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Fear of pension crisis grows as workers raid savings

Wednesday, June 10th, 2009

Source: http://www.guardian.co.uk/money/2009/jun/10/hsbc-pensions-survey

International survey suggests more than 20% are dipping into nest-eggs to pay down debt

More than 20% of the world’s workers have dipped into their savings to pay down debt and 13% have stopped saving altogether, according to a study of retirement trends over the past year.

In Britain, China, India and the US, the study suggests, savings have taken a back seat to maintaining living standards threatened by the global downturn.

According to research by HSBC, almost nine out of 10 people feel they are unprepared for retirement, and three-quarters do not know what income they can expect when they stop working.

Even in countries where the population is relatively young, there is a degree of panic among legislators keen to prepare for the day when over-65s outnumber schoolchildren. According to HSBC’s head of insurance, Clive Bannister, China is drafting plans for a nationwide scheme based on an occupational pension model established in Hong Kong. At the moment, most Chinese workers fall outside the limited number of occupational schemes and must rely for a retirement income on younger family members or their own small savings.

Last year, Britain reached the point at which 65-year-olds outnumbered 16-year-olds.

Bannister said the report, which was based on interviews with 15,000 people in 15 countries, showed there was a “downturn deficit” that the state alone could not solve. He said: “the recession means that people are worrying more about surviving from day-to-day than they are concerned about the future”.

He added that the situation in fast-growing economies such as India and China was more difficult. “We can see the state retreating across the globe as the number of older people increases quite dramatically. There simply won’t be enough workers to support a retired population through taxation. In emerging economies, falling state benefits means that, more than elsewhere, individuals must look after themselves.”

The last six months has seen a severe downturn in projections for retirement savings after a torrid two years for world stock markets and steep declines in interest rates. The problem is compounded by increases in life expectancy in most countries that mean pension planning must be extended to cope with a longer retirement.

Several countries, including Britain, have sought to raise the retirement age, but the burden of working longer has, in the main, been shifted by the current generation of over-50s to younger workers.

Previous HSBC studies have shown that workers from China to Britain expect to work beyond the age when they receive state pensions. But while many workers will remain fit enough to keep working into their 70s, others will find that they are unable to carry on and could fall into poverty.

The reluctance to save in the downturn adds to the “unpreparedness gap” being felt in every major economy, the bank said.

Stephen Green, the bank’s chairman, said: “A perfect storm is confronting pensions planning, created by an ageing population, falling pension fund values, a drop in state and employer contributions and an economic downturn which is forcing people to make financial choices.”

Green wants governments to support education schemes and financial advice centres for workers to make informed choices about their retirement planning.

Pensions
Occupational pensions
State pensions
Financial crisis
Global recession
HSBC

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Tags: a-torrid-two, bank, beyond-the-age, britain, china, chinese, green, guardian-news, guardian.co.uk, hsbc, media, money, population, retirement, state pensions
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Trusting in the Power of the Internet to Make Money

Wednesday, June 10th, 2009

Picture yourself in a supermarket that runs 24 hours a day and 7 hours a week.

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Trusting in the Power of the Internet to Make Money

Tags: a-day-and, a-dull-moment, a-need-for, a-new-breed, and-convenience, ever-imagined-, increasing-rate, internet, local, online, power, simplicity, the-internet, the-simplicity, world
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Government faces heat on fuel poverty

Tuesday, June 9th, 2009

Source: http://www.guardian.co.uk/money/2009/jun/10/fuel-poverty-energy

Select committee claims ministers are failing millions of vulnerable families and demands urgent action on fuel poverty

The government was today urged to offer more help to the millions of families in fuel poverty due to rising energy prices.

The Environment, Food and Rural Affairs select committee said ministers had failed to meet statutory obligations to end fuel poverty and called on them to set up an action plan to help people struggling with energy bills as a matter of urgency.

It warned the resources available for tackling fuel poverty were “inadequate and getting worse”. Anyone spending at least 10% of their income on heating and lighting their home is deemed to be living in fuel poverty. In a series of recommendations, the select committee called for the winter fuel payment to be no longer given to people paying higher-rate tax. Instead it wants the money to fund energy efficiency programmes aimed at helping the fuel poor and vulnerable households.

It also called on the government to consolidate its range of energy efficiency programmes into one comprehensive scheme to upgrade all homes in England, with the improvements delivered by local authorities.

Committee chairman Michael Jack, said: “We need action and clarity – not further consultation – to tackle the three elements that drive fuel poverty: prices, income and energy efficiency levels.

“The government must act swiftly to bring forward practical measures before next winter, using technologies that are already well understood, to help the millions of households that remain in fuel poverty.”

The committee said the Warm Front programme, the government’s main scheme to help vulnerable households cut their energy bills, should have its budget increased and that it should be extended to include all hard-to-treat properties.

It recommended a central budget be created into which energy companies pay their carbon emissions reduction target contributions, so the cash could be pooled with money from other programmes to fund home upgrades.

Energy regulator Ofgem should be ordered to ensure energy companies tell customers about social tariffs and who is eligible for them, to help increase competition for certain customers, such as those who use pre-payment meters, it said.

Jonathan Stearn, energy expert for Consumer Focus, said it was “outrageous” that there were still more than 5 million vulnerable households struggling to afford to heat and power their homes.

He added: “The government’s energy efficiency schemes are simply not up to scratch. Immediate investment is needed in a radical and co-ordinated action plan if we are to lift millions of the poorest pensioners, families and disabled people out of fuel poverty and cut carbon emissions.”

Michelle Mitchell, charity director for Age Concern and Help the Aged, said: “The report sounds a loud wake-up call for the government, whose strategy to tackle fuel poverty is miles away from reaching its targets.

“Ministers should immediately set out to implement the committee’s recommendations, reviewing the Warm Front Scheme and producing a new ‘road map’ to bring home a more ambitious energy efficiency plan.

“Focusing the winter fuel payment on fuel-poor households could give an edge to the government’s strategy to tackle fuel poverty, as long as the system required to implement it is simple and workable.”

Campaigners say the number of householders in fuel poverty has been one of Labour’s greatest failures. In March last year, its own advisers, the Fuel Poverty Advisory Group, said the government appeared to have given up trying to hit its legally binding target to reduce fuel poverty. The group criticised ministers for cutting the grants programme aimed at those in fuel poverty by a quarter during the comprehensive spending review.

This, it said, was despite the Treasury receiving significantly higher VAT receipts on the back of gas and electricity prices which have doubled in recent years.

Energy bills
Household bills
Poverty
Consumer affairs

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Tags: bank, feeds, home, improvements, money, retirement, the-government
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Should we stretch for a mortgage?

Tuesday, June 9th, 2009

Source: http://www.guardian.co.uk/money/2009/jun/10/property-mortgage-renting-self-employed

Q We are renting?a house, having sold our flat in December 2008. We have about £70,000 in the bank and would like to buy again. My partner has a permanent (and, we think, safe) job that he’s been in for 11 years. I have been self-employed on and off since 2006 (but I don’t have any ongoing accounts – I was claiming unemployment benefit for a couple of months in 2007 and have claimed state maternity allowance in the last two years, too) but I’m self-employed until the end of July 2009 (it will have been a job for one year).

I am looking to work again after this job ends (there is a chance it may continue, but nothing is definite). We have a toddler and would like another child relatively soon, but I’d also like to remain working.?

I earn a good income and we have lots of spare cash (I do save a bit), but when I’m not working?we can just about get by on my partner’s wages.?

I’m not sure whether to stick at the freelance work, or if I’d be best getting something permanent that will count towards a mortgage – but I know I’ll earn?less, possibly half my?freelance day.?

I guess my question is, how much should we stretch ourselves in terms of the mortgage? If we shop around for mortgage offers, then we will know our situation – I think it’s possible that my income could be taken into account (but it’s so uncertain). We are thinking about moving out of London to get a cheaper property. However, I am more likely to get work in London and I can’t see how we can both logistically commute with our small child (I don’t want to leave him too long). HW

A Being self-employed is not, in itself, a barrier to getting a mortgage but you do need to have at least two years’ evidence of income. This doesn’t necessarily need to be formal accounts, as lenders will happily take tax statements issued by HM Revenue & Customs as evidence. If you don’t have these, I would start to worry.

If you are self-employed and tax is not deducted from what you earn at source (which is unlikely), you are legally required to file a self-assessment tax return each year. If you haven’t been doing this, you face financial penalties and a big bill for unpaid tax.

But, assuming that you have been filing tax returns, you should also have tax statements which will provide the evidence of income that you will need to have your income taken into account when applying for a mortgage. So you don’t need to give up your freelance work just to get a mortgage.

As far as how much you should stretch yourselves, a lot depends on your future income. If you are planning to have another child, you need to take that into account when looking at the cost of mortgage repayments. And you also need to look carefully at the financial implications of moving out of London. Although you may be able to get a cheaper property, you have to factor in the cost of commuting – not to mention child care costs for the time you spend on your way to and from work.

Mortgages

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Tags: earn-at-source, editorial, guardian.co.uk, london-although, media-limited, mortgages, most, price
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Mortgage protection could become mis-selling scandal

Tuesday, June 9th, 2009

Source: http://www.guardian.co.uk/business/2009/jun/09/mortgage-insurance-warning

Don’t cut protection in face of rising unemployment, regulator tells insurers

City watchdog Lord Turner attacked insurers today for threatening to water down unemployment protection on mortgages, warning he would investigate any attempt to push through price rises due to the recession.

The chairman of the Financial Services Authority warned the industry it risked repeating the mistakes of past scandals such as the mis-selling of endowment mortgages.

Concern has grown that insurers plan to increase prices for customers with mortgage payment protection insurance and restrict the scope of policies to reduce payout costs, ahead of an expected surge in unemployment in the second half of the year.

He told an audience of insurance executives at a conference organised by the Association of British Insurers that the industry would provoke an angry response from customers, which the regulator would need to take seriously.

“Whilst it is natural for the industry to respond to changes in risk, this raises issues with both unfair contract terms, disclosure and our ‘treating customers fairly’ principles,” he said.

“How many consumers would have taken up this cover if they had known that at the very time they needed the protection the most, the price of it could significantly increase or the amount of cover decrease?

“This is an area where insurers must expect us to intervene to address poor consumer outcomes. And more than that they must think strategically about the impact of their actions on the sector’s reputation.”

The warning is understood to follow moves by the Post Office to raise prices on its mortgage protection policies that cover payments during periods of unemployment or after accidents and during long-term sickness. In April the Post Office gave 30 days notice that it also planned to reduce the level of cover from a maximum £2,500 a month to £1,500. Claimants will also have to wait for 90 days after stopping work before they receive any money. The delay was previously 30 days.

Turner said he was aware the number of people with the insurance had fallen in recent years. In 2005 there were 2.5m policies covering just over a fifth of the 11.6m mortgages in the UK. By 2007 MPPI policies had fallen to 1.2m and 700,000 in 2008.

He said: “While mortgage payment protection insurance has not previously been a major focus of our concerns, it may become one in an economic downturn. As the likelihood of unemployment-related claims increases, some insurers are responding by increasing premiums or reducing cover for existing policyholders.”

The FSA and the Competition Commission have spent the last four years investigating accusations of profiteering by lenders that sell payment protection insurance on loans and credit cards. Last year the commission ruled that selling practices were so bad that it banned the sale of the most profitable product until at least a fortnight after the purchase of a credit card or loan. The industry appealed, but was unsuccessful.

Turner said he would not hesitate to repeat the enforcement measures on insurers that contravened rules on the sale of mortgage payment protection.

He said: “The recent problems may have been primarily in the banking industry and that is where the most significant changes are needed, but in an era of heightened public expectations that the FSA will identify and prevent major problems from recurring, we need to reinforce our capability across all high impact firms.

“And we need to respond to people’s expectations that we will be more forceful in pursuing enforcement against reckless or abusive practices which cause customers harm.

“We certainly need to ensure that our responses are proportionate and are focused on what matters: that they are outcome focused. And we will also continue to look for market solutions where they are available, such as in addressing contract certainty and commission disclosure.”

Regulators
Insurance industry
Mortgages
Insurance
Payment protection insurance

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Tags: business, competition, feeds, focused-on-what, home, industry, media-limited, mortgages, most, office, price, sale, until-at-least
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Lloyds to close C&G branches

Tuesday, June 9th, 2009

Source: http://www.guardian.co.uk/business/2009/jun/09/lloyds-cheltenham-gloucester-close

• The latest round of cuts will see the demise of 1,600 jobs
• Unite condemns the move as ‘nothing short of disgraceful’

The entire Cheltenham & Gloucester branch network is to close by November, as Lloyds Banking Group cuts another 1,660 jobs after the merger with HBOS.

The bank, which yesterday began repaying its multibillion-pound loan from the taxpayer, confirmed this lunchtime that all 164 C&G branches will shut within five months. This will mean about 1,000 employees will lose their jobs.

Lloyds is also cutting 265 positions across its personal loans division, which will lead to job losses in Chester and Cardiff, with other jobs also going across its retail, personal finance and mortgage sales operations.

The Unite union attacked the move as “nothing short of disgraceful”. It will mean the end of the C&G name on the high street after more than 150 years, but the brand will continue to exist on mortgages sold through brokers.

News of the closures broke this morning, sending Lloyds scrambling to inform C&G staff of the plan and sparking fierce debate online.

One branch worker said that C&G customers should not panic, as “branches will not close for months”. From November, they will have to use one of Lloyds’ 1,800 remaining branches.

Lloyds said that compulsory redundancy would be “a last resort” if it could not find new roles for those affected.

“It is always difficult to make decisions about our business that affect our colleagues,” said Helen Weir, Lloyds’ group executive director for retail banking. “We will work through these changes carefully and sensitively and continue to consult closely with our unions throughout the process.

“Cheltenham & Gloucester is a very strong brand. The strategic focus for C&G from now on will be to further strengthen its intermediary and direct savings businesses. Another major priority for us is to ensure that we manage the closure of the C&G branch network so that it causes as little disruption as possible to our customers. We have a number of measures in place to achieve this.”

Lloyds has already eliminated about 3,000 positions since finalising the takeover of HBOS. Last week it announced 510 job losses across its retail banking arm. It has also decided to drop the Clerical Medical name, which was part of HBOS, with the loss of 300 jobs.

Lloyds employs 140,000 people, and City experts believe 25,000 jobs could eventually go once HBOS is fully integrated.

Unite had already called on Lloyds to end the uncertainty hanging over its workers. Its general secretary, Derek Simpson, warned this morning that closing the C&G network would “rip the heart out of hundreds of local communities up and down the country”.

“Hundreds of staff who have worked hard for years to make the C&G brand a success will view this news as a kick in the teeth,” he said. “UK taxpayers have not poured billions of pounds into this organisation just to see it sack thousands of hard-working people.

“Front-line staff in banks across the country are blameless for the mistakes of management which have brought the important finance industry to the point of collapse. Yet these workers now face an uncertain future as Lloyds abandons C&G’s high street branches. This is truly a dark day for the financial services sector in this country.”

C&G was founded in 1850 in Cheltenham, and was acquired by Lloyds in 1995.

Industry experts had predicted several months ago that Lloyds might drop C&G in favour of Halifax, which is the UK’s biggest mortgage lender and is perceived to be a stronger brand.

Alex Potter, banking analyst at Collins Stewart, believes the closure of the C&G branch network could be an attempt to prevent the European Commission blocking the merger. Shares in Lloyds plunged by a third on 20 May after the bank warned shareholders that it may be forced to slim down its business to win state aid approval from the commission.

“There are still antitrust concerns about the Lloyds-HBOS merger at commission level,” Potter told BBC Radio 4’s Today programme. “Perhaps this is a sop to the regulators.”

Lloyds launched its takeover of HBOS last autumn after the government said it would waive competition rules that would otherwise have made the deal impossible.

Cuts at RBS

Unite also said today that 500 staff at RBS have been told that they are at risk of redundancy.

“The closure of a cash centre in Glasgow impacting around 140 staff and 360 job losses throughout other UK locations will devastate staff. Unite is opposed to compulsory job losses and through continued consultation with the bank will seek to find suitable alternative employment for workers,” said Unite national officer Rob McGregor.

These cutbacks are part of the wide-ranging cutbacks announced in April by RBS, which plans to cut its UK workforce by 4,500.

Lloyds Banking Group
Banking
Job losses
Trade unions
Financial crisis
HBOS
Redundancy

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Tags: a-very-strong, banking, country, guardian.co.uk, job losses, lloyds-banking, media, morning, news, property, stephen-ludlow
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