Money

3 more years of grinding poverty

The Motley Fool — 2012-02-09T14:27:00+00:00

Last year, 20,000 people had an unexpected gift: life. That's the number of people who should have died, but didn't, according to figures released by The Actuarial Profession, the collective name for the Institute and Faculty of Actuaries.

Apparently, there has been a sudden and considerable improvement in the mortality rate. Instead of improving at an average annual rate of 2.4% or so -- the rate over the last 10 years -- in 2011 it climbed to 4%.

"The last 20 years have seen unprecedented improvements in mortality rates, particularly for pensioners," says Actuarial Profession spokesperson Gordon Sharp.

And while this initial estimate is subject to revision once the Office for National Statistics publish updated population estimates for 2011, the uptick is large enough for the organisation to be confident that it's real.
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"We are able to say with confidence that the mortality improvement for 2011 has been well above average," sums up Mr Sharp. "This means that there have been 20,000 fewer deaths than would have been expected -- enough people to fill the O2 Arena in London."

An extra three years

What's shocking about these figures from the Institute and Faculty of Actuaries is the further impact that they might have on longevity.

Ross Matthews, the head of mortality research at actuarial and pension fund investment advisors Punter Southall, for instance, reckons that if the 2011 fall in mortality rates continued, a man of 65 retiring today could expect to live to 91, three years longer than the typical current estimate of 88.

Of course, such projections need treating carefully: while average lifespans are getting longer, the increase can't go on forever.

But even so, warns Tom McPhail, head of pensions research at Hargreaves Lansdown , actual life expectancy over the last few decades has consistently overshot expectations. In other words, far from overstating the likely longer life span of pensioners, such figures could actually be underestimating the real impact of declining mortality.

Falling annuity rates

Of course, it's no surprise that fewer people are dying. It's well known that average longevity figures are climbing.

We've already seen that reflected in annuity rates, of course -- with annuity providers having to pay out for longer, annuities have declined sharply. The recession and quantitative easing haven't helped, either.

Back in 2008, points out Hargreaves Lansdown's McPhail, a 65-year old man seeking an annuity with a five-year guarantee could expect pension savings of £100,000 to generate an annual income of £7,800 or so.

Today, that figure is below £6,000 -- and that's before today's announcement of a further £50 billion of quantitative easing has hit the markets.

For comparison, that same pensioner retiring in the early 1990s could have expected £15,000 or so -- a shocking collapse in retirement prospects.

Stretched savings

Roll it all together, and the impact is obvious -- and sobering.

Simply put, all those scaremongering articles you read last year, warning that people weren't saving enough, in fact probably weren't doom-laden enough.

Your pension savings are going to have to sustain you for rather longer than you thought -- a further three years or so, if you're around 65 now, and rather longer if you're younger.

Punter Southall's Ross Matthews, for instance, reckons that a 45-year-old could live to 95, seven years longer than today's cohort life expectancy.

And unless people's pension provision improves, those years are going to be pretty grim, as meagre savings are stretched even further.

Five-point plan

What to do? There isn't, sadly, a magic bullet.

But I reckon that the five-point plan below could help stack the odds of a better retirement a little further in your favour:

Retire later. Because your pension won't have to sustain you as long, you'll get a better annuity income.
Save more into your pension fund, be that a pension or an ISA. Retiring later will help with that, of course -- but upping your savings rate now will give those savings longer to compound up to a decent figure.
Invest wisely. Cash savings deliver a meagre return, but a stocks and shares ISA should do better, and a SIPP will benefit from tax relief, as well -- an important consideration if you're a higher-rate taxpayer.
Shop around for annuities. Again and again, we hear of poor deals, and people losing out by staying with their current provider. Don't.
Diversify your income mix. The longer you live, the more your income is at risk of an unexpected buffeting. To me, a mix of ISA income from a clutch of decent dividend paying shares and funds, annuity income, cash savings and inflation-linked National Savings certificates seems an attractive route for diversifying away some of this risk.

Your thoughts? Feel free to share them in the box below.

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Five terrible ways to cut Valentines costs

Sarah Coles — 2012-02-09T12:00:00+00:00

Filed under: Shopping & Deals

Jan Haas/DPA/Press Association Images

It's that time of year again, where we knowingly enter into a day of commercialised sentimentality, declaring our love through a £4 greetings card, a £25 bunch of flowers, or a £50 meal in a crowded restaurant with an over-stretched staff.

We know it's a rip off, but it's better than the alternatives. The first is to ignore the day entirely - and pay the price for the next year. The second is to follow some of the more amusing suggestions for a cut-price Valentines Day.
The press release-writers have been out in force, suggesting creative ways to treat your Valentine that don't break the bank. The top five more alarming suggestions are dominated by Debt Advisory Line. Among a host of suggestions they recommend:

1. Instead of splurging money on chocolates and cards surprise your other half by buying them something you know they already want and will appreciate more if you get it as a gift.

Brilliant! I'm thinking a new toilet brush, or a six-pack of lager should go down a treat.

2. Maximize the benefits of memberships already paid for such as leisure centres.

There's nothing more fun than a Valentines spin class. And who wouldn't want to be told by their other half that their gift for the day is to get their behind in better shape?

3. Think outside the box - roses are a traditional Valentine's gift but are pricey. Carnations, Chrysanthemums', Snow Drops' and Freesia are less expensive and make a unique gift.

And there's nothing nicer than picking a bunch of snow drops from next door's garden and trying to pass them off as a thoughtful gift.

4. Keep an eye on restaurant and supermarket meal deal offers - vouchers are always available to download on money saving websites offering buy one get one free meals or two courses for as little as £10 so keep an eye out.

According to VoucherCodes.co.uk 75% of people feel it is acceptable to use a discount voucher to reduce the cost of a Valentine's Day meal. So clip those coupons and watch those deals - or why not go the whole hog, and take them to the chippy?

5. This suggestion comes courtesy of VoucherCodes.co.uk, which wisely points out that a number of vouchers aren't valid on the big day. It, however, has a brilliant solution - eat on another day when you can get a better deal.

Apparently its research reveals that nearly half (49%) of Brits reveal they would be would be willing to celebrate by eating out on a different date in order to get a better restaurant deal. The question is whether this half includes your partner or not... and whether you're willing to risk it.

Would you?

Jim Rowley of Debt Advisory Line, said: "You can save money this Valentine's Day and still show how much your partner means to you!" It just depends whether or not these creative ideas really give off the right message.

Of course we all want to cut the cost, but just how much does it cost to actually tell someone you love them? If the words stick in your throat, you could always write a letter. For the cost of a stamp you can tell your other half you don't have any money to spend on Valentine's Day, but you will spend the rest of your life showing them how much you love and value them through everything you say and do.

What would you prefer, a Valentines message from the heart, or a bedraggled bunch of stolen snowdrops and a new kettle descaler? Let us know in the comments.

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Diageo drink sales decline in UK

Press Association — 2012-02-09T11:46:00+00:00

Filed under: Investing

Drinks giant Diageo has said sales in the UK were falling behind its continental neighbours - although Britons are still lapping up vodka and Baileys.

Smirnoff and whiskey and cream-based liqueur Baileys remained popular in the six months to December 31, but overall sales still declined in the UK and were flat in Europe, which was supported by double-digit growth in France and Germany.

Diageo, which saw a 12% rise in pre-tax profits to £1.8 billion in the period, said UK sales were hit by a decision to hold firm on prices and cut the number of promotions.

Elsewhere, Latin America remained the company's strongest market with 23% sales growth, compared with 12% growth in Africa, 10% in Asia and 5% in North America.

Diageo is exposed to several struggling eurozone economies, such as Spain, Greece and Ireland, which have all posted declining sales as the wider problems flowing from the sovereign debt crisis lead to a squeeze in consumer spending.

Andrew Morgan, Diageo Europe president, said: "The economic environment, particularly in southern Europe, has impacted our performance in Western Europe, while in the emerging markets of Europe we have delivered strong growth."

Smirnoff vodka was up 8% in the period, driven by sales in the UK and Germany, while Captain Morgan grew by 25% in the region, although it has a relatively small hold in Europe compared with regions like the US.

Diageo, which sells its drinks in 180 countries across the globe, also has high exposure to emerging markets which have supported the half-year performance. In Africa, Guinness sales were 10% ahead, while scotch label Johnnie Walker was up 32% and in Latin America the performance was driven by a 32% rise in Smirnoff sales.

Shares in Diageo fell more than 1% after the trading update was published.

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Revealed: Best energy deals on the market

Sarah Coles — 2012-02-09T11:00:00+00:00

Filed under: Utilities

Andrew Milligan/PA Archive/Press Association Images

The cost of energy is all over the place at the moment. Each company has tweaked prices here and there to account for falling wholesale prices. But the complexity of the market and of the changes mean it's tricky to keep on top of the best deals.

So who is offering the most competitive deals at the moment?
Comparison website energyhelpline.com has investigated the best deals around right now. The site points out that Fuel Poverty Awareness Day tomorrow is all very well and good for highlighting that seven million people are struggling with their bills and are now officially in fuel poverty. However, it doesn't do them any good unless they know where they should be moving.

The experts say that making the right switch for gas and electricity could save the average household £292 - so it's worth the effort. Mark Todd, director of Energyhelpline.com, said: "Living standards are being squeezed to the point where many households face a daily challenge to make ends meet. However, it is not all doom and gloom and energy customers can save hundreds of pounds in just a few minutes by switching supplier."

The best deals

The best deal overall is the First Utility Internet tariff, which will cost the average UK household £1,030 a year - £292 cheaper than the UK average bill of £1,322. The company is also responsible for the second most competitive deal - which would save the average householder £262 a year.

For those who would rather go with a better-known provider, Ovo, nPower and Scottish Power are all in the top five, and according to energyhelpline.co.uk they are currently attracting the most business.

The future

Interestingly there are four fixed deals in the top five - indicating that the providers don't think prices will be rising again in the immediate future.

In fact, it may be worth considering a variable deal, because prices may be on their way down. Todd said: "The recent spike in wholesale prices due to the cold weather has now calmed. Further small price cuts are expected from summer onwards. If the UK and European economies slow dramatically this year then big price cuts are possible."

So it's well worth switching now, and if you opt for a variable deal, it may well be worth switching later in the year too. It may seem like changing suppliers is your new full time job, but it could be a rewarding one.

Top 5 cheapest deals

first:utility iSave v9, average cost of £1030
first:utility iSave Fixed v1, average cost of £1,060
Ovo New Energy Fixed, average cost of £1,061
Scottish Power Online Fixed Price Energy May 2013, average cost of £1,070
Npower Go Fix 10, average cost of £1,078

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Rolls hits record £1.16bn profit

Press Association — 2012-02-09T11:00:00+00:00

Filed under: News

Engines giant Rolls-Royce has posted record annual profits of more than £1 billion and said it is confident of further growth this year.

Derby and Bristol-based Rolls has been lifted by an order book that stood at £62.2 billion at the end of 2011, fuelled by demand in civil aerospace.

Unveiling profits of £1.16 billion and revenues of £11.3 billion, chief executive John Rishton said the business performed well in 2011.

He added: "Our order book gives us good visibility of future revenues and demonstrates the confidence our customers have in us."

A year ago, the company's results were blighted by the £56 million impact of the mid-air failure of one of its Trent 900 engines on a Qantas superjumbo.

However, the civil aerospace division appears to have weathered the storm after its order book grew by 7% to £51.9 billion, a workload which includes more than 5,000 engines. Profits in the division increased by 27% to £499 million due to higher volumes and improved productivity.

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Rolls expects the operation to produce further strong profits growth this year, alongside more modest improvements in its defence, marine and energy arms.

The pressure on Government budgets meant the order book in defence fell by 7% to £6 billion but Rolls said the £1.8 billion of new business achieved in the year demonstrated there were still opportunities for growth.

Rolls completed one of the biggest deals in its history last year when it joined forces with Mercedes-Benz owner Daimler to acquire German engine maker Tognum for around £3 billion. The company will combine Tognum with its own Bergen business, which makes engines used across the maritime and power generation sectors.

The profits figure of £1.16 billion represented an increase of 21% on a year earlier and was helped by foreign exchange benefits worth £54 million. Shareholders will receive a full-year dividend of 17.5p a share, an increase of 9% on a year earlier.

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Facebook discloses boardroom deals

Press Association — 2012-02-09T10:30:00+00:00

Filed under: News

Facebook's top executives, including chief executive Mark Zuckerberg, are eligible for twice-a-year bonuses of up to 45% of their base salaries and other earnings, according to a recent regulatory filing.

Facebook said in a filing it will pay Mr Zuckerberg, 27, a base salary of 500,000 US dollars (£315,000) per year.

Mr Zuckerberg's 45% target bonus will be based on his performance.

Chief operating officer Sheryl Sandberg will receive a base salary of 300,000 US dollars (£190,000). Her target bonus is also 45%, the same as the other executives.

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David Ebersman will continue to serve as chief financial officer and he will get a base salary of 300,000 US dollars.

Mike Schroepfer, Facebook's vice president of engineering, will receive a base salary of 275,000 US dollars (£174,000).

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Pub landlords warned of tough times

Press Association — 2012-02-09T10:30:00+00:00

Filed under: News

The UK's biggest pub landlord has warned its publicans to be braced for a tough year ahead as costs increase and consumers face further economic uncertainty.

Enterprise Inns, which has a portfolio of 6,289 leasehold and tenant pubs, has increased the prices it charges to tenants by 4.3% as it passes on higher bills from brewers.

The warning to publicans comes a month before the next Budget, in which the Chancellor is expected to increase duty on alcohol sales, and follows reports that the price of a pint could increase by as much as 15p as tenants face no choice but to pass higher bills on to customers.

A spokeswoman for Enterprise said: "We have communicated the outcomes of our 2012 pricing review directly to all our publicans, and do not discuss private and confidential matters between the company and its publicans with any other parties.
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"We share a strong common interest in our publicans' success and will continue to go to considerable lengths to assist and support them in dealing with current economic challenges."

Meanwhile, Enterprise revealed robust trading in the 18 weeks to February 4, with average income per pub in the majority of its estate increasing by 1% on a like-for-like basis, which is an improvement on the same period last year, when income dropped 2%.

Solihull-based Enterprise said trading has benefited from the comparison with the extreme weather conditions of December 2010, which it estimated cost almost £2 million in operating profit last year. Average net income per pub, which benefits from the disposal of underperforming pubs, was almost 5% ahead during the 18-week period, Enterprise added.

In a sign that economic conditions are improving for tenants, Enterprise said it had seen a lower number of business failures, a further reduction in the level of overdue balances and a "substantial" reduction in the cost of financial support for struggling publicans.

The group saw strong income growth at its Beacon pubs - venues where Enterprise works more closely with tenants to improve standards. The 110 pubs which have been operating under the Beacon-managed tenancy format for at least four weeks delivered net income growth of nearly 30%.

Enterprise urged the Government to reconsider implementing its duty accumulator and to "recognise the economic and social contribution that responsibly-run, thriving community pubs can make to this country". The group added: "We expect trading conditions to remain challenging throughout the coming year as consumers face economic uncertainty and publicans have to manage rising cost pressures."

Related stories:

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Games hotel prices 'extortionate'

Press Association — 2012-02-09T10:17:00+00:00

Filed under: News

The Government must tackle the "scandal of extortionate price rises" in London hotels during the Olympic and Paralympic Games, a Labour MP has said.

Shadow minister for London and the Olympics Tessa Jowell claimed prices across London were averaging an increase of 315%, as she called for action "on behalf of those already struggling families across the UK who want to be able to afford to come to London and enjoy the Olympic and Paralympic Games".Speaking during Commons Culture, Olympics, Media and Sport questions, Ms Jowell cited the case of a woman from Exeter who, she said, was having to pay £1,000 a night for a room with a hoist to be able to take her disabled daughter to the Paralympics, a room for which at Easter she was paying £375 - a 167% increase in price.

She said: "There is a big problem here and while I welcome the Government's £4 million to encourage domestic tourism and yield the potential £2.5 billion Olympic tourism premium, do you agree with me that the Government should act to address this scandal of extortionate price rises in London hotels during the Olympic and Paralympic Games?"

Minister for Tourism and Heritage John Penrose maintained the London Organising Committee of the Olympic and Paralympic Games (Locog) had "just released" additional rooms to ease the restriction in supply.

He said: "I would completely agree with her that it is vitally important that we have properly accessible both attractions and accommodation and indeed there's been a great deal of work done to make sure that the importance of the legal obligations - but also the commercial opportunities of making accommodation available to people with disabilities - is well understood and the opportunity is grasped."

He added: "I would however say to her that it has always been the case that prices alter during the course of the season, that is entirely natural.

"What has happened in the case of London most recently is that the Locog block booking, which she'll be aware of since it was part of the original Olympics deal, meant that there was a restriction in supply. That has now been eased as a result of the recent release of additional rooms which Locog has just released."

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NatWest's sneaky catch to its latest ISA

Sarah Coles — 2012-02-09T10:00:00+00:00

Filed under: Savings & ISAs

Tim Ireland/PA Archive/Press Association Images

NatWest has just launched a new cash ISA offering up to 4.2% in fixed interest, which is virtually unheard of in the current market, and immediately thrust it to the top of the best-buy tables.

However, a report by Thisismoney is warning savers that it comes with a hefty catch - and one which renders the account far less competitive.

The deal

The ISA was launched last week. It is called the preferential fixed ISA, and in adverts and leaflets the rate of up to 4.2% for those who switch from other providers has loomed large.

The catch

However, if you look to the finer print it points out that this rate doesn't kick in until April. Up until that point it goes into NatWest's variable Cash ISA, which pays as little as 0.5%. This can make the rate up to 10% less rewarding than is advertised.

The newspaper calculated that for those signing up to the 3.35% fixed one year deal, they were actually getting a 14 month 2.94% deal - which is decidedly less attractive.

The specifics of the deal are made clear in the small print before the customer signs up - so NatWest is not breaking any rules. However, there would be those who argue that neither is it being crystal clear. And there are plenty of savers who once they get to this stage in the process are already committed and don't have the time or inclination to search elsewhere.

The reason

Kevin Mountford, Head of Banking at Moneysupermarket.co.uk says this is a sign that the banks are trying to get more creative for this ISA season, by encouraging people to commit in advance. He says: "Around 80% of the ISA market operates in March and April and there's every sign that this year is going to be even more of a bun fight than the last couple of years." There have been a number of accounts announced in recent weeks.

He says: "We would always recommend people make use of their ISA allowance as early as possible in the tax year. It's just a question of whether you think this is a good enough deal to go for now, or whether you'd rather wait a few weeks for the rest of the deals to be announced."

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HMRC Redknapp blunder could cost £8m

Adrian Holliday — 2012-02-09T08:00:00+00:00

Filed under: News

The judgment of HMRC is under the spotlight after Tottenham Hotspur manager Harry Redknapp was acquitted of cheating the public revenue, along with Milan Mandaric, the ex-Portsmouth chairman.

HMRC's investigation lasted five years. It cost the taxpayer several millions. Yet HMRC remains defiant about the waste of public cash.

No regrets

"If you look at the logic of the case none of it made sense," Harry Redknapp's defence barrister John Kelsey-Fry, QC, told the Mail. "It's one of those things where if you sit down and think about it, you know there is something not right there."

It's difficult to know exactly how much the bungled HMRC allegations cost the taxpayer. The Crown Prosecution Service was involved - 'fair, fearless, effective' it claims - as was the City of London Police - and, of course, it clocked up thousands of HMRC hours. Police interviews; a dawn raid; many millions spent. But a jury threw the case out in just five hours.
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What is breathtaking is that HMRC had no regrets about taking on Redknapp, whose own legal fees for the case have tipped £500,000. HMRC's Assistant Director of Criminal Investigations, Chris Martin, said it was "vitally important" that the facts of the case were presented to a public jury.

No arrests

"We accept the verdict of the jury but I would like to remind those who are evading tax by using offshore tax havens that it always makes sense to come forward and talk to us before we come to talk to you."

The FT claims HMRC has been given £900m to look more closely at tax avoidance and to step up the number of prosecutions, though clearly it will need to pick with more care in future, especially if targets are high profile.

The City of London Police haven't, like HMRC, come out of this covered in much glory either. Despite a massive global banking seizure, the City of London police have yet to arrest one single banker for any offence. Yet much of the credit crisis deal-making was done in the City of London, right in its own backyard.

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