Monthly Archives: July 2011

Low bank interest rates are the largest pension performance problem for retirement savers across the world’s most developed countries, warns the Organisation for Economic Co-operation and Development (OECD).

The global think-tank reports pensions are recovering from the stock market slump of the credit crisis in many leading developed countries but inflation and low interest rates are stunting growth.

Pension savers can compare fund performance against OECD benchmarking, which saw average pension fund values rise by 2.7% in 2010, down by half of the 4.3% increase seen the year before.

Levels of recovery vary between nations. The OECD’s findings for last year disclose most pension funds recouped 80% of the value lost during the credit crisis, but Ireland, Japan, Portugal, Spain and the United States continue to fare badly.

New Zealand, Chile, Finland, Canada and Poland had the best performing pension funds.

Public pension reserves were up from US$4.6 trillion in 2009 to US$4.8 trillion in 2010.
Return on investment was down last year compared with 2009 but remained positive.
The OECD has concerns that worries over the future of the Eurozone and some financial markets makes predicting the best place for retirement savings difficult.
The report also confirms that countries with declining numbers of defined benefit pensions or with savers who have smaller funds see higher administration costs that erode returns already diminished by inflation and low interest rates.
The costs of running pension funds vary throughout OECD countries, with managers taking just 0.1% of assets in Denmark and Portugal to 1.3% in Spain and 1.4% in the Czech Republic.

Less-developed countries showed high pension fund operating costs, with the Ukraine the highest at 5.9% of plan assets.

Overall. private pensions do not perform as well as public schemes, with returns averaging 4% last year, falling from 7.3% in 2009.

Bedbugs are biting in to the profits of hotels and holiday resorts are reporting record levels of infestations attacking travellers.

The pests are small parasites that come out at night to feed on human blood from their hiding places in beds, carpets and other soft furnishings.

Infestations are reported as worst in the US and Europe, with New York topping the list of cities battling the bugs.

Travellers staying in an infected hotel risk carrying the bugs home unnoticed in their luggage.
Bedbugs are hard to kill, more elusive and less prone to insecticides than cockroaches, ants and termites.

They can live for a year or more without eating and can withstand temperatures from almost freezing to 50 Celsius.

Lloyd’s underwriters are teaming up with brokers Aon and Global Excess Partners to offer comprehensive bedbug insurance to travellers.

According to Lloyd’s, bedbugs trigger major problems for hotel owners, landlords and businesses as rooms lose revenue while undergoing expensive chemical treatments.

Bedbugs were almost killed off by DDT, but since the chemical was banned for inducing cancer, the parasites have swelled in number to their current epidemic.

The US Centers for Disease Control and Prevention (CDC) explained the bugs are not only a problem for developing countries, but are growing in numbers in the US, Canada, the UK and across Europe.

“Bed bugs have been found in five-star hotels and resorts and their presence is not determined by the cleanliness of the living conditions where they are found,” said the CDC.

Travellers can spot bedbug bites as they itch and swelling in to welts, thdn subside after a few days.

The bugs do not live on humans, but come out to feed then scuttle off to a hiding place.

Because they are smaller than apple pips, the bugs are hard to spot secreted in clothing, shoes and suitcases.

A debt charity is steering over 55s who owe money through equity release as a way to pay back borrowed money.

In the last 12 months, the Consumer Credit Counselling Service (CCCS) equity release advice service helped debtors unlock an average of £29,983 from their homes to pay down borrowings and meet other costs.

Over 55s contacting CCCS for help owed an average of £29,772 on credit cards, personal loans and other unsecured debts, like car loans and store cards.

The charity reports increasing numbers of older clients see equity release as a way of clearing what they owe.
CCCS Equity Release manager Tom Moloney said: “Many clients are rightly cautious when considering equity release, but with the right advice and guidance this is an attractive solution for some – especially for those who wish to resolve their debt problems without moving home.”

Meanwhile, many green-fingered over 55s are turning to growing their own food in a bid to keep spending down.

HSBC Bank research shows many people are turning to gardening to provide cheaper and organic alternative to supermarket produce.

One in three have fruit trees or bushes in their garden, over a quarter have a vegetable patch and a fifth have a herb garden.

Around 3% of Britons keep livestock in their garden – mainly chickens.

The growing your own trend peaks between the ages of 55 and 64. About 40% of this age group use their garden for growing fruit and vegetables compared to just 16% of people aged under 25.

Vegetable patches (31%) and herb gardens (28%) are also popular among the 55-64 year old age group.
“With the rising cost of living, many families are seeing their disposable income being squeezed and are seeking alternative meaning of saving money,” said Bruno Genovese, HSBC head of savings.

“There is a modern focus on organic food, which coupled with the climate of austerity means that growing your own has become increasingly popular. It is no surprise then that items associated with self sufficiency such as fruit trees and vegetable patches also rate highly on the list of features Britons want in their ideal garden.”

Researchers in Scotland and the US have discovered a link between single head injury and dementia.

A previous study had already linked sports involving repetitive blows to the head, such as boxing and football, to dementia. The new study is the first to suggest a link between a single head injury and dementia.

The study, undertaken by researchers at the Southern General Hospital in Glasgow, compared the brain tissue of 39 people who had previously sustained a brain injury and recovered to 39 people who had never had a brain injury at all.

Approximately one third of those who had had a brain injury showed abnormalities in their tissue.

Dr William Stewart, who had led Glasgow team of researchers, has described the findings as an exciting development. He indicated that patients with the abnormalities had large numbers of proteins in their brain. These findings are similar to those seen in older patients and people with Alzheimer’s.

Dr Stewart hopes that this research will in turn lead to further research into dementia. He added: “Part of the challenge in dementia is that a lot of the work we do is with people who already have it.”

He suggested that the more they know about the development of dementia the better. Furthermore, this research will prove to be helpful in developing effective new treatments for the disease.

Currently there are over 150,00 head injuries that affect people in the UK every year.

The number of over 50s supplementing their retirement savings and pensions with sales jobs has soared by a third.

Around 120,000 over 50s are reckoned to earn some extra cash with door-to-door sales and parties.

Firms leading the market include homeware supplier Betterware, cosmetics giant Avon, naughty undies seller Ann Summers and Herbalife, a health supplement provider.

The direct sales business is a niche market worth around £2 billion a year and the over 50s make up around a third of the 400,000-strong army of sellers knocking on Britain’s front doors.

Setting up a direct sales business generally requires little outlay – often no more than £100.

As self-employed sellers, hours are flexible and other costs are low – although some national insurance may be due and the tax man will want a slice of any profits.

Trade body the Direct Selling Association (DSA) has released statistics showing the number of over 50s employed in selling is up from 93,000 in 2010.

For many, selling has a business and social goal.

Not only can the earnings top-up savings and pensions, but active retirees can still get out and about and meet new people once they have given up a career.

Fitting a sales job around personal and family commitments is also easy to juggle.

DSA director general Paul Southworth said: “In terms of quality of life, many in the plus-50 age bracket enjoy the social side of direct selling, which allows them to continue to work and network with a variety of people.

“It is an attractive option, allowing them to manage their own business with minimal outlay as well as generate an income.”

According to the DSA, most direct sellers work for a few hours a week and earn less than a £1,000 a year. Around 30,0000 people make selling a full time job and can earn £50,000 or more a year.

The government has said that some of the increases announced previously to public sector pensions may be shelved, but employees must agree to other savings initiatives instead.

The plans to bring in the first rise in pension contributions for most public sector workers will still go ahead in April 2012, despite the recent industrial action taken by teachers, lecturers and other civil service workers.  However, the latest suggestion is that future increases may not come into effect.

The new contribution increases affect members in pension schemes for the civil service, NHS, teachers, police force and firefighters.

The new pension proposals will see staff who earn between £15,000 and £21,000 per annum have a contribution increase of 0.6 percentage points from April 2012.  Those who earn more than £21,000 a year will have to increase their contributions by 2.4 percentage points.  Public sector workers earning less than £15,000 per annum will have their contributions remain the same.

The coalition is following the recommendations set out in a report by the former Labour pension’s minister, Lord John Hutton.  His review of public sector pension schemes, published earlier this year, suggested that pensions needed to be changed from final-salary pensions to career-average pensions.

He also recommended that higher contributions needed to be made by workers, along with increasing the pension age so it came in line with the state pension age.

The government had initially proposed that contributions be increased to a total of 1.5 percentage points for workers earning between £15,000 and £21,000 and a total increase of up to 6 percentage points for those at the higher threshold of over £21,000 per annum. These increases would have come into effect by 2014-2015.

Now the government is open to the idea of scrapping any further pension contributions over the next couple of years if savings can be found in other areas.

Chief Secretary to the Treasury, Danny Alexander said: “The government remains committed to securing the full Spending Review savings of £2.3bn in 2013-14 and £2.8bn in 2014-15, requiring each scheme to find savings equivalent to a 3.2 percentage point increase,”

“Scheme specific discussions will make proposals on how these savings are achieved and will be required to make proposals by the end of October this year.”

There will need to be separate discussions for those who pay into local government pension schemes as they are funded by underlying investment funds.  However, there is a possibility that they won’t face any contribution rises if the government can find savings through different channels, such as later retirement ages or benefit cuts.

“For local government, the government recognises that the funded nature of the scheme puts it in a different position and will discuss whether there are alternative ways to deliver some or all of the savings,” Mr Alexander said.

Trade unions have previously argued that increases to members’ pension contributions would spur thousands of lower paid staff to leave their pension schemes as they wouldn’t be able to afford the contributions. They pointed out that this would have the opposite effect to funding that the government was trying to achieve.

The government now hopes to start talks with individual unions to address the issues on a scheme-by-scheme basis, with new proposals in place by October this year.

Consumer watchdogs are urging the government to take action against insurance firms and advisers who sign up retirement savers to expensive pension plans with unfair terms.

Consumer Focus claims three pension industry sales strategies are to the detriment of savers and wants easier to understand agreements and a ban on some pension transfers.

The group highlights three personal pensions features for investigation:
• Pension ‘churning’ – the transfer of funds between different pension schemes – which can result in higher charges and more investment risk that can leave retirement savers worse off

• A ban on ‘trail commission’ – ongoing fees paid to advisers or the pension provider – which Consumer Focus claims gives no benefit to consumers but cuts the size of their retirement fund

• Clearer disclosure of fees and charges so savers can compare pension products and how costs affect their investment over several years

Consumer Focus wants the government to force pension firms to open their books and reveal the true nature of their charges to retirement savers.

Christine Farnish, who chairs Consumer Focus, said: “The complexity of costs and charges, despite years of work by regulators on disclosure, make it all too easy for savings that should be going into a pension pot to be siphoned off in costs and charges. This complexity makes it impossible for consumers to judge price, and shop around for a good deal as they would in other markets.

“Too many consumers are being persuaded to switch their pension into different pension products which may well leave them worse off. Others are signing up to paying trail commission to their advisor for the life of the product – which may be decades – without receiving any tangible benefit.”

Consumer Focus also wants an inquiry with a view to letting employees with private pensions transfer their funds in to the new NEST pension scheme that starts next year. The aim is to let savers with modest pension funds make more of their investments.

“The FSA needs to get a grip on this market and tackle consumer detriment as soon as possible. We also call on the government to review its policy on transfer of small pension pots into the new low cost NEST scheme when it launches next year,” said Farnish.

The first appointed Legal Ombudsman warns that companies offering unregulated will-writing services are ripping off thousands of people.

Adam Sampson, the Chief Ombudsman for England and Wales says in his first report that some of the most complaints he’s received were about family law, will-writing and conveyancing:  ”One service which crops up a lot is will-writing. It’s a service carried out often by will-writing firms who aren’t regulated, because of this, customers are left with little means of redress when things go wrong.”

He continues: “We’ve seen similar confusion about claims management companies, with lots of consumers believing they’re getting a legal service even though most of the work is carried out by a non-authorised person. Again, we can’t help.”

He has called upon the government to implement some action that will ensure that people are not taken advantage of by service providers who are not regulated.

As thing currently stand, only a small percentage of legal services need to be carried out by a qualified lawyer, this means that services such as divorce, employment, immigration and will-writing can be provided by unqualified and unregulated companies.

Currently, one in five wills written in the UK is legally incorrect, sadly most of these mis-written wills don’t come to light until it’s too late. Many are poorly written or have exorbitant executor fees. Badly written wills can lead to family disputes and misunderstandings of the will-writers intentions, some legal errors could even leave family members to be disinherited.

At the moment anyone can operate as a will-writer, and we are seeing stalls setting up in shopping malls promising a quick and easy service.  Quite often though, these companies will use their own names as executor of the estate and charge extremely high fees once the will maker has died.

Adam Sampson was appointed as Legal Ombudsman in October 2010, but he can only act on complaints that he receives from customers that have experienced bad service from qualified solicitors.

Both the Law Society and the consumer organisation Which? Have back Mr Sampson, calling for regulations to be put into place to protect consumers, citing that grouping together legal and financial services put customers at risk and left them unprotected.

Executive Director of Which?, Richard Lloyd said: “As the legal-services market continues to grow in both size and complexity, it’s crucial that consumers who have paid for a legal service that’s not up to scratch know where to turn to get help.

“We want the government and regulators to wake up to the current lack of clarity and to provide a clear and straightforward route of redress for consumers.

“The arrival of a legal-services market in which consumers will, potentially, have complaints about hybrid services poses some serious questions about who they’ll be able to turn to for help.”

Just one in four over 50s are aware of the weekly cost of long term care and many make no provision to cover the expense.

Only 26% of people asked could correctly state the average weekly cost of long term care – which is £504 a week, according to the findings of a report from the Equity Release Solicitor’s Alliance (ERSA).

Around four out of 10 (41%) believed the cost was significantly lower and only 14% of those over 66 years old could say how much residential care really costs.

The survey went on to ask how the over 50s would fund long term care.

Four out of five (80%) had no idea how their local authority would assess their finances if they needed long-term care, and did not know how much they would have to pay personally.

Some had thought about how they would pay for care – but only a low number.

A fifth (22%) plan to fund care from savings, 16% from pension payments and 11% will explore releasing equity from their homes.

Many are concerned about equity release, and a third (32%) stated they would feel a lot better about signing up if the government backed the scheme.

Claire Barker, chair of ERSA, welcomed the Dilnot Commission’s report in to the funding of long term care.

“Anything allowing people better understanding to plan for their retirement is to be encouraged,” she said.

“Equity release has always had a role to play here. In the first instance, it often allows people to stay in their own homes for longer and to pay for care there but it also has a major role to play with paying for residential care costs too.
“If the government offers an endorsement of equity release we will see a significant shift in the number of people looking for advice about how equity release can form part of their financial planning in retirement.”

The average charge for renting a property from a private landlord across England and Wales went up 0.7% in June to £701 per month. These figures have been reported by LSL Property Services who own letting agencies around the country.

The letting firm has indicated that there is currently a strong demand for rented properties and that this demand has been driving prices up. They have also indicated that there is no sign of a let-up in demand from tenants; this is the fifth successive month of rent increases.

The figures for the past year have shown that on average, rent charges in England and Wales have increased by 4.1% or the equivalent of £28 per month. The highest rental charges are in London where the charges have gone up by an average of 6.9% in the past year. The average rent in London is now £1,006 per month.

David Newnes of LSL Property Services indicated that whilst tenant demand is continuing to grow, there isn’t enough new rental property coming onto the market to meet it. He added: “In areas like London where competition for rental property is most intense, it’s not unheard of for rental properties to be let within a day of coming on to the market.”

In 2008 and 2009, rent charges had been showing an average decrease in price. However, as the economy began to recover, they started to rise strongly again.

The Association of Residential Letting Agents (ARLA) have confirmed that the number of people who are looking for rental accommodation is increasing. They also confirmed that 74% of their members had more prospective tenants on their books than they had property available to let.

LSL Property Services believe that there are two factors contributing to the increase in demand for rental accommodation. They believe that a lack of new build properties is forcing many potential home buyers to turn to the rental market. Only 103,000 new homes were built over the past year – at the same time, the UK’s population has been growing at a rapid rate. They also believe that a large proportion of first-time buyers are unable to raise the deposit required to be
eligible for a mortgage, and many more are finding it difficult to raise the amount needed.

On a more positive note, LSL Property Services also indicated that tenants’ arrears have fallen to 9.3% of all rents due, a reduction of 2.2% from 11.5%. The LSL Property Services calculations suggest that this now amounts to an approximate total £257 million in rent arrears across the UK.

However, Mr Newnes believes that this improvement in rent arrears has been driven by a change in the behaviour of many landlords. H indicated that in light of the increasing rental charges, many landlords are being less forbearing with any tenant who shows signs of payment
difficulties. The expectation of higher rental income is encouraging them to replace these problem tenants with more reliable, and profitable, clients.