A report by pensions and insurance provider AXA indicates that the current crisis in the pensions industry is likely to worsen in the next few years.

According to the report, more than three in five UK citizens expect to rely on their state pension as their main source of income in retirement, as many businesses close their pension schemes to workers, and fewer people opt to join a private pension scheme.

According to the survey, 64% of UK residents plan to rely on their state pension for income after they are forced to give up work.

One in five 25-34 year olds believes they will able to release equity in their home to help finance them through their retirement, despite the fact that a shortage of supply and tighter lending criteria could mean many people are blocked from climbing onto the housing ladder.

(more…)

The European Union has approved proposals to split nationalised Northern rock into two businesses, possibly heralding a partial sell-off.

One of the businesses would function as a “good bank”, containing Northern Rock’s sund assets, including most retail deposits and low-risk mortgages. The remaining “bad” bank would hold the remaining mortgages and repay outstanding government loans.

Northern Rock said the EU’s approval was “an important and positive step”.

Whilst the good bank will eventually be sold to a third party, potentially by the time of next year’s general election, the bad bank will have its assets run down until it goes into liquidation. Potential buyers include Virgin, Tesco Bank and National Australia Bank, which owns the Clydesdale and Yorkshire Bank.

(more…)

Tesco Bank is to create 1,000 jobs in Newcastle. The supermarket giant’s financial arm announced this morning the creation of a new customer service office in the city to handle customer enquiries and sales for the bank.

“Newcastle is the ideal home for our new insurance customer service centre. The north-east of England has strong experience in customer services and the financial sector, with a well-qualified and enthusiastic workforce,” said Benny Higgins, chief executive of Tesco Bank.

“The city is a great fit for our business and as it develops we will be investing even more in the region over the coming years.”

The firm aims to fill 500 posts by the end of next year, and all 1,000 by 2014. It has taken a 15-year lease on a business park site, and is receiving a grant of almost £2m from the local development agencies.

(more…)

National Savings & Investments has announced large increases to the interest rates on some of its policies.

Rates for its guaranteed growth bonds and guaranteed income bonds will rise by as much as 2.95% for new savers, bringing the annual interest rate on some of its fixed rate policies to 4.6% a year before tax.

“Customers can choose to invest between £500 and £1m in our one, two, three or five-year bonds,” said John Prout, a director at NS&I.

The new rates are some of the best available for savers, and are a direct challenge to banks and building societies keen to win customers. NS&I offers the second most competitive two-year bond in the UK with a gross interest rate of 4.25% (just behind AA at 4.35%). Meanwhile a one-year bond with the state-backed institution carries a gross interest rate of 3.95%.

(more…)

Pensioners will see their basic state pension rise by £2.40 a week next April following the publication of inflation figures later today.

Next year’s pension rise is based on the retail price index for September, which will be published by the Office of National Statistics today. Economists predict that the index will fall below last month’s figure of -1.3%, but the government has already guaranteed an increase in weekly pension payouts of no less than 2.5%. On this basis the state pension is likely to increase from £95.25 a week to £97.65. It follows an increase of 5 per cent a year earlier, up from £90.70.

Andrew Harrop, head of policy at the Age Concern and Help the Aged charity group said the rise was woefully inadequate. “Although the commitment to raise the basic state pension by at least 2.5 per cent will be a relief for older people, a £97.65-a-week pension is still not enough to ensure a decent standard of living to people who have worked hard all their lives.

(more…)

Over-50s will be able to put aside up to £3,000 extra in tax-free savings from today, as new ISA allowances come into force.

The amount people can save in a tax-free ISA has risen from £7,200 to £10,200, of which half can be saved in cash and half in stocks and shares. The new limit applies to those born on or before 5th April 1960. Younger savers will have to wait until 6th April 2010.

The new limits, which were announced by Chancellor Alistair Darling in this year’s budget, are designed to help savers who have been hit by the steep drop in interest rates.

“I am determined to help savers, because while low interest rates have helped millions of homeowners, I also know that they have hit those who rely on their savings to get by,” he said.

(more…)

Years of savings would be needed to return household wealth to pre-recession levels, a Bank of England report has found.

According to the figures, it would take nine years for households that saved 10% of their income to bring wealth back up to the average of the last 20 years. However, the Bank said that it is difficult to assess how much, if at all, households will put aside in savings in order to rebuild their wealth.

The report found that between 1995 and 2007 the ratio of household spending to saving fell to historical low levels. Rising property prices, falling interest rates and easy access to credit meant that people were tempted to spend rather than save during the late 90s and early part of this decade.

(more…)

On October 6, the rules for Individual Savings Accounts change for those over the age of 50, with the annual allowance for tax-free savings rising from £7,200 to £10,200. Under 50s will have to wait until April to see their ISA limit increase.

However, according to research by the Post Office, two-thirds of those eligible for the increased allowance are still unaware of the new rules.

Richard Norman, head of Post Office savings, said: “With more people feeling the financial squeeze it is important to make your money work as hard as possible. But most people don’t know about the changes.”

(more…)

The Bank of England’s Monetary Policy Committee voted yesterday to keep interest rates set at 0.5% for the sixth consecutive month.

The MPC also decided against increasing the amount of money the Bank is pumping into the economy through quantitative easing - the option favoured by three members of the nine-strong committee - keeping the size of the scheme at £175 billion. It said that the Bank would carry out quantitative easing for another two months, adding that “The scale of the programme will be kept under review.”

The MPC’s decision follows recent evidence that the UK economy may be returning to growth after five quarters of recession in a row, including a rise in manufacturing output, a tentative rise in house prices and reports of increased activity in the services sector.

(more…)

The Bank of England is widely expected to keep interest rates set at 0.5% for the sixth month in a row when it announces its decision later today. It is also tipped to maintain its programme of quantitative easing - pumping money into the economy to stimulate growth - but is not likely to extend it.

Though the Bank conceded that there is evidence to suggest Britain is emerging from recession, it warned that recovery is not guaranteed, and that it could take months for the full impact of its policies to be felt.

Last month the Bank’s Monetary Policy Committee (MPC) surprised markets by increasing its quantitative easing programme by £50 billion to create up to £175 billion on the UK’s balance sheet, with three of its nine members, including Bank of England governor Mervyn King, voting for an even larger increase.

(more…)