New £5, £10 and £20 notes

In a few days, the Bank of England will start issuing fresh £5, £10 and £20 notes, with the new Chief Cashier Chris Salmon's signature on them.

You can see Chris signing his name in my report on last November's new £50, the first note featuring his signature.

Incidentally, you'll see he's left handed like the previous Cashier, Andrew Bailey.

Chris Salmon's job goes back to 1694, when the Bank of England was founded and the first Chief Cashier, John Kendrick, was appointed.

In the early years, cashiers had to write out the notes entirely and sign them by hand. Even after notes were fully printed, from 1855, the signature had to be added by hand.

But here's an interesting £5 note, from 1871, up for sale at Spinks:

It shows the name of the then Chief Cashier, George Forbes, after the practice of printing the signature itself had started in the previous year:

So, luckily for Chris Salmon, he doesn't have to sign all of the millions of notes which are to be put into circulation with his name on them.

Old notes, with Andrew Bailey's name of them will still be valid, of course.

If you're worried about counterfeits, here's a tour of our banknotes, to help you check the key features.

And, just for good measure, here's my guide to spotting fake £1 coins.

The annuity trap

Just look at what terrible value you get when you buy your pension annuity. It's the income for life you buy using the funds in a personal pension plan.

Say you have saved up a pension pot of £100,000.

A single 65 year old man would get £6,035 a year for that, with no annual increases.*

Or a couple, wanting a 3% increase each year would get £3,698. If one dies, the survivor carries on receiving half the money.

BUT all the original fund is spent. The £100,000 is gone.

Compare that with today's best fixed rate savings accounts.

They pay over 4%, according to Moneyfacts.

So you would get £4,000 a year for £100,000. You'd still be able to get your original savings back. And you'd be able to move the money from time to time to take advantage of higher rates.

You don't have to buy an annuity any more.

But there are complicated rules about how you can use your pension pot, so most people end up buying annuities anyway.

And they end up losing out.

*Figures from Hargreaves Lansdown.

1 in 10 beers is illicit

Few shoppers are aware that one in every ten cans of beer on sale is illicit, because the alcohol duty hasn't been paid.

Or that 28,000 truckloads of illicit beer trundle up and down our motorways every year.

Or that of the 450m litres of beer exported, supposedly, to the continent in a year, only 180m litres is actually needed over there.

What about the rest? Well, some of it is sent back from bonded warehouses on the other side of the Channel and then sold cut-price to off-licences and other shops, without any duty being paid.

But much of the booze never crosses to France or elsewhere in the EU. It is taken off the lorries before the crossing and sold on, without anyone troubling Revenue & Customs with a duty payment.

Then, to complete the subterfuge, the lorries board the ferries empty to make it appear that they really are pursuing a legitimate export trade, which isn’t subject to duty in the UK.

Add to that the straightforward smuggling of foreign beer and wine into the UK by hundreds of well-organised gangs and you have a massive problem.

Revenue & Customs has cranked up its efforts to collect the unpaid alcohol duty. It retrieved £433m in 2010-11. But MPs want to see more of the gang leaders put behind bars.

Pay freeze? What pay freeze?

The Treasury has denied that the £3.3bn annual savings expected from the public sector pay freeze are threatened by behind the scenes wages rises for staff.

The FT reports today that many workers have been enjoying "substantial" and "disguised" pay rises because they are entitled to increments, known as pay progression, moving them up their pay scales.

The increases, in the NHS, local government and a number of Whitehall departments, range between 2 and 5 per cent.

But, according to the Treasury, it was always envisaged that staff would receive these increases, which they were entitled to under their terms of employment.

My understanding is that axing the pay rises was thought to be a pointless exercise, because it would have resulted in complicated and costly appeals.

This wasn't mentioned in George Osborne's June 2010 budget speech when he said he was "asking the public sector to accept a two-year pay freeze".

However, he did say in 2011's Autumn Statement, when announcing that rises would be restricted to 1 per cent for a further two years, that:

"Many are helped by pay progression - the annual increases in salary grades that many people are entitled to, even when pay is frozen."

He added that pay progression was one of the reasons why public sector pay has risen at twice the rate of private sector pay in recent years.

Flagging exports hurting our economy

What difference has the fall in exports by British industry made to the shrinkage of the economy? A big difference – and Europe is a major factor.

As reported by the ONS today, the economy shrank markedly in the 2^nd quarter of 2012, but by less than the stats people had thought before. UK GDP (everything we produce) was down 0.5% rather than the previous estimated fall of 0.7%.

There are various factors, for instance construction work is well down from last year and manufacturing has fallen back as well.

Construction contributed 0.3% to the shrinkage and manufacturing 0.1%.

But international trade has been a major influence too, both what we produce to sell to other countries and what we buy from them. Exports affect GDP, so does lower spending on imports by hard-up UK shoppers.

Exports did really badly in the 2^nd quarter. So how much did other countries’ problems affect our economic growth? And how much can we blame this on the havoc in the Eurozone?

Over the 3 months UK exports of goods to the EU were down £2.8bn on the previous quarter to £36.5bn. The biggest factor was oil, but exports of chemicals, cars, consumer goods, partly manufactured goods and industrial equipment were all down.

Exports to non-EU countries were down by £1bn to £36.9bn.

The ONS says that the drop in total exports depressed UK growth by 0.5%, which happens to be the same as the new figure for the overall shrinkage in GDP over the quarter. It’s just one component of the economy, out of many, but without the export drop there’s no GDP drop.

It’s worth pointing out that my £2.8bn figure for the export drop to the EU only includes visible goods (things you can see and touch), while the percentage figure for the impact on GDP includes intangibles, such as financial services and advertising.

Even so, you could argue that without the poor export performance, GDP would have been unchanged in the 2^nd quarter. Also, that the Eurozone has to take most of the blame.

Do pensioners lose from QE?

The Bank of England says its £375bn of money creation or Quantitative Easing (QE) hasn't hurt pensioners as various groups have complained. The charge has been that the QE process has reduced the value of retirement annuities which people buy with the money they've saved in their pension pots - that's because QE has the side effect of cutting the income you can earn from government bonds or GILTS, and hence the potential income from an annuity.

The Bank claims that's not true because:

"For those approaching retirement in ‘defined contribution’ schemes, lower gilt yields as a result of QE have reduced annuity rates. But it is crucial to allow for the fact the QE has raised the value of pension fund assets too. Once allowance is made for that, QE is estimated to have had a broadly neutral impact on the value of the annuity income that can be purchased from a typical personal pension pot invested in a mixture of bonds and equities.

"The paper shows that QE also has a broadly neutral impact on a fully funded ‘defined benefit’ scheme. Moreover, the pension incomes of people coming up to retirement in a defined benefit scheme, whether fully funded or not, will have been unaffected by QE. But schemes that were already in substantial deficit before the financial crisis are likely to have seen those deficits increased."

Dr Ros Altmann, Director-General of Saga says the Bank's argument doesn't make sense:


“A brief examination of the facts does not support the argument that QE has pushed up asset prices by at least as much as it has depressed annuity rates...investments in equity markets have been hugely volatile and the overall performance of the stock market has not risen sharply in recent years, whereas gilt yields have moved sharply lower and annuity rates have plummeted.

“The fall in annuity rates since mid-2008 is over 24%.  Cumulative inflation for older age groups has risen by over 20%.  The FTSE is relatively unchanged and the average balanced pension fund has performed poorly, so that for people with defined contribution pensions, the impact of QE in reality has not been as the Bank of England is assuming.”

Santander mortgage rise

Hundreds of thousands of Santander mortgage customers face an increase in their payments from October after the bank announced it was planning a rise in its Standard Variable Rate, or SVR, of half a percentage point.

The rate will move up from 4.24% to 4.74%, resulting in an average increase of £26 per month for a £100,000 mortgage

Santander said it was writing to mortgage customers to tell them about the change, which it intends to implement from 3rd October.

It explained that for the last three years the amount it costs to provide mortgages and the rates offered to savings customers have been increasing despite the Bank of England's base rate remaining static

Santander will also be writing to large numbers of borrowers who are currently on fixed rates or trackers which will revert to SVR over time. However, customers with Alliance & Leicester branded mortgages and paying SVR are not affected.

The increase follows similar moves this year from the Co-op Bank, Halifax, Bank of Ireland and the Yorkshire and Clydesdale banks.