Recent figures have shown that the aggregate deficit of corporate UK pension funds has now soared past the benchmark figure of £250 billion. This record breaking shortfall which was arrived at in March was attributed to, drop in gilt yields, apparently caused by the Bank of England’s policy of quantitative easing. According to a spokesman from the Pension Protection Fund, the aggregate gap between the values of assets of liabilities it raised to £253.1bn, reflecting 90% of all the UK’s 7,400 current pension plans. The deficit is now more than 10 times higher than the level it was in the corresponding month of last year.

On the FTSE yesterday the carry forward of disappointing economic data coming out of Wall Street, seemed to curtail gains across the board although banking stocks did continue to move forward after strong 1st quarter results from Goldman Sachs gave the sector a boost. This piece of positive news was dampened by the news of an unexpected drop in US retail sales

Lloyds Banking Group rose by 11% (8.4p to 87.9p)and Barclays already on a role buoyed by last week’s iShares deal struck with CVC announced that it could still sell its entire asset management arm also jumped by 10.5% (18p to 195.5p)

The insurance sector saw some price adjustment after analyst comments that recent share price falls were overdone. Legal and general rose by more than 13% (5.7 pence to 54.5) with Friend Provident rising 3.7p to 68.6p and Standard Life up 9.7 pence at 183.1p.

The mining community on the Stock Exchange also had smiles on their faces with Vedanta Resources humping 15% (134.5 pence to 1008) Trailing in their wake, but not by a distance were Kazakhmys who rose 47.5pence to 513.5and Xstrata whose shares moved forward by 41pence to close at 613.5 .

It was a much stormier ride for British Telecom investors yesterday, with shares dropping by 6% on early trading on news that the group’s annual results next month may include a £1.5bn write down. Later trading saw their shares make a rally closing 0.1p higher at 81.1p

BP didn’t enjoy the same relative fortune, with the petroleum giant’s shares losing 7.5 pence to close the day on 438.5. Reasons given were the decrease in crude oil prices and expectations of falling demand

To prove the point that if people won’t buy crude oil but will still buy fruit drinks was the news that Britvic, the Robinsons and Fruit Shoot company enjoyed a sugar intake of 4% on their shares for the day. They raised 9.75p to 255.25p, after the company announced that they had successfully arranged new banking facilities, which will run through to 2012.

Over the day, the FTSE 100 peaked at 4039.67 points during early trade, and then closed up just 5.28 points, or 0.1 per cent, at 3988.99 points. The FTSE 250 closed the day on 7152.16, up nearly 175 points on the day.

The pound hit a five-week high against the euro and rose against the dollar on Tuesday as well as rising slightly against the Japanese Yen and the Swiss Franc:

Pound/US dollar 1.4879

Pound/Euro 1.11268

Pound/Japanese Yen 147.80

Pound/Swiss Franc 1.7057

Uncertain corporate outlooks and data showing the U.S. economy is still suffering weighed on global stocks on Wednesday, despite claims from U.S. President Barack Obama that his remedies were starting to work. The Dow Jones Average dropped 137.63 to close at 7920.18. NASDAQ fell 27.59 points to close at 1625.72.

Europe was in shock Wednesday on the news that Swiss banking group UBS were about to announce a very heart loss for the first quarter of this year, during their annual meeting to be held in Zurich. Investors’ worst fears will be confirmed along with the news that the Swiss banking group will be dispensing with the services of more than ten per cent of their global workforce.

In Asia, early trading saw stocks values dropping back from the six-month highs achieved on Wednesday after the drops on Wall Street. Later hopes for increase Chinese stimulus spending helping offset these early losses. The feeling was that investors were cashing in on gains after many equity markets have jumped between 20 percent and 30 percent since early March.

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Tags: Bank, Bank of England, Banking, British Economy, Credit Crunch, FTSE, Money Management, Pensions, Private Pension, Recession, UK Banks, UK Recession

In a time where just about anything is possible in the banking World, there might even be a scenario unfolding where banks will begin to charge their customers a storage fee for keeping their money on deposit. Sounds unlikely? It might well be, but with experts predicting that interest rates on savings account may fall by around a quarter of a percent in the wake of last week’s treasury decision to cut the base rate to a half a percent then the prospects of interest rates on short term deposit accounts could hit that big round zero figure, with the question of what comes after that!

Among the latest line of depressing statistical releases from the Bank of England was one that announced that the external liabilities of UK banks fell by a massive three quarters of a trillion pounds in the last nine months of 2008, representing the largest ever withdrawal of foreign funds in recent decades

And who can blame the depositor for looking somewhere else to take of their money? With concerns that the UK is no longer the safe place that it was to hold funds, under the considerable and ever-growing uncertainty of the banking crisis, along with almost inevitable shift towards financial protectionism internationally, it seems almost logical.

There is no escaping the fact that the average rate paid out by British Banks for an instant access account sat at 0.17% at the end of February, before the last rate cut. While the low interest rates charged by the banks and building societies may well suit those who are sitting on heavy mortgages, it will certainly not suit those who have been saving hard all of their lives, and have accumulated a small next egg, where they hoped or even assumed that the interest earned would go a long way to supplement their pension. Even 2008, not a great year for savers by anyone’s standards, but at least the banks were paying out 2.69% interest on savings accounts. An indication on the slide in interest rates is that in January 2008 banks were paying out 5.06% on savings accounts.

The feeling amongst savers is that they are being punished to meet the costs of mistakes made by banking management.

The only ray of light in a distinctly black picture for savers is that general acknowledgment that rates have gone as low as they are ever likely to, and form here the only way is up for savers. An interesting fact revealed by the Bank of England in their recent survey was that, despite the doom and gloom of recession there are household savings currently being held by banks an building societies of just over one thousand billion pounds, a considerable sum by any ones terms, but not so, when you consider that the banks are currently owed one and one quarter billion.

The question would have to be that, in the light of this information and the very low return on their investments, if the Great British saver could find a safer and more magnanimous place to house their savings, would they?

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Tags: Alastair Darling, Bank of England, Banking, British Economy, British Pound, Finance, Financial News, Money Management, Savings

In yet another attempt to get the UK economy moving forward, the Bank of England announced that they will be reducing interest rates by half of a percent to one percent, the lowest interest rate in the history of UK economics. The Banks have shown that they can go no lower with rate cuts with the current reduction in interest rates being the fifth since October 2008.

However, while industry and commerce are still not exactly chomping at the bit to borrow money even at these “give away” prices, the unfortunate few who still actually have some money on deposit are losing out on the interest they are receiving, yet have nowhere else to go to deposit funds and earn some interest. Even the good old days of autumn 2008 seem appealing when the bank rate was hovering around five per cent to where it is now, say many would be savers.

As far as borrowers, especially those with mortgages to pay, the good news about this recent interest rate cut is that the banks actually intend to pass this rate cut to their clients, and already many of them have been seen to do so, including Halifax Building Society, Nationwide, Barclays and Lloyds TSB.

In announcing the cut, a spokesman for the Bank of England hastened to point out that “although the transmission mechanism of monetary policy was impaired, the past cuts in Bank Rate would in due course nevertheless have a significant impact

To cast some further clouds over what should have been a happier occasion; a few items of negative financial news were announced yesterday. Firstly that the announcement that the UK economy contracted by 0.6% in the third quarter of 2008, and that unemployment has risen to 1.92 in the British Isles in the last quarter of the year.

Things made not be great in Great Britain but when compared to Iceland we are doing very well here indeed.

The one time highly successful Reyjavik based retail investor Baugur, is strong pressure from Icelandic bank Landsbanki, to sell some if not all its UK High Street retailing outfits..

Baugur, under its UK holding company BG Holding are fighting to prevent being put into administration by Landsbanki and have applied for protection from Landsbanki as well as other minor creditors.

Stakeholders in such UK institutes as the House of Fraser and Hamleys Toy Store, Baugar are reported to have debts of around one million pounds. If an interim agreement cannot be reached as well as a restricting plan instigated, the retail group could find themselves being placed in the hands of the liquidators as early as today.

On the FTSE, stocks were stable with Unilever, the world’s second-largest consumer-products company, announcing that they deemed it “inappropriate” to make forecasts for the next two years amid the global recession, offsetting a rally by banks. Unilever’s shares slumped 5.9 percent on that report

Both Lloyds Banking Group Plc, Britain’s biggest mortgage lender, and Royal Bank of Scotland Group Plc rose more than 5 percent on the back of the recent report stating that British house prices had raised rose 1.9 percent in January higher than all the forecasts.

Lloyds rose 5.7 percent to 100.6 pence. Royal Bank of Scotland Group Plc, the biggest U.K. bank controlled by the government, increased 5.8 percent to 22 pence. Barclays Plc gained 3.2 percent to 100 pence.

Publisher of the U.K.’s Yellow Pages phone directories Yell Group Plc saw their share value decline by five percent to 47.75 pence. The company anticipate a drop in revenue for the current quarter to be their largest ever as

The U.K.’s third-largest gas producer BG Group Plc advanced by ten percent (97 pence to 1,048) after reporting a 56 percent gain in fourth-quarter profit on higher prices for liquefied natural gas. The company also raised its full-year dividend by twenty percent.

Food service provider Compass Group Plc also showed an upswing gaining 4.2 percent (14.25 pence to 257.25) after announcing that their first-quarter operating profit forecast was way ahead of 208, due to “significant” contract wins in North America.

The FTSE 250 index rose by 0.56% or 35.67 points to 6,426.82
while the FTSE 100 rose by 0.54% or 23.03 points to 4,251.96 on a conservative days trading.

On the foreign exchange markets, Sterling rose slightly against the main currencies.

Pound/US dollar 1.41.4739

Pound/Euro 1.153

Pound/Japanese Yen 134.8

Pound/Swiss Franc 1.7272

Wall Street shares had not a bad day on Thursday’ trading

The Dow Jones Industrial Average rose 106.41 to close at 8036.7 while NASDAQ rose again, this time by 31.19 points to 1546.24

Vulnerable on Wall Street were financial stocks which fell among renewed fears about the bank’s stability. Investors are about whether government efforts to prop up banks will be harmful to shareholders.

Bank of America was the most notable among those whose stocks continued to tumble, both on Wednesday, as well as yesterday. Pressure on the stock grew because some mutual funds are prohibited from owning stocks that fall below $5, with the stock down fourteen percent on Thursday’s trading (65 cents to $4.05).

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Tags: Bank, Bank of England, Banking, British Economy, British Pound, Economics, Financial News, FTSE, Money Management, Savings

A pension is a financial device, effectively a savings mechanism, which in theory is designed to pay for your retirement years. You pay into a fund during the years you earn, which builds the fund up to a level which is then released per month once you have retired and will continue to pay until you die.

And once you start a pension, the actuaries will have worked out for you on a regular basis what is required to keep the fund up to the level of pay-out you are expecting in your retirement. As many pension funds are big investors in stock markets, then pension funds, as a collective, can go up and down like a yo-yo. In principle, a long term investment, like a pension, should show substantial growth over the period of the pension policy’s life. And as for fund managers, stock markets do give better returns than simply collecting interest on a daily basis from a more reserved saving funds vehicle. But therein lies the rub. When markets collapse, so can the value of pension funds, so you might be thinking that retirement is looking very rosy indeed, and then find out that you might not be as well of as you thought.

So, a pension is a quite simple idea, but as with many financial tools in the modern world, it’s anything but straightforward. It used to be that most employees in the private sector would join a company pension. And the employee and employer would both make contributions to a fund. Then businesses decided that running pension funds was firstly rather expensive and secondly, a too time-consuming task. Thus the private pension was thrust into the lime light and people were told to make their own provisions.

Nowadays most companies either do not run their own pension schemes, or have closed their existing schemes to new employees, much to the chagrin of the workers and unions.

Even in the public sector, in which employees were compensated with lower wages than the private sector with extremely good pension provisions, the Government is now mooting the idea that things will have to change.

Basically, as we all live longer and people fight off diseases that would once kill at an earlier age, providing a pension is a very expensive business.

So, mostly, preparing for your retirement is up to you. And a basic principle of a pension is that the earlier you can afford to start one, the better, as it is cheaper to establish a useful fund over a long period of time.

It’s been estimated that if a man in his mid-twenties were to contribute £100 a month up until a retirement age of 60, his annual pension could be in the region of £1,000 per month. But if that same man started at 40, he would have to contribute nearer £300 and for a 50-year-old, £1,000 a month. So, it follows, the earlier you get started, the better.

As to how much, that usually depends on your personal circumstances and how much you can afford. In many early working careers there’s little money to spare and other things keep intruding, such as marriage and children. And this is why a popular way of saving for your retirement is to build a pension fund to make the final payment on an interest-only mortgage. This method is now more popular than endowments. 

But you can see from the above calculation of £100 a month returning £1,000 a month from a mid 20-year-old, you have to look at your wage packet, or salary slip, and think if you can mange that, as well as afford all the other things you want to do.

But don’t put it off; most people make retirement and you will need some provision for your later life.

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For More information on specific Banks use these links

• Alliance & Leicester
• Barclays
• Capital One
• Child Trust Fund
• First Direct
• HSBC
• Post Office
• Tesco Savings

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Tags: Pension, Pensions, Private Pension, Saving, Stock Markets