said Selby.However, Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, warned that the reform could backfire. “Tempting as it is to talk about allowing early access to pensions during times of financial crisis it only kicks the can down the road as people won’t be able to retire when they need to because they’ve raided their pensions,” said Morrissey.“This could mean more people are forced to work for longer when they may be in ill health.”The Treasury said it had no current plans to change pension access tax rules, but that all aspects of the tax system were kept under review. More

Globalisation is not dead. It may not even be dying. But it is changing. In the process, the institutions that shape it, notably the World Trade Organization, are being forced to change, too. We are moving towards a different and far more difficult world. But, in setting our new course, we need to avoid some mistakes. Here are seven.The first is to focus attention only on trade. As Maurice Obstfeld, former chief economist of the IMF, has noted, today’s fluid global capital markets have generated waves of financial crises, while bringing little evident benefit. Insufficient attention is paid to this reality, largely because the interests in favour of free capital flows are so powerful while their economic impact is so hard for most people to understand.The second is a belief that the era of globalisation was an economic catastrophe. In a recent note, however, Douglas Irwin of Dartmouth College observes that between 1980 and 2019 virtually all countries became substantially better off, global inequality declined and the share of the world’s population in extreme poverty fell from 42 per cent in 1981 to just 8.6 per cent in 2018. I make no apology for having supported policies with such outcomes. The third is the idea that rising inequality in some high-income countries, notably the US, is principally the result of openness to trade or, at the least, a necessary consequence of such openness. Evidence and logic are to the contrary. Indeed, this is a superb example of “lamppost economics” — the tendency to focus attention and blame where politics casts the brightest light. It is easy to blame foreigners and resort to trade barriers. But the latter are a tax on consumers for the benefit of all those in a specific industry. It would be better to tax and redistribute income less arbitrarily and more fairly and efficiently.

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The fourth is the supposition that a greater self-sufficiency might have protected economies from recent supply chain disruptions, at modest cost. To someone whose country was forced into a three-day week by a miners’ strike in 1974, this has never seemed plausible. The recent shortage of baby formula in the US is another example. Greater diversification of supply makes sense, though it can be costly. Investment in stocks can make sense as well, though that will also be costly. But the idea that we would have floated through Covid-19 and its aftermath if every country had been self-sufficient is ludicrous.

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The fifth is the notion that trade is an optional economic extra. Here lies a paradox in trade policy: the countries that matter most in trade are the ones to which trade matters least. The US is the only economy in the world that could conceive of being largely self-sufficient, though even it would find this costly. Smaller countries are dependent on trade and the smaller they are the more dependent they tend to be: Denmark or Switzerland could not have attained their current prosperity without it. But big countries (or, in the case of the EU, large trading blocs) shape the world trading system, because they have the biggest markets. Thus, the trading system depends on the most indifferent. Smaller countries must try hard to offset that indifference.The sixth is to presume we are already in an era of rapid deglobalisation. The reality is that the ratio of world trade to output is still close to an all-time high. But it stopped rising after the financial crisis of 2007-09. This is the result of the dwindling away of fresh opportunities. Global trade liberalisation essentially stalled after China’s accession to the WTO in 2001. Given that, the world has by now largely exploited trading opportunities. But, as the World Bank’s World Development Report 2020 pointed out, this is a loss: the ability to participate in global value chains has been an engine of economic development. These opportunities need to be spread more widely, not less so.The final mistake is the view that the WTO is redundant. On the contrary, both as a set of agreements and a forum for global discussion it remains essential. All trade involves the policies (and so the politics) of more than one country. A country cannot “take back control” over trade. It can only decide policies on its side. But if businesses are to make plans, they need predictable policies on both sides. The more dependent they are on trade, the more important such predictability becomes. This is the essential case for international agreements. Without them, the recent backsliding would surely have been greater. The WTO is also necessary to ensure regional or plurilateral agreements fall within some set of agreed principles. It is not least the place to carry out discussions of issues that connect closely to trade, such as the digital economy, climate or the biosphere. Some seem to imagine that such discussions might happen without engagement with China. But China is too important to too many for that to be possible.As Ngozi Okonjo-Iweala, director-general of the WTO, remarked back in April, the impact of new competitors, rising inequality within countries, the global financial crisis, the pandemic and now the war in Ukraine “have led many to conclude that global trade and multilateralism — two pillars of the WTO — are more threat than opportunity. They argue we should retreat into ourselves, make as much as we can ourselves, grow as much as we can ourselves.” This would be tragic folly: consider the economic damage that would be done in the process of reversing most of the trade integration of the past few decades.Yet the disruptions of our age — above all, the rise of populism, nationalism and great power conflict — put the future of global trade in question. So how should we try to reshape trade and trade policy? That will be my topic for next [email protected] Martin Wolf with myFT and on Twitter More

Food prices for the eurozone’s shoppers are set to keep rising at near-record rates for at least another year, despite the region’s largely self-sufficient agriculture sector, according to the European Central Bank.Russia’s invasion of Ukraine has disrupted supplies from the war-hit region and led to a surge in the price of key agricultural commodities imported from there, such as fertiliser, animal feed and sunflower oil. An ECB report on Tuesday warned this is pushing up costs for European farmers and food producers well beyond those that rely directly on imports from Ukraine or Russia — and is likely to drive broader increases in what consumers pay for their weekly groceries.In an article from the ECB’s monthly research bulletin published on Tuesday, officials said food inflation was “expected to stay high in the coming months, despite some counterbalancing factors”, such as increased domestic production or a switch to alternative sources. Pointing to a surge of more than 40 per cent in the farm gate and wholesale prices of food in the eurozone, the central bank predicted that further “price pressures will affect euro area consumer food prices through the pricing chain in the coming months”.The soaring cost of fertiliser, which rocketed 151 per cent in the EU in the year to April, meant food prices would continue to surge in 2023, the central bank said.

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The EU produces more agricultural products than it consumes. But this has not insulated the region from the surge in food prices sweeping across much of the world.The price of food in the 19 countries that share the euro rose 7.5 per cent in the year to May, an all-time high since the single currency was launched in 1999. Annual food inflation is higher in the US and UK, but prices have been rising faster in the eurozone over the past three months.Monetary policymakers would normally look past short-term rises in food prices as a supply-driven source of inflation that they have little influence over. But if food prices keep going up, people’s expectations that costs will continue to spiral could become entrenched. Consumers are more sensitive to sharp increases in their weekly food bill, because it is more easily noticeable than other costs. Jennifer McKeown, head of global economics at Capital Economics, said policymakers “no longer have the luxury” of dismissing food inflation, “particularly since food prices are so visible and influential on the inflation psyche”. She forecast that if agricultural commodity prices kept rising it would cut consumer spending in advanced economies by 0.7 per cent.The ECB announced this month that it would begin raising rates in July in a bid to combat inflation that, at more than 8 per cent, is now four times policymakers’ goal of 2 per cent. The invasion of Ukraine, known as “the breadbasket of Europe”, has vastly reduced the country’s exports of wheat and corn as well as sunflower oil. The war also hit supplies of fertiliser from Russia and potash from Belarus.The ECB said Ukraine, Russia and Belarus only accounted for a combined 2 per cent of the food and fertiliser imported into eurozone countries in 2020. But it added that the bloc still relied heavily on the supply of certain products from the three countries, such as maize, which is used widely for animal feed, sunflower oil and fertiliser.Disruption to the supplies of fertiliser or maize were likely to push up the price of many other food products by raising costs for farmers, the central bank said. Alternative supplies of these products would be more expensive, it added.“Households may substitute sunflower seed oil with other vegetable or animal oils and fats, but it is also used in a number of processed food products, so the reduced supply has a large impact,” it added.

In the Baltic states and Finland, which rely more heavily on Russia, Ukraine and Belarus for agricultural and fertiliser imports than most eurozone countries, food inflation has been well above the bloc’s average at between 12 and 19 per cent.Even if food producers buy their ingredients from domestic farmers or those in other eurozone countries, they will still have to pay more due to the surge in global prices for many agricultural commodities and sharply higher energy and fertiliser costs for farmers, the ECB said. More

Surging inflation is expected to push up British grocery bills by £380 this year, according to new consumer data, as the Bank of England chief economist argued that higher interest rates would be necessary to tame rising prices.In April, the research company Kantar had predicted the average cost of an annual supermarket shop would rise by £270 this year, but revised this up by more than £100 on Tuesday due to continued upward price pressures across the supply chain.The research showed “just how sharp price increases have been recently and the impact inflation is having on the [food retail] sector”, said Fraser McKevitt, head of retail and consumer insight at Kantar.Official data showed that consumer price inflation rose at a 40-year high of 9 per cent in April with the Bank of England predicting it could rise by 11 per cent in autumn.The figures came as the Bank of England’s chief economist Huw Pill said there was a need for further interest rate rises in the UK even if an increase heightened the risk of recession.Speaking to an online audience on Tuesday, Pill said that the BoE’s efforts to ease inflation used “blunt instruments” that would bring down inflation but could not fine tune the economic cycle or address inequality. Pill acknowledged that inflation had taken on “self-sustaining momentum”, which might prompt the BoE to act more aggressively to bring it down with higher rates. Official data for prices of food and beverages rose at an annual pace of 6.7 per cent in April, the fastest in more than a decade. Kantar data showed that the surge in food price growth has continued to rise. Grocery inflation reached an annual rate of 8.3 per cent in the four weeks to June 12, according to the data, up 1.3 percentage points from the previous month and its highest level since April 2009.Shoppers have responded to rising living costs by swapping branded items for cheaper supermarket own-label products, Kantar said. Sales of the former fell by an annual rate of 1 per cent in the 12 weeks to June 12, in contrast with a 2.9 per cent increase in sales of own-brand goods. “We can also see consumers turning to value ranges, such as Asda Smart Price, Co-op Honest Value and Sainsbury’s Imperfectly Tasty, to save money,” added McKevitt.

Financial markets expect the central bank to raise rates to 3 per cent over the next year as the bank tries to rein in inflation. At the same time, the outlook for UK economic growth is deteriorating as higher price growth is expected to hit consumption. Although some on the BoE’s Monetary Policy Committee do not think further tightening is required to tame inflation, Pill sided with the more hawkish members. “We will do what we need to do to get inflation back to target. And at least in my view, that will require further tightening of monetary policy over the coming months,” Pill said.  More

ROSEBUD, South Dakota (Reuters) -U.S. President Joe Biden on Tuesday announced his intention to appoint Mohegan Indian Tribe Lifetime Chief Marilynn Malerba as U.S. Treasurer, marking the first time a Native American’s signature will appear on U.S. currency.U.S. Treasury Secretary Janet Yellen, who is visiting the Rosebud Sioux Tribe in South Dakota on Tuesday, also announced the creation of a new Treasury Office of Tribal and Native Affairs, which will report to the treasurer and administer tribal relations.Malerba’s appointment by Biden also will allow Yellen’s signature to be added to the U.S. currency, as this was prohibited without a U.S. treasurer in place. Dollar notes have been printed since Yellen took office last year with former Treasury secretary Steven Mnuchin’s signature on them.The appointment helps reduce a long list of unfilled and unconfirmed senior positions at Treasury.The treasurer position has been vacant since January 2020, when Jovita Carranza left to become Small Business Administrator in the Trump administration. The U.S. Treasurer directly oversees the U.S. Mint, the Bureau of Printing and Engraving, storage of about $270 billion worth of gold at Fort Knox and is a key liaison with the Federal Reserve.Malerba’s appointment to the position no longer needs confirmation by the U.S. Senate.”With this announcement, we are making an even deeper commitment to Indian Country,” Yellen said in prepared remarks to be delivered at the Rosebud Sioux reservation. “Chief Malerba will expand our unique relationship with Tribal nations, continuing our joint efforts to support the development of Tribal economies and economic opportunities for Tribal citizens.”Malerba, who had a lengthy career as a registered nurse, has been chief of the Connecticut-based Mohegan tribe since 2010 and previously chaired its tribal council and served as its executive director of Health and Human Services, according to the Mohegan website https://www.mohegan.nsn.us/explore/heritage/our-ceremonial-leaders/chief.The Treasury said Malerba will join Yellen at the Rosebud Sioux reservation on Tuesday, where Yellen will discuss the impact of some $30 billion in federal COVID-19 aid to tribal governments.Yellen’s visit to the Rosebud Sioux reservation marks the first time that a Treasury secretary has visited a tribal nation – department officials said they could find no record of a prior visit. Yellen will tour programs at the reservation that are using nearly $200 million in funds last year’s American Rescue Plan, including $40 million worth of affordable housing projects.The Treasury on Tuesday also announced that it has approved the tribe’s plan to use more than $160,000 to upgrade its broadband internet infrastructure under a $10 billion broadband fund for state, local and tribal governments. More