Pensions shake up
The government has announced new plans in relation to workplace pensions. They want to see an automatic enrolment scheme introduced, with an option to opt out for every worker aged 18 or over. This would replace the existing scheme, where every employee aged 22 or above is enrolled if they earn above £10,000 per annum.
Figures show that over 9 million workers within the UK have been automatically been enrolled into a pension scheme; this figure is in addition to the 10.8 million workers who have already contributed to a workplace pension. The Department for Work and Pensions, in a recent review, have announced that approximately 12 million workers are currently not preparing themselves for retirement, with approximately 38% of the working population not saving enough money.
Government ministers want to see the reduction in age, which should affect approximately 900,000 young people across the UK. They want to see the younger generation preparing themselves for older age – however it does mean that employers will be hit with extra costs.
Since October 2012, the automatic workplace pension has slowly been introduced, David Gauke, the Secretary for Work and Pensions has announced that since the introduction of automatic enrolment, larger savings have been recognised for pensions, and he wants to see that extended to every young person from the age of 18 to their early 20’s.
He believes that introducing younger people to saving for their future will become a habit for them rather than a chore. A rise in contributions have been announced for next year, and this may have a negative impact. Even so, to date, very few have opted out of the system.
Steve Webb, Ex-Pensions Minister, and now Director of Policy for pensions firm Royal London has been unimpressed by some aspects of the DWP’s review. Although he agrees with some of the ideas within the review, he has described the change as “shockingly lethargic”.
Webb believes that the announcement and the plan to have the restructuring of pensions in place by the mid 2020’s is leaving a gap, and potentially leaves a generation of workers behind.
How a workplace pension works is simple. An employer automatically takes a slice of an employee’s wages and places these into a ‘pension savings pot’. This amount then remains invested within the pot until the employee reaches retirement age.
In addition to this, the employer has an obligation to make an additional contribution to this, as well as the government. Employees are given the option to opt out if they wish to do so. Once they have made the decision to opt out, the employer will also cease making contributions. An employee is eligible to join the scheme, even if only employed on a short-term contract, or in receipt of an agency paid wage. This includes employees who are on maternity, adoption or carers leave.
Currently the minimum contribution amounts to 2% of employee’s earnings. This is made up of 0.8% from the worker, a 1% employers contribution and 0.2% government tax relief. This amount is set to rise from April 2018, with an increase to 5%, made up of 2.4% from the worker, 2% employers contributions and 0.6% government tax relief.
We can expect to see another rise from April 2019 to 8%, made up of 4% from the worker, a 3% employers contribution and 1% government tax relief.
The new proposals will be required to be approved, alongside the other proposed changes to the system, these include:
• Contributions made from a proportion of earnings up to £45,000 (higher tax threshold), replacing the current system that calculates a proportion of earnings that fall between £5,876 to £45,000. It is believed that this new system could assist those who hold several positions.
• Contribution level review, and annual review for automatic enrolment (when an employee starts to earn £10,000 and above).
• Using technology for the purpose of encouraging 4.8 million self employed people within the UK to save for their retirement.
It is understood that the proposals could cost employers an additional £1.4 billion annually, with the government expecting an extra £600 million in tax relief per annum.
Mike Cherry, the National Chairman of The Federation of Small Businesses said, “Requiring employers to contribute from the first pound of earnings, will mean that, by 2019, hundreds of thousands of small employers will have to pay up to £180 more per employee each year”.
Fox gets chewed up by a mouse
A recent announcement from The Walt Disney Company confirmed that a large proportion of Rupert Murdoch’s, 21st Century Fox empire, including portions of its film and television industry look set to be bought by Disney for a staggering $66 billion. A ‘definitive agreement’ has been met between the two industry greats, which has now been guaranteed until at least 2021. The Chief Executive of Disney, Bob Iger has gone on record as saying that he feels honoured and grateful that Rupert Murdoch has enough trust in Disney to ensure that the business that he’s taken a lifetime to build will be well looked after, and will go from strength to strength.
Iger believes that the combination of the two industry greats will be a key to unlocking increased value for the shareholders with Disney, setting a pace for the future within what can only be described as an “exciting and dynamic” industry. The transaction has not only included the 21st Century Fox film and television studios, but does in additional include cable and international TV businesses, including a small fraction of SKY TV within the UK.
Prior to the Disney takeover, Fox will continue with their plans to complete their purchase of the 60% of Sky that it doesn’t currently own, including the subscriptions of 23 million UK customers. This transaction is expected to be completed by June 2018. Once the takeover has been completed, Disney will become one of the leading media companies across the globe – they will also find themselves able to compete head to head with a number of heavyweight web provider and services, including Amazon and Facebook. Disney will be a strong position globally and will continue to thrive and grow, generating new sources of revenue along the way.
A key part of the takeover has been Fox’s large portfolio of high earnings through film and cartoon franchises. Disney are now expected to dominate global entertainment and will be well place to compete with both Amazon and Netflix alike. Once the buyout of Fox Broadcasting has taken place, its network and stations will then be listed as a newly listed company.
The breakdown in the costs of the buyout have been confirmed as $52 billion of stock and a staggering $13.7 billion in debt still owed by Fox that will be covered by Disney, amounting to a the $66.1 billion buyout cost.
The high cost of Bitcoin
Bitcoin has become a global success this year, with investors receiving huge investments with their cyberspace assets. However, bitcoin’s success is shining under a dark sky following a damning report that the triumph of the cyber currency is using a excessive amount of energy, with the aid of air polluting fuels.
A recent report has highlighted, Bitmain Technologies in Northern China, run a server farm contained in 8 x 100-metre-long metal warehouses. These warehouses house approximately 25,000 computers that are solely used for solving encrypted sums that are used to generate each bitcoin. The buildings are running on electricity that is produced with air polluting coal.
Cryptocurrency mines are forming rapidly across China, according to research from the Digiconomist Bitcoin Energy Consumption Index. The fuel feeding the mines is equalling the fuel consumption of 3 million US homes, equating to more than the entire fuel consumption of 159 countries across the globe.
As bitcoin becomes more successful, greater amounts of bitcoin are being generated with increasing levels of calculations resulting in more fuel being required and used. Christopher Chapman, from Citigroup, based in London described the manufacture of bitcoin as a “dirty thing to produce”.
Bitcoin’s creation has always been heavily involved with large amounts of energy consumption, indeed, energy has been ascribed to it as part of it’s DNA. Satoshi Nakamoto, creator of the dirty currency, devised the operation that honours the virtual currency that controls the algorithms for the digital ledger which is encrypted. This ledger is used to track the work along with each transaction. Since 2009, the market has grown from, what is described as a ‘hobbyist culture’ to what is now a hugely successful phenomenon across the globe during 2017. However, with this success comes the need for further computing power.
It is believed that China receives approximately 60% of its electricity from the use of coal. On top of this, China has the largest ‘computer mines’ across the globe. Following a report published in April by Garrick Hileman and Michael Rauch’s from the University of Cambridge, it is understood that a quarter of China’s electricity consumption is used in the creation and maintenance of cryptocurrencies.
Electricity costs in China are well below what consumers would pay throughout the US and Europe. This is due to the excess amounts of coal-fired generators and excessive fuel reserves at its disposal. James Butterill, the Head of Research and Investment Strategy at ETF Securities based in London has been studying the cryptocurrency markets, and has confirmed that each Bitcoin transaction requires more work and that the growth of the currency intensifies the amount of work.
When estimating the costs, Butterill believes that with the electricity costs and the calculation speeds growing, the cost of each Bitcoin could double from $6,611 during the 4th quarter to $14,175 in the 2nd quarter of 2018. The cost of Bitcoins at the start of 2017 were $2,856. During Butterill’s studies, he observed that these rising costs could pose a greater risk for miners should cryptocurrency fall in price.
Butterill set up his own computer mine in his home using his spare time to mine tokens, working alongside a network of 120,000 other miners in order to boost the process and returns of Bitcoins.
“You’d be hard-pressed to find anywhere where it isn’t profitable to mine,” said Butterfill, “But if you’re investing in a Bitcoin rig, you have to look at the long term, and with the volatility as high as it is, it’s probably still doesn’t make sense to mine Bitcoin in Europe.”
Bitcoins success has seen a rise of more than 2000% during 2017, with records exchanges amounting to more than $17,500 during last December. Approximately 58% of the globe’s largest cryptocurrency mining pools are situated in China, with 16% residing in situ in the USA.
The use of electricity during the manufacture of cryptocurrency can fluctuate – estimates on its usage can be compared against the output of one large nuclear reactor to the whole of Denmark’s energy consumption. Figures show that the total use of electricity for maintaining cryptocurrencies grew significantly by 30% last month, according to a report from accounting firm Price Waterhouse Cooper (PwC). Alex de Fries, Blockchain Analyst from PwC commented on the “insane amounts” of electricity that is required to power Bitcoin and highlighted the damaging affects it could have on the planet if the use of Bitcoin grew to a global scale.
However, some analysts have dismissed such claims, and believe that the ‘high-end’ estimated demand will account for only 0.1% of global fuel usage, and have confidence in the advancement in technology with processes becoming more resourceful and energy efficient.
Although the rise in energy use is growing with the ever-increasing demand to produce cryptocurrency, the larger mines will continue to seek a cheaper source of power to reduce volatility according to Hileman and Rauch’s study at Cambridge.
Bitcoin has rival cryptocurrencies, such as Ethereum and Litecoin. To date, Bitcoin is currently the most successful and largest cryptocurrency across the globe.