Millions of members of the UK community of retirees are looking at the dim prospect of receiving a pension hike of less than ten pounds a month when the new rates kick-in in April 2010 The reason for the minimal increase is that UK inflation on which pension rises are calculated. Is considerably less than the minimum of 2.5%. government pledge to annually increase the state pension.

Instead, recently released figures from the Office for National Statistics show that UK retail prices index registered actually recorded a fall of 1.4% for the year ending September 2008. This means that both state and public sector pensions, both of which are calculated according to September inflation, will reach only the minimum figure of 2.5%.

A spokesman for the charity, Age Concern rushed to state that at £97.65 a week the basic state pension was seriously inadequate to guarantee the UK elderly a reasonable standard of living. Thy went on to insist that the current pension system is in need of urgent reform that will ensure older people can live off their pensions without having to apply for benefit top ups.

A monthly study has shown that living costs for pensioners are rising at a rate much higher than those for younger people, with the elderly spend a disproportionate amount on energy bills and food.

This daunting piece of news for UK retirees is only the latest in a line of unexpected pitfalls they will have to bear. Recent studies have shown that not only are many Britons are dramatically reshaping their retirement plans to match a new reality. A reality that depicts those who were due to retire in the near future, are putting off their retirement for as long as possible as the reality hits home that those who are retiring today will need to live off less than what represents half of the UK national average wage.

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Tags: Age Concern, British Economy, British Pound, Credit Crunch, Debt, Economy, Financial News, Government, Inflation, Interest Rates, Money, Money Management, Office for National Statistics, pensioners, Recession, Retail, retirees, Savings, state pensions, UK Economy, UK elderly, UK government, UK inflation

It seems such a short time ago that people who invested all of their money in the stock market were regarded as being "risqué," and those who kept their money in the bank in short and long term deposit accounts were described as being "sensible". Well that role has certainly been reversed over the last crazy year or so, when the financial world turned upside down for so many.

Nowadays people who still have money on deposit at the bank are regarded as being some form of masochists, and no less than the banks themselves. With interest rates seemingly stuck forever on 0.5%, money left in a bank account is not only gathering dust, it is also paying for the privilege. On the other hand, the FTSE can almost do no wrong. And it has been that way for more than half a year, when the first indications that the global economic downturn might not last forever began to look evident. Sufficient to say that, the FTSE 100 rose by 21% in the third quarter of 2009, and 45% since March the highest percentage rises since the exchange was created in 1983. At current interest levels, investors would have to leave their money in the bank for around 7 years to earn that kind of return on their investment.

Leading economists argue that by trying to jump start the economy, the UK government has damaged national growth for the foreseeable future, with the only way that the situation can be reversed is to put an end to the stimulus passage and increase interest rates. They go on to suggest that as soon as the government does increase interest rates, only then will the stock market boom begin to fizzle out. That will be the time for the smart investor to release their equity exposure and return most if not all their capital to their bank account and earn some reasonable interest. Like the good old days.

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Tags: Bank Account, Banking, British Economy, British Pound, Credit Crunch, Currency, Economic Downturn, Economics, Economy, Financial News, FTSE, Global Credit Crisis, Interest Rates, Investment, Money, Money Management, Recession, Savings, stimulus passage, stock market, Stock Markets, Stocks and shares, UK Banks, UK Banks, UK Economy, UK government, UK Recession

The International Monetary Fund (IMF) today gave another green light to the Bank of England (BOE) to print more money. Their agreement to allow the bank to accelerate its electronic money-creation programme came in the light of increased data that the benefits of "quantitative easing" were finally being felt in factories and high streets across the UK.

The IMF took advantage of figures issued denoting a bi-annual assessment of global financial conditions to warn that any sign of restraint of credit risked could effectively derail Britain’s economic recovery.

Currently, the central bank has increased its purchases of assets to £175 billion, and indications are that BOE governor Mervyn King is interested in increasing that figure to £200 billion. However King was outvoted by the majority of his colleagues on the Monetary Policy Committee (MPC), who preferred to stay with the lower figure, at least for the meantime.

As part of the bigger picture, the majority of UK based economists are of the common opinion that quantitative easing has helped to stabilise the British economy as well as reducing borrowing costs across the economy. Factors that have gone a long way in sparking off an albeit tentative recovery. Overall, commercial bank lending has remained lower than expected, although the general consensus is that quantative easing (QE) was not intended as a means to increase bank lending.

The IMF’s Global Financial Stability Report has emphasised that the UK was particularly vulnerable to credit constraints caused by the weakness of bank lending and by the need to finance the government’s rapidly rising deficit.

Over 2009 and 2010, the fund estimates the UK will have a funding gap totaling £430 billion, representing 15% of the country’s GDP. This figure is devastatingly higher than the 2.4% projected for the United States and the 3% for the Eurozone region.

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Tags: Bank of England, Banking, BOE, British Economy, Credit Crunch, Currency, economic recovery, Economy, Financial News, GDP, Global Financial Stability Report, IMF, Interest Rates, International Monetary Fund, Mervyn King, Monetary Policy Committee, Money, MPC, Recession, UK Banks, UK Economy, UK government, UK Recession

It now appears likely that Bank of England Governor, Mervyn King will be awarded the post of deputy chairman of a Europe-wide board, that will be responsible for the tracking the stability of financial institutions as well as co-coordinating risk supervision by national bank regulators.

King would join the board as number two to the European Central Bank governor Jean-Claude Trichet, who has been invited to chair the new body.

Reports have it that although no formal offer to Mr. King has yet been delivered, if Mr. King was to accept the post as deputy, his presence might help to calm UK fears that the revamp of Europe’s supervisory system would undermine the City’s position as leader in financial services in Europe.

Meanwhile head City regulator, Lord Turner made a robust defence on Tuesday night of his allegations that the “swollen” financial services sector has produced “socially useless” products, He continued by adding that UK banks may become “boring” lower-risk, lower-return investments.

“Banks need to refocus their energies on their core functions of providing savings and credit and payment products to customers,” Turner added at a speech presented at the Mansion House City banquet hosted by the lord mayor of London.

"The huge profits that many banks were expecting to make this year should be attributed to implicit government guarantees and low interest rates, and therefore much of that money should be used to build bigger capital and liquidity buffers rather than paying big bonuses", summed up Lord Turner.

According to recently released information, the pace of business failures slowed in August to its lowest level in almost 12 months. Although statistics gathered continue to suggest the worst of the UK recession may be over, there are wide geographical disparities within the data, with the north-east of England showing a 92.7 percent increase in the number of insolvencies.

In the first deal of its kind since the credit crunch began in the summer of 2007, Lloyds Banking Group are set to sell more than £2.8 billion in new bonds. The bonds are backed by UK residential mortgages.

Understandably, the sale is being closely monitored, due to its potential to reopen the market for residential mortgage backed securities in Europe. The hint of a return to mortgage backed funding for banks, which helped to fuel the boom in mortgage lending before the crunch is reported to be making a few people in the city feel a little hot under the collar.

Meanwhile the Cadbury/ Kraft turnover saga continues. Cadbury has seemingly approached the UK Takeover Panel to ask Kraft to “put up or shut up” on their unsolicited £10. 2 billion takeover approach of three weeks ago.

Cadbury approached the panel to request that Kraft either make a formal takeover proposal or put their advances on hold for the next six months.

Financial experts are predicting that Kraft will be ordered to make a formal offer within the next two and eight weeks, and if no offer is forthcoming, Kraft will not be able to make another offer for Cadbury for at least six months. Meanwhile reports have it that head of Kraft Foods, Irene Rosenfeld, is due to fly in to London this week in an effort to persuade investors to back their £10.2 billion takeover offer.

The chairman and chief executive are scheduled to hold one on one meeting with global shareholders at an investor day organized by Bank of America Corp. A representative for Kraft wasn’t immediately available to comment, while a spokesman for Cadbury stated that it remained unclear whether chief executive Todd Stitzer would be among the company’s senior executives attending the conference, and that no meetings between Stitzer and Rosenfeld had been arranged. In the shadow of such uncertainty, Cadbury’s stock fell 0.5 percent to 788 pence on yesterday’s trading.

According to experts in the UK real estate market, home sellers have raised asking prices in September as confidence in the property market improved and the supply of homes dwindled.

The average cost of a home increased 0.6 percent so far this month to £223,996 after falling 2.2 percent in August. Price gains in London, the southeast and East Anglia outweighed declines in the rest of England and Wales.

The U.K. property market is showing signs of recovery as the country emerge from the recession. The recovery continues to be aided by the Bank of England maintaining the benchmark interest rate at 0.5 percent alongside other moves to stimulate the British economy.

On the FTSE, house builders Barratt Developments were reported to be looking to raise up to £700 million through a share placing and open offer, to reduce their debt level of £1.3 billion as well as to buy land for fresh housing developments. The news failed to either depress or excite the market, and their stock ended flat at 268 ½ pence.

High street retailer Blacks Leisure who operates the Millets and Freespirit chains saw their shares fall a considerable 17.5 per cent to 42 pence after admitting it was likely to breach its terms of borrowing.

A spokesman for the company warned that trading had missed targets and they are likely to be in breach of their lending agreements.

Shares in Carphone Warehouse, gained 4.9 per cent to 192 ½ pence due to positive comments on the company’s growth policies by their brokers.

On the day, the FTSE 100 ended up 8.24 points on yesterday’s trading at 5,142.60, while the FTSE 250, rose by 28.02 points to close on 9,248.67.

The pound made a minor recovery yesterday against the dollar and Euro while falling against the Yen.

• Pound/US dollar 1.6399
• Pound/Euro 1.1069
• Pound/Japanese Yen 149.188
• Pound/Swiss Franc 1.6767

The Dow Jones Industrial Average re-adjusted itself after losses on Monday, up 51.01 points to 9,829.87. The NASDAQ continued its steady rise, up 8.26 points to 2146.3.

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Tags: Bank, Bank of America Corp, Bank of England, Banking, Barratt Developments, Blacks Leisure, British Economy, British Pound, Cadbury, Carphone Warehouse, Credit Crunch, Currency, Dow Jones, Economy, European Central Bank, Financial News, Freespirit, FTSE, Interest Rates, Irene Rosenfeld, Jean-Claude Trichet, Kraft, Lloyds Banking Group, Lord Turner, Mansion House City banquet, Mervyn King, Millets, Money, Money Markets, Mortgage, Mortgages, NASDAQ, Recession, Retail, Stock Markets, Stocks and shares, Todd Stitzer, UK Banks, UK Economy, UK government, UK mortgages, UK Recession, UK Takeover Panel

In times gone by, the self righteous members of the community were often heard to say "neither a lender nor a borrower be." Not a bad piece of advice it would transpire and one that should have been heeded more carefully a few years ago. However it must have been hard to take when handed out by your maiden Aunt who refused to lend you sixpence for your bus fare, which you had mistakenly spent on liquorice allsorts.

The last year has seen an all time low for both savers as well as those whose life style forces them to borrow just to survive. For savers it has been especially tough. According to statistics gathered by the Bank of England’s the average interest rate for savers has plunged from 4.49% to 0.41% in the last twelve months, as the BOE has cut interest rates to the bone to prop up the banks.

Interest rates for the average instant access account has plunged from 1.85% before tax (2.31% after tax) to 0.14% (0.17%), while the average price of fixed rate bonds has fallen from 4.53% (5.66%) to 2.42% (3.03%).

However the true picture for many savers is a lot less colourful than that, as these rates are only on offer frosh fresh deposits, while much of the money held in UK banks are on older long terms plans, where interest rates have plunged as low as 0.08% (0.1 %) interest, returning just 80 pence interest a year for every £1,000 saved.

For borrowers the picture is just as gloomy. Overdrafts are being cut and default interest rates being applied with a heavy hand. Those whose debt package is linked to their credit card have fared no better. Reports of rates hiking reduced borrowing limits or even having their credit cut off completely abound. And balance transfer deals and reward schemes are rapidly becoming part of banking history.

It may be a bitter pill for many to swallow, but Auntie might have been right!

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Tags: Bank of England, Banking, BOE, British Economy, British Pound, Credit, Credit Crunch, Current Account, Debt, Economy, Financial News, Interest Rates, Money, Money Management, Overdraft, Recession, UK Banks, UK Economy, UK Recession

The Bank of England have announced that they will be holding interest rates firm for the sixth consecutive month, at a record low of 0.5%.

The bank also announced that their quantitative easing program is not to be expanded, remaining at £175 billion.

The ownership saga at National Express seems to be drawing to a close, after the company reached an agreement to allow a consortium comprising its largest shareholder to examine its books. The next step is likely to be a £765 million takeover of the group, which operates both bus and rail networks in the UK. The successful bidders are a consortium headed by Spain’s Cosmen family, who already own 18.5 per cent of the group, private equity firm CVC Capital Group and Stagecoach who operate a similar facility in the UK. The consortium has apparently raised their cash offer to 500 pence per share from 450 pence, which had been magnanimously rejected by the board.

Shareholders in Cadbury are apparently not being coy, and are pressing Kraft to raise their takeover bid for the UK confectionery group and as soon as possible.

Reports have it that some of Cadbury’s principal shareholders are anxious to see the deal go through, as they are afraid to see any takeover become a long drawn out issue. A spokesman for one of Cadbury’s largest shareholders expressed their fears by saying: “The longer Kraft dithers, the more chance of a counter-bidder appearing on the scene."

On the FTSE, the U.K.’s third-largest oil and natural gas company, BG Group Plc, saw their share value rise by 3.8 percent after announcing that the Guara oil field, of which they hold 30 percent, has been found to contain between one to two billion barrels of oil.

Stock in the Hilton Food Group Plc climbed two percent, to 192.5 pence in anticipation of positive half year results. The U.K. meat-packer works with most leading supermarket chains including Tesco Plc. Home Retail Group Plc, owners of the Argos store chain is also scheduled to release their second quarter trading statement. The stock rose 0.6 percent, to 329.7 pence in anticipation of promising results. Not looking quite so promising was the outlook for Kesa Electricals Plc who owns the Comet appliance stores group. Their stock fell 0.9 percent to 151.6 pence pre-release of their first-quarter interim management statement

The FTSE 100 index failed to maintain its above 5,000 points status on a flat days trading on Thursday. The index closed down 16.62 points at 4,987.68

The FTSE 250’s rise was checked yesterday, with the index falling 11.34 points to close on 9,125.71

The pound rose against the Euro for the first time in almost a week, as well as continuing to improve against the dollar, and the other major currencies.

• Pound/US dollar 1.669
• Pound/Euro 1.1426
• Pound/Japanese Yen 152.8564
• Pound/Swiss Franc 1.7312

The Dow Jones Industrial Average continued to rise, up 70.29 points to 9617.51 while the NASDAQ Composite also rose by 20.31 points to close on 2080.7.

General Motors (GM) have finally reached a decision regarding the European based Opel and Vauxhall plants. As expected the successful bidder is the Canadian car parts manufacturer Magna

German Chancellor Angela Merkel was reported to be "very pleased" about GMs decision, especially as Magna, who are Russia’s Sberbank, has made it obvious that all four German plants will remain open.

However the long term future of Vauxhall and its 5,500 UK workers still remains uncertain.

Oil prices have risen above $72 a barrel following Opec’s decision not to change the amount of oil being produced by its members.

US light sweet crude rose 85 cents to $72.16 in Asian trading, as the euro continued to gain ground against the US dollar in currency markets.

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Tags: Angela Merkel, Argos, Bank, Bank of England, Banking, BG Group Plc, British Economy, British Pound, Cadbury, Currency, CVC Capital Group, Dow Jones, Economy, Employment, Financial News, FTSE, General Motors, Global Credit Crisis, Guara oil field, Hilton Food Group Plc, Interest Rates, Kesa Electricals Plc, Kraft, Magna, Money Markets, NASDAQ, National Express, Opel, Recession, Sberbank, Stagecoach, Stock Markets, Stocks and shares, Tesco, UK Banks, UK Economy, UK government, UK Recession, Vauxhall

A recent report from the Bank of England has revealed that the total amount of personal debt in the UK is lower than it has been for more than 16 years, and probably even more, as that was when records first began.

Factors such as rising unemployment and the economic downturn have caused UK consumers to become increasingly reluctant to increase their levels of personal debt, indicated by borrowing falling by £600 million in July, taking the total personal debt in the UK to a little below £1.5 trillion. Which is still a considerable sum of money.

At the same time, current low interest rates means that the amount of equity outstanding on mortgages is decreasing by £400 million a month at current levels, meaning that many home-owners are managing to repay more of their outstanding mortgage, reducing their deficit.

The manufacturing sector, also doing their best to draw in their horns, complain of increasing price rises from their banks, despite the abundance of Government packages to increase liquidity in the banking system and interest rates being at an all time low. According to the Engineering Employers Federation (EEF), credit terms remain "very tight" for manufacturers. A fact that they claim could hold back an early recovery from the recession, and certainly not in line with the US, Japan and even France and Germany.

Britain retail sectors, living in hope of a good Christmas season, are going to need it, if recent forecasts are correct. The forecast, from a leading firm of accountants and business advisers, forecast that the worst effects of the recession for the retail sector will not be felt until next year. Fears that rising unemployment will hit the high street hard and as many as 5,000 companies will be forced to close their doors throughout the UK.

Some good news for the UK economy is the announcement that British Petroleum (BP) has discovered a massive oil field while drilling of the Gulf of Mexico.

BP, currently the largest producer of oil and gas in that area, have till now produced more than 400,000 barrels of oil a day, with their latest discovery expected to increase that figure considerably. The company had to dig deep, not just in their pockets, but also through the Earth’s core to get to the fast reservoir of crude, reaching a depth of 35,055 feet making it one of the deepest wells drilled in the World.

On the news, BP shares jumped 3.8% to 538 pence, making it star of the show on the FTSE 100 yesterday.

It wasn’t really a major achievement as equities continued to be under pressure on the FTSE yesterday, however late trading did push it back to a reasonable condition. The k index ended just 2 points lower at 4,817.55, following losses of 89 points during the previous session.

Meanwhile the FTSE 250 continued to slide, yesterday dropping a further 99.75 points to close on 8,519.93

Sterling made a minor recovery against the major currencies on Wednesday’s trading.

• Pound/US dollar 1.6272
• Pound/Euro 1.1409
• Pound/Japanese Yen 149.9756
• Pound/Swiss Franc 1.7249

In the US, once again Federal Reserve policy-makers are showing increased confidence that the downturn in the US economy is due to officially come to an end. At a recent meeting, chaired by recently re-appointed Fed Chairman Ben Bernanke a more upbeat tone emanated, hinged with an uncertainty about how quickly the economy would grow in 2010. Fears remain that unemployment, which is set to move above 10% this year, may impact on consumer behaviour.

On Wall Street, US stocks were up and down on Wednesday affected by the release of data on job losses, with the release of the Challenger jobs report, which showed that the pace of US job losses has slowed, later offset by data released by the

This was quickly counterbalanced by payroll giant Automatic Data Processing (ADP) stating that employers in the private sector had cut by more than 50,000 the jobs expected in July than the expected 250,000.

On Wall Street, the markets returned to relative stability, with the Dow Jones Industrial Average dropping by 29.93 points to close on 9280.6 while the NASDAQ Composite index stabilised, falling a mere 1.82 points to close on 1967.07

European Union finance ministers have taken up the gauntlet and will press for clearly defined restrictions on bonus pay for bankers in the future. The issue will be at the focus of talks to be held with their US and other G20 counterparts later this month.

Anders Borg, finance minister of Sweden, which holds the EU’s rotating presidency, speaking on Wednesday after a meeting of the EU’s 27 finance ministers designed to set out common positions on bankers’ pay as well as the other hot potato of financial market regulation. Other issues on the table will be how to draw back from the fiscal, monetary and other emergency measures adopted this year to prevent a deep global recession, with financial stability returning.

Gold prices surged to a near three-month high on Wednesday as investors turned to the precious metal after a weak opening in equity markets in New York.

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Tags: Automatic Data Processing, Bank of England, Banking, Ben Bernanke, BP, British Economy, British Petroleum, British Pound, Credit Crunch, Currency, Debt, Dow Jones, Economy, Employment, Engineering Employers Federation, Federal Reserve, Financial News, FTSE, Interest Rates, Money, Money Markets, Mortgage, Mortgages, NASDAQ, personal debt, Recession, Stock Markets, Stocks and shares, UK consumers, UK Economy, UK government, UK Recession, Unemployment, US economy, Wall Street

Recent suggestions are that UK banks and building societies will come under increasing pressure to reduce their fixed mortgage rates after government bond markets began to increase rapidly. Analysts in the bond market have recommended that, as a result of the rise in the price of government bonds which is causing an attendant and converse relationship to yields, lower mortgage rates should automatically follow.

The feeling running high among UK mortgage brokers is that the banks and building societies are simply holding tight from reducing interest rates for as long as possible, in order to earn some extra profit on the backs of the hard-pressed British home owners who are carrying equity on their property. These large financial bodies are manipulating swap rates, used to set fixed-rate mortgages, and which currently account for about half of the mortgages held in the UK.

Swap rates define the cost incurred when a bank or building society alters or "swaps" from a floating interest rate to a fixed rate. Two years of fixed swap rates fell recently by 1.95 percent to a low of 0.785 percent, taking a plunge of nearly half a percentage point since the beginning of August – the lowest level since records began in 1985 – while five-year gilt yields fell to 2.43 percent. As government bond yields have fallen, it would follow that the swap rates should also have dropped, in line with them. This event is taking too long to happen, mortgage analysts claim, while adding that the banks have also shown a determined reluctance to pass over reduced borrowing costs to potential customers, as long as demand for mortgages outstrips supply.

Five-year swap rates also fell to 3.33 per cent, close to a drop of 0.5 percent. These falls were driven by forecasts that official interest rates would remain at historic lows of 0.5 per cent and speculation that the Bank of England might even introduce negative interest rates on commercial bank deposits.

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Tags: Bank of England, British Economy, British Pound, building societies, Credit, Debt, Economy, Financial News, government bonds, home owners, Interest Rates, Loans, Money, Money Management, mortgage brokers, mortgage rates, Mortgages, Swap rates, UK Banks, UK Economy, UK government

Although your bank manager will tell you that he or she is your friend, and that they have your best interest at heart when they cut your overdraft or credit card levels, don’t believe them. The truth is that banks thrive on people who are in financial trouble and know exactly how to play on your weakened situations to continue to feed their insatiable drive for profit.

More so, that when you go to them on your knees asking for just a little more leeway, they will already have made sure that you will find it difficult if not impossible to find alternative finance elsewhere, and will take full advantage by providing you with additional finance at horrendously high interest rates.

The UK public must surely have learned one expensive and painful lesson from the current financial crisis and that is to keep the credit under control, and to try to do so by achieving and maintaining a credit rating that is as pure and white as the first snows of winter.

And believe it or not, despite prodigious efforts by the FSA to prevent this from happening, lenders, be they banks, building societies or credit card companies, are pooling their efforts to make sure that people who have fallen into debt in the past will find it very difficult to improve their credit rating.

There is, and always has been, a great anomaly about how finance providers look upon a potential client. If someone has money, why should they need to borrow it? Yet in many cases it is sensible to borrow money, particularly for a mortgage, or to buy a new car or even some major household appliance. Banks carry out tens of thousands of transactions every month, although secured loans are much less attractive to them than unsecured loans, where they can make more than twice the interest.

The sad truth of the matter is that if people are in severe financial trouble the last place they should set foot in is a bank, building society or credit card company, except to ask for an extended agreement on the same terms. Under no circumstances should they agree to accept a new refinancing agreement which will certainly be on prohibitive terms.

Only time will cure most people’s problems, and eventually better times will come. In the meantime it is everyone’s interest to keep the head down, draw in the belt even tighter, and repair each credit status. Learning to be less credit dependent will be a challenge for all of us, but it will be justified by never having to bend your knees to your bank manager again.

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Tags: bank manager, Banking, Building Society, Credit, Credit Card, Credit Crunch, credit rating, Current Account, Debt, extended agreement, Finance, finance providers, financial trouble, FSA, Interest Rates, Loans, Money, Money Management, Mortgage, Mortgages, negative equity, Savings, UK Banks, UK Credit Cards, unsecured loans

UK families who have just lost a loved one seem likely to be penalized if they are late in paying inheritance tax on their estate. It’s a move that is difficult to take on board even for the most cynical and which, at its best, will earn the Treasury a mere £10 million annually. One wonders if Brown and Darling’s public relations people are aware of this forthcoming legislation; if passed, it will do even more damage to their already tarnished reputation – and this with a general election looking increasingly likely for the spring of 2010.

Reports have it that the UK Government is set to levy a 3 per cent annual interest charge on inheritance taxes that are submitted later than a certain time scale after a person passes away and the estate has been dissolved. Additionally, the tax man will be living up to his heartless image by reducing the rate of interest traditionally paid when any overpayment of inheritance tax is returned to the estate.

Government critics were forming a line to condemn what they described as a desperate, heartless move by Brown’s obviously hard-pressed government. Currently the laws pertaining to inheritance tax stipulate that where estates have a value of £325,000 or more, the trustees must submit the inheritance tax within six months of the death, on the taxable residue. If they fail to do so, the estate is charged a minimal interest of 1% annually until the tax was remitted. The Labour government even displayed some unusual compassion by cutting the rate to zero, and as recently as March of this year, showed an understanding that most estates are based around properties which were and still are difficult to dispose of under the prevailing market conditions.

From the coming September, late payments are to be charged at 2.5 percentage points above the Bank of England base, which is now sitting on the historic low rate of 0.5 per cent, with the interest that HM Revenue & Customs due to pay on refunds scheduled to be one point below the Bank‘s rate, although it cannot go below the 0.5 percent level. It seems likely that many executors will find themselves with no option but to pay the interest rather than offload a property at below-market prices, which will be, for many, a bitter pill to swallow.

In the most recent figures available the Treasury announced that it expects to collect around £2.2 billion in inheritance tax for the current tax year, with late payment interest amounting to a mere £10 million.

What next, a nation asks, of Gordon and Alastair?

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Tags: Alastair Darling, Bank of England, British Economy, Economy, Financial News, Gordon Brown, HM Revenue & Customs, inheritance tax, Interest Rates, Money, Savings, Tax, UK government