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Pension funds on the road to recovery.

October 29th, 2009 by tom | 0 Comments | Filed in Central banks, Daily News, Employment, Exchage Rate, Pensions, Recession, Retail, Saving, Stocks and shares, UK Bank Accounts, UK Banks, UK employment

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Pension funds in the western world have made am almost one trillion pound ($1.5 trillion) recovery in the first half of 2009. Whilst commendable, this figure represents less than a third of what these funds have lost in market value last year. These figures were released by the Organisation for Economic Co-operation and Development (OECD) who have been tracking the progress of pension funds since the outset of the global economic turndown. According to the OECD who is based in Paris, the recovery in pension fund performance has continued through September 30, 2009, on the back of strong equity returns. However it will take some time before the losses that occurred during 2008 are fully recouped. Most pension funds staged a partial recovery in the first half of 2009, generating investment returns of 3.5 percent in nominal terms. Membership of OECD is made up from mostly financially developed industrialized economies

The cost of car insurance appears to be dramatically on the rise, according to a recent survey from the Automobile Association (AA) in the third quarter of 2009, insuring a car rose at its fastest pace in 15 years, driven by a spate of rising personal injury claims and exacerbated by fraud. Statistics issued by the AA show that the average quoted premium for comprehensive motor cover rose 5.6 percent to £821 pounds during the three months to September 30, and by 14 percent from 2008.

As news filters through to the market that Virgin Money has applied for a banking license through the FSA (Financial Services Authority) it now appears more than likely that Virgin Money will make an offer for part or all of the Northern Rock business, with many analysts claiming that an informal agreement has already been struck with the UK government, and all that is required is tie up a few loose ends before the deal can be officially announced. Speculation in banking circles point to the fact that the UK government will need to request a high asking price for Northern Rock. Any sale at a "knock down" price is bound to infuriate taxpayers whose money was used to keep the Rock from sinking. On the other hand, Branson’s company is not liable to pay an inflated price for the bank. This could lead to an impasse that could see the operation stay with the UK government for the foreseeable future. Analysts state that selling Northern Rock would be in the best interests of both the government and UK taxpayers, but only in the medium to longer term. With an election looming, questions remain whether Gordon Brown’s government could allow themselves such a luxury.

Discount retailer, Matalan is reputed to be weighing up a £1.5 billion offer, after a number of companies expressed their interest in acquiring the business which remains privately owned. Among the parties interested are private equity group CVC. Matalan were taken private by John Hargreaves, their founder and controlling more than three years ago with indications having it that Hargreaves is neither interested in entering into an auction to sell his company or at any price.

The employee owned department store chain John Lewis, has seen online sales of its clothing range, take tremendous steps forwards since the company re- launched their updated website last month. With the launch came the release of a wide range of new fashion brands exclusive to the company. A leading executive from John Lewis Direct announced the company’s satisfaction with results achieved till now, that far surpassed their predictions. In general, sales of clothing online from the company were about three times higher than last year.

Mobile phone company Orange are due to begin marketing the iPhone to UK customers in Early November, a move that is bound to mark strong competition with O2 as the Xmas run up gets under way. Orange’s announcement last month that it had become the first UK network breaks O2’s exclusive hold on marketing the iPhone device, caused shock waves in the industry. The iPhone is expected to be launched by Orange on 10 November, just one day after O2’s two-year exclusive contract with Apple ends. Carphone Warehouse, which was the only independent retailer able to stock the iPhone when O2 had it to itself, is also expected to sell the phone on behalf of Orange. The iPhone is seen as the best touchscreen phone in the market, and has won a clutch of industry awards.

In the money markets, Sterling was back on a rise against the leading currencies with the notable exception of the Swiss franc.

  • Pound/US dollar 1.6322
  • Pound/Euro 1.10979
  • Pound/Japanese Yen 150.2587
  • Pound/Swiss Franc 1.6629

The FTSE 100 suffered a late reaction to the news that the UK economy was still in recession, falling 50.83 points to close on 5191.74 on Monday. The FTSE 250 was also down by 137.55 points to 9186.10.

The world’s largest construction equipment maker Caterpillar, has announced their intention to permanently cut 2,500 jobs in the US. The news was a contradiction to predictions that economic recovery was on its way for the construction industry in general and Caterpillar in particular, with the company undertaking to reinstate 550 workers that they had previously laid off. During the downturn, Caterpillar has cut about 34,000 jobs globally.

On Wall Street, the Dow Jones also continued to decline, down a further 104.22 points to 9867.96. At the same time, the NASDAQ Composite index appeared to be on a never ending but steady decline, yesterday down a further 12.62 points to close on 2141.85

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How safe is your company managed pension scheme?

July 1st, 2009 by admin | 0 Comments | Filed in Daily News, Money Management, Pensions, Saving

money infoThere are a very large number of UK employees who have been contributing to a private pension scheme partially funded by their employers, which they are assuming will provide them with either a very tasty lump sum, or a monthly stipend that will considerably boost their state pension. However people who are due to retire within the next five years are in for a not too pleasant surprise when they discover that the value of their pension has been eroded due to the economic ravages that the equities market has experienced in the last 24 months.

Some worrying information has emerged that the UK’s largest private sector retirement fund ,the BT Group Pension Scheme was reported to have only sufficient funds on hand to pay about 57 per cent of their pension obligations in the event, albeit unlikely, that the telecommunications company were to become insolvent. A spokesman for the company did hasten to announce that they are now taking every step possible to return this figure to a healthier level, as well as considerably cutting back on its future investments in equities for the future.

Huge companies, such as BT, who are faced with the awesome responsibility of handling huge pension funds consistently, took refuge in the FTSE as a hedge against inflation. The shift in investment strategy that they will now be making is significant and they will now have to find ways to make safer short term investments to keep their pensions funds at a higher level.

A spokesman for the British Telecom Pension Scheme (BTPS) announced their target is cut to 33 per cent of the fund’s equities portfolio and instead acquire assets which are low yielding and safer such as bonds that will move in line with liabilities.

The statement of investment principles applying to company managed pension funds explained the investment shift, noting: “The trustee acknowledges that, in particular, the level of investment in risky assets might, over the short to medium-term, influence the volatility of the funding level of the scheme, and hence may influence the volatility of the employer balancing contribution rate.”
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Another inevitability crammed in between taxes and death:…

May 26th, 2009 by admin | 0 Comments | Filed in Daily News, Pensions, Recession, Saving, UK Bank Accounts, UK employment

financialnews1…a malfunctioning pension scheme
Something that was hovering in the air for a long time, and has been swept under the carpet a little as a result of the ongoing credit crunch is the fact that most UK citizens can afford to become old or worse still, to retire.

A recent report issued jointly by the Help the Aged and Age Concern charities has discovered that around two thirds of the baby boomers are no looking at a normal retirement as at best a forlorn hope, and have come to grips with the reality that their “golden years” will be a lot tougher than they worked for and in the majority of cases also deserved.

Families who have always been savers are seeing their nest eggs deflated by low interest rates, property prices devaluing at a pace and intensity that they may never recover from for at least the next decade or so. To make matters worse, their pension scheme has been knocked very hard by the decline in stock market share values, on which their pension plans were based.

Worrying but typical statistics that are coming out of the crisis, as unemployment begins to sore, is that percentage wise, the number of people in their fifties upwards who are being laid off is very high.

According to official figures released by the Office for National Statistics unemployment among people aged 50 or above has risen by 47% within the last twelve months, with the chances of these people returning to the job market looking extremely bleak for the foreseeable future. This means either retraining which takes time or money or digging into the already rapidly devaluing family next egg.

Those fortunate to stay in work face an uncertain future, especially those without a well funded pension plan. They will be forced to live the rest of their lives walking a financial tight rope, in fear of redundancy and hoping that they can continue to work for as long as possible, even well into the years when they should have been sitting in the park, feeding the pigeons.
While the pension shortfall problem exists all over the Western World, financial analysts state that it is especially acute in the UK.

A recent report from the National Institute of Economic and Social Research found that accumulated wealth, pension levels and assets if realized will still be too low on average to allow a quality of life equivalent to current standards for most UK retirees, and there is little that can be done to change the situation for most people who will reach retiral age over the next two decades.

For those of us who are in that trap it appears that the only solution appears to work longer. If the UK government would raise the retirement age to 70 for men and 65 for women it would be realistic and would allow an increase in retirement income by around 30%, most financial analysts estimate.

For those people who see that retirement is still a long way off, the news is that setting money aside for pensions should begin as early as possible, no matter how far off it seems.
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UK pension still giving cause for concern

April 15th, 2009 by admin | 0 Comments | Filed in Daily News, Money Management, Pensions, Recession, Savings Accounts, UK Bank Accounts, UK Banks

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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Pensions: when should I start one?

December 3rd, 2008 by jamie | 0 Comments | Filed in Daily News, Money Management, Pensions, Saving

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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