Tuesday, 29 November 2011

Wait until 67 for your pension

8 million people now aged between 42 and 51 will have to work up to a year longer and lose as much as one year's state pension.

That is the result of the Chancellor's decision to accelerate the move to a state pension age of 67, by introducing it in a two year transition starting in 2026.

The jump in pension age comes 8 years earlier than previously planned and will save the Exchequer £60bn over that period.

The Chancellor pledged that no one within 14 years of reaching pension age would be affected by the change, which the Treasury blames on rising life expectancy.

The decision puts in question a subsequent increase in the State Pension Age to 68, which would have occurred by 2046 according to earlier plans.

A faster move to 68 could now be on the cards. The Treasury says future increases will be based on "demographic evidence".

The charity Age UK said the change was a "bitter blow"  to many people fast approaching retirement especially those in ill-health, caring for relatives and those out of work.

The Department for Work & Pensions gave this breakdown of the age groups affected:

People born after 5 April 1960 and before 5 April 1961 (currently aged between 50 and 51) will have a State Pension age between 66 and 67.

People born between 5 April 1961 and 5 April 1969 (currently 42 to 50) will have a State Pension age of 67.

People born between 6 April 1969 and 5 April 1977 (age 34 to 42) already have a State Pension age of 67 - these proposals will not change this.

Osborne's options

Autumn statement

Personal Finance Possibilities

Restrict tax relief for higher and top rate taxpayers
Restrict or tax the tax free lump sum
Accelerate move to pension age of 67

Freeze tax credits
Child tax credit reductions are already in train for April next year

More on raising personal allowance to £10,000 eventually

Tinker with 5.2% uprating pencilled in for April
Announce a review of uprating system (uses Sept CPI rate)

Allow Child Trust Funds to be transferred into new Junior ISAs

Monday, 28 November 2011


Out of a UK workforce of 29m,

3.4m private sector employees contribute to workplace pensions, 2.4m of them looking forward to salary-linked pensions

5.3m public employees are paying into salary-linked schemes

6.4m workers are paying into personal pensions, which are NOT linked to salary

So 15m are actively contributing to pensions, or 51%.

The typical (or median) public sector pension pays £5,600 a year, compared to £5,860 from similar private sector schemes.

But only 12% of private sector employees are contributing to salary-linked schemes, compared with 87% in the public sector.

42% of the private sector workforce (including the self-employed) contribute to some form of pension scheme, including personal pensions and other schemes where there's no promise of a particular level of retirement income.

With a typical personal pension pot of £30,000 a saver could buy an inflation-proof pension annuity of £1,115 a year.

For reference:
The workforce is 29m strong.

You can split this into:
23m private sector, 6m public sector
25m employed, 4m self-employed
21m full time, 8m part-time

ONS Pension Trends, Sept 2011
ONS Labour Market Statistics, Nov 2011
NAPF Annual Survey 2010
Hutton Report
Hargreaves Lansdown

Pension reforms delayed

Small firms are to be given more breathing space to enrol millions of employees into workplace pensions, a delay which will allow them to put off the cost of making contributions.

The Department for Work and Pensions said that firms with fewer than 50 employees will get more than a year extra to comply with the new rules, which oblige them sign up staff for pensions unless they opt out.

They had been due to start from Spring 2014. The deadline has been moved until after the next election in 2015.

"Making staff in small businesses wait even longer before they get the right to an employer contribution to their pension is a grave disappointment", said TUC General Secretary Brendan Barber

The National Association of Pension Funds had warned that putting off the scheme would be highly damaging. Workers in small businesses are the least likely to be covered by existing pension arrangements.

Firms will eventually have to contribute at least 3% on top of each employee's salary and the employee at least 4%. Tax relief would take the total contribution to a minimum of 8% of pay.

The biggest companies will have to meet the auto-enrolment rules from October next year, as before.

"We recognise that small businesses are operating in tough economic times so we are softening the timetable for implementation to give them some additional breathing space," said the Pensions Minister, Steve Webb,.

He added that all businesses remain "in scope" to be covered by the new rules.

Wednesday, 23 November 2011

£280 on energy bills

The Energy Secretary Chris Huhne has revealed that the cost of policies to deal with climate change will add £280 to household energy bills by 2020.

The policies, including support for renewable energy, will add 27% to the price of electricity.

However, he said that energy efficiency measures, such as home insulation, would cut bills by more than that. So the overall effect would be a £94 reduction in bills, a drop of 7%.

The figures ignore any increase in the underlying price of gas and electricity, which will add significantly more to the cost of heat and power.

The government is introducing a Green Deal next year, enabling households to pay for insulation out of the future savings they achieve from having it installed.

Energy companies will have to provide £1.3 billion a year to ensure everyone is able to benefit from the Green Deal, no matter their income or the type of house they live in.

Monday, 21 November 2011

Store card clampdown

Retailers have agreed to a ban on inducements which tempt shoppers into signing up for expensive store cards.

As part of the government's review of consumer credit, they have pledged not to offer customers hefty discounts on the time when they agree to apply for a card.

Ministers were concerned that the inducements would result in people trapped with high cost credit.

Instead, any cut-price offers will only be available seven days after the application has gone in.

Stores will not be able to offer discounts, free gifts or similar incentives to encourage consumers to take out store cards at the point of sale, or for the seven day cooling-off period.

There will also be a ban on the payment of commission to shop staff for signing up shoppers for the cards.

Government statement:

"The package comprises three core features: a ban on direct commission to sales staff, a good practice training scheme and a seven day ban on retail incentives when a consumer takes out a store card. This ban will mean that stores will not be able to offer discounts, free gifts or similar incentives to encourage consumers to take out store cards at the point of sale, or for the first seven days. The introduction of the seven day ban on retail incentives will tackle the key concern raised by respondents, by de-coupling the decision to take out credit with an instant discount on a purchase.

"These measures will address the concerns raised by respondents and will be introduced from the second quarter of 2012, enabling consumers to benefit from the effects swiftly."

More leeway on overdrafts

Banks have promised to give customers more leeway when they slip into overdraft, in response to a government review of consumer credit.

From next April, all current account holders with leading High Street banks will have the option of a receiving an alert by text, phone or email if they get close to becoming overdrawn.

A year after that they will benefit from a buffer zone of £5 to £10 beyond their overdraft limits. They won't incur zone charges if they stray into the buffer zone for a short period.

And they will be warned at what time of day charges will be imposed, giving them time to top up their accounts to avoid having to pay a penalty.

The new commitments apply to 85% of current account customers who use the top five banks But smaller banks expected are expected to follow suit when they can.

As part of the review, ministers have ruled out imposing a cap on interest rates for credit and store cards.

But retailers have agreed to stop tempting customers into expensive credit by offering discounts on purchases at the time they take out a store card.

Taxpayer in hock to First Time Buyers

Today's promise from the government that it will guarantee the mortgages of First Time Buyers raises the question : at what point would taxpayer money be lost?

By the way, remember this Mortgage Indemnity Guarantee, masterminded by the Home Builders Federation and the Council of Mortgage Lenders, will also be open to existing owners who want to move but can't afford more than a 5% deposit.

Here are the details, but in summary the...

Homebuyer can get a 95% mortgage on a new home, because...
Housebuilder guarantees 3.5% of the price,
Taxpayer guarantees 5.5%,
Buyer puts up a 5% deposit.

For there to be a call on the taxpayer guarantee, first there has to be a default.

Plenty of people carry on servicing their mortgages, even though the value of the home has fallen and put them in negative equity. If there is negative equity, the taxpayer is in danger, but doesn't have to stump up any cash.

Next, the deposit has to be eliminated - a 5% shortfall in the price.

Then, the builder's stake of 3.5%, before there is a call on the taxpayer.

So what you'd need, in theory, would be a default and drop in value of more than 8.5%.

Of course, if the price of one home falls, others will drop as well. So if one buyer defaults it's likely that many others will be in the same dire position. The cost for the taxpayer would multiply.

Wednesday, 16 November 2011

Silver lining for savers

Today's grim news about the economy from the Bank of England has a silver lining for savers.

Cash in savings accounts has been shrinking in value, because virtually all interest rates are less than the rate of inflation.

But the Bank's Inflation Report suggests that Consumer Price Inflation (CPI), currently 5%, will drop to 2% and below in the second half of next year and to 1.3% in early 2013.

For savers, this means light at the end of a very dark tunnel.

Take two top-of-the-table accounts on Moneyfacts today, accounts which aren't distorted by bonus payments which get removed after a year.

West Brom Building Society has an internet account paying 2.8%, a money-shrinker at the moment. But potentially a money-grower if inflation does fall sharply next year.

Even with 20% tax taken off, the rate equates to 2.24%.

And you can get a similar return, tax-free, from Northern Rock's E-ISA.

For those prepared to lock their money away for 3 years, much higher rates are available: 4.3% from Yorkshire Bank, for instance, and 4.15% from the AA.

Don't expect fireworks from interest rates. Most pundits think the Bank of England's base rate will stay at 0.5% until 2013 and possibly beyond.

But at least the pain for savers could start to ease.

Tuesday, 15 November 2011

Jump in smartphone frauds

There has been a surge in frauds committed to get hold of the latest smartphones and high value mobile phone contracts, with a 93% rise since last year in fraudsters using someone else's identity to sign on with providers.

One explanation for the increase is the tough economic climate, according to the fraud prevention service, CIFAS, which works on behalf of banks, retail credit firms and telephone companies.

The 93% year-on-year jump was in cases of "impersonation of the victim", when the perpetrator sets up the account using someone else's name and current address, with 10,572 cases in the first nine months of 2011.

Fraudsters have been known to ask Royal Mail to redirect the resulting correspondence to their own homes, or to rifle through letters arriving at buildings with several flats.

There was an 85% increase in the use of completely fictitious details to get hold of phones or sign up for accounts, with 4,789 confirmed cases up to the end of September.

Often fraudulent Direct Debit details are supplied, in order to avoid paying any bills.

CIFAS says that sophisticated phones have "become so embedded in our lives that many of us seem unable to do without them".

Wednesday, 9 November 2011

Used car clampdown

A company which describes itself as the Uk's leading car supermarket has been forced to give undertakings to the Office of Fair Trading not to breach consumer law.

The OFT says customers complained that Carcraft, which has 11 car supermarkets across England and Wales, did not carry out the pre-sale inspections it advertised, resulting in significant problems after purchase.

The watchdog found that the company did not repair or replace some cars which were unsatisfactory and misled customers about the scope of its after-sales guarantee.

Last year the OFT warned used car dealers they must comply with the law or face enforcement action, after receiving high levels of complaints.

Carcraft has outlets in Rochdale, Newport, Sheffield, Merseyside, West Midlands, Leeds, North East, Lakeside, Trafford, Enfield and Chertsey.

It co-operated with the investigation and says it has changed its business practices.

Monday, 7 November 2011

House prices up 450%

The average house price in October was £163,311, according to the Halifax, up 1% on the previous month.

That is 18% down from the peak in 2007, but still 74% higher than 2001, 141% higher than 1991 and 450% higher than 1983 which is as far back as their published figures go.

Average House Price

10/2011  £163,311
08/2007  £199,612 (peak)
10/2001   £93,610
10/1991   £67,585
01/1983   £29,696

Source: Halifax

Friday, 4 November 2011

Surge in Debt relief Orders

The Insolvency Service has reported a sharp rise in the number of people seeking Debt Relief Orders, a cheap form of bankruptcy for people with few assets. They reached a record level of 7,600 in the three months to September.

Debt Relief Orders or DROs were brought in two years ago to provide a route out of debt for the poorest people in financial trouble.

The process costs just £90, much cheaper for the debtor than bankruptcy, and is only open to those with less than £300 in assets as well as a low value car.

While bankruptcies have fallen sharply as families batten down the hatches and cut spending, the numbers at the bottom of the pile seeking protection from creditors is on the rise.

Mark Sands, from insolvency experts, RSM Tenon, said, "It shows how many people are so desperately short of money that they qualify for DROs."

The total figure for individual insolvencies was down 11 per cent compared with the thrid quarter of 2010.

But with financial pressures building, the Consumer Credit Counselling Service (CCCS) fears there will be a surge in insolvencies next year.