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NS&I Increases Interest
Rate On Income Bonds

NS&I increases interest rate on its income bonds
National Savings and Investments (NS&I) has announced
that it has increased the interest rates on its Income
Bonds by 1%. The revised interest rates came into effect
from 20 May 2009 for Income Bond customers.
Guaranteed Income Bonds are intended to provide
investors with a100% secure monthly income at a
competitive variable interest rate. This no risk
guarantee to the investment capital is possible because
National Savings and Investments is backed by HM
Treasury. Income Bonds can be cashed in at any time with
no notice and no penalty and income can be paid directly
into a bank or building society account or into a NS&I
Investment Account or Easy Access Savings Account.
The combination of complete security and the increased
interest rates are expected to make NS&I Income Bonds
especially attractive in the current economic climate.
NS&I constantly reviews savings products offered by
other providers and has made this decision to take into
account the rates available on other types of products
which might be considered by Income Bond customers. NS&I
continues to follow a pricing strategy designed to
balance the interests of its savers, the taxpayer and
the stability of the financial services market.
The interest rates on NS&I's other savings products,
including NS&I's Guaranteed Income Bonds, will remain
unchanged.
This brings the new Income Bonds variable gross rates*
to 1.7% p.a. (1.71% AER**) for savings of £500 - £24,999
and 2% p.a. (2.02% AER) for savings of £25,000+.
Note
*Gross means the taxable rate of interest without the
deduction of UK Income Tax
**AER stands for Annual Equivalent Rate and enables the
comparison of interest rates from different financial
institutions and across different products on a
like-for-like basis. It shows what the notional annual
rate would be if interest was compounded each time it
was credited or paid out. |
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Make The Most Of Summer Savings |
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• 42% of Britons think they save money on
household bills and outgoings during the summer,
on average £77.39 a month
• However, 48% think they spend more on leisure
activities in the summer, a monthly average of
£109.80
• 43% increase summer spending as sunny weather
makes them more relaxed
Much of the British population is failing to
make the most of money saved on household bills
and outgoings during the summer months as the
increased sunshine makes them forget their
budgets and spend more on having fun, according
to the latest NS&I (National Savings and
Investments) Quarterly Savings Survey.
More than two-fifths (42%) of Britons think they
spend less on outgoings such as utilities and
groceries during the summer months, with people
expecting these summer savings to average more
than £75 (£77.39) a month. However, rather than
setting these extra pounds aside, it seems
they're being spent on leisure actives when,
with a little planning, they could still have a
good time for less money. Nearly half (48%) of
the population think they spend more on leisure
activities in summer, this is more than likely
to be impacted by children's' school holidays.
During this season, outgoings on activities like
socialising with friends, parties and holidays
increase by a monthly average of more than £100
(£109.80).. The warmer weather carries much of
the blame for this rise in spending as 43% of
Britons say improvements in the weather made
them feel more relaxed about their outgoings.
While 92% of people say they use less heating in
summer, four-fifths (82%) hang washing outdoors
rather than use the tumble drier, more than
two-thirds (70%) save on transport by walking
more, and a third (34%) save money by eating
garden produce - there are other expenditures
which outweigh these savings. Nearly two-thirds
(60%) of the population confess to spending more
on holidays and weekends away in summer than
winter and almost two-fifths (39%) are more
likely to spend money going out to bars and
restaurants with friends.
Dax Harkins, NS&I's savings strategist
commented: "Everyone loves to see the sunshine,
but people should try not to be so dazzled that
they forget their finances. It's great that many
essential household costs are less during the
warmer months, but Brits would be wise to try
and make the most of these savings by putting
some of this money away. Summer fun doesn't need
to be expensive. It's always worth planning what
you most want to do cost effectively and
checking what free activities are on in your
local area or perhaps consider packing up a
picnic for an outdoor lunch rather than going to
a restaurant."
Top summer savings tips from NS&I;
• Get involved in your community - keep abreast
of all summer activities organised by your local
council and community groups, many of which will
be free
• Look out for 'days out' coupons - often
available with your shopping or in newspapers
• For a fun day-out take the kids to a local
fruit picking farm; it's good exercise, you get
delicious fresh food and have lots of fun all at
the same time. And it's not too late to grow
your own
• Research the top 10 walks or bike rides in
your area, and make them more interesting for
children by reviving traditional activities like
blackberry picking.
• Clear out your wardrobe. When you find summer
clothes that have fallen out of fashion or no
longer fit, don't throw them out, throw a
clothes swap party with your friends.
• Cut down on transport - by walking and cycling
more you can save energy and enjoy the warm
weather. Plus the extra exercise will help you
keep fit
• Reduce your household energy consumption by
drying clothes outdoors instead of using the
tumble dryer
In fact, by taking a careful look at their
finances, Britons could make even more seasonal
savings. Over a quarter (26%) of the population
feel there are more opportunities to set money
aside during the summer of which they currently
aren't taking advantage. Further, 23% believe
that they could look more carefully at the
amount they spend socialising to reduce their
outgoings. 26% of the population are actively
trying to budget during these months, but
sometimes overspend.
Harkins continued: "Some people (7%) say that
they're too busy to budget properly. I would
urge everyone to try and set aside a small
amount of time, even just half an hour each
month, to review their incomings and outgoings
and to assess how they can better plan their
budget - and as a consequence make their
longer-term finances healthier."
You and your money -
www.youandyourmoney.info
- is a website launched by NS&I as part of an
ongoing drive to improve the public's
understanding of personal finance.
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Low
Savings Rates
But Real Returns
Continue To Climb
Savings rates look to have ended their freefall, with
the average no notice rate hovering around 0.65%,
marginally above bank base rate.Newly published inflation figures shows that the real
return after basic tax and inflation on an average no
notice savings account is 1.73 per cent for Retail Price
Index (RPI) for Consumer Price Index (CPI) is still in
the negative at minus 1.77 per cent.
Darren Cook,
Analyst at
Moneyfacts.co.uk,
commented:
“Unfortunately low interest rates are geared to
encourage savers to plough their savings back into the
economy, but this serves little or no benefit to those
who rely on interest from their hard earned wealth to
subsidise their pension. Using both inflationary
indices, the real return on savings interest is showing
a pleasing upward trend for RPI, up 0.67 per cent on
last month.
“Due to the make up of RPI, the only beneficiaries of
this positive real return are those that have recently
benefited from cheap monthly mortgage repayments.
"Mortgage-free pensioners who are relying on savings
interest to subsidise their income are seeing their
expenses rise by CPI at 2.30 per cent and their savings
fall by 1.77 per cent in real terms”. |
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Pensions ‘Perfect Storm’
Looms For Unprepared
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A ‘PERFECT STORM’ of
demographic, individual and
financial elements is poised to
derail people’s retirement plans
in the UK unless they prepare
properly now, a global survey
from HSBC Insurance has
revealed.
The fifth annual Future of
Retirement study, It’s Time
to Prepare, shows that
globally:
· people’s
short-term survival strategies
in the midst of recession are
creating a serious long-term
pensions ‘downturn deficit’
·
there is a continuing lack of
pensions planning, even though
people are aware that they are
likely to live longer
· this
is being exacerbated by poor
levels of financial
understanding, education and
access to advice
· while
people are more concerned with
protecting their pets and
possessions in the short-term
than ensuring they can look
forward to a secure life after
work.
The consequence of these
combined issues is that many
people in the UK will struggle
to make ends meet when they come
to retire, unless they urgently
review their priorities and
planning.
Stephen Green, Group Chairman of
HSBC, said: “A perfect storm is
confronting pensions planning,
created by an ageing population,
falling pension funds values, a
drop in state and employer
contributions and an economic
downturn which is forcing people
to make tough financial
choices.
The preparedness
gap
It’s Time to Prepare
has identified a ‘preparedness
gap’ in people’s pensions
planning across the world with
nearly 9 out of 10 people not
feeling fully prepared for their
retirement.
The Future of Retirement survey,
which questioned 15,000
people in 15 countries, making
it the largest study of its kind
in the world, shows that in the
UK:
· Only
25% of respondents feel fully
prepared for their retirement
· 76%
do not know what income they
will receive in retirement
· Only
38% feel they fully understand
their long-term finances
· Approaching
half (43%) have undertaken some
planning for later life, but
still remain unclear about what
their retirement income will
look like
· 13%
have done no retirement planning
at all
Stephen Green continued: “The
‘preparedness gap’ reveals that
families in the UK need greater
support and guidance to
effectively handle their
finances, not simply in schools
and colleges but through
‘trusted advisers’ providing
professional financial
guidance.
“If people prepare adequately
for the long-term an extended
later life can present a golden
opportunity for many – but now
is the time for people to
seriously consider boosting
their pensions contributions to
improve their prospects of a
comfortable retirement. The cost
of procrastination is likely to
be high.”
Advice gap opens
up
It’s Time to Prepare
also reveals a parallel ‘advice
gap’ in the UK linking a lack of
preparedness to insufficient
financial education and
guidance:
· More
than a third (37%) have never
had any form of professional
financial advice
· While
a third (33%) feel ‘fairly’ or
‘very’ unprepared for their
retirement
· More
than half (56%) of respondents
have never had any form of
financial education
· Only
5% realised they would need to
buy an annuity when they
retire.
Clive Bannister, Group Managing
Director, HSBC Insurance, said:
“The Future of Retirement report
this year reveals the need for
people to have access to more
and better financial advice and
guidance to help them survive
the downturn while making the
right financial decisions for
the long-term.”
Coping with the
downturn – pets not pensions?
People are paying little
attention to long-term
considerations such as their
likely retirement needs,
focusing instead on purely
practical short-term concerns
which they better understand,
It’s Time to Prepare
reveals.
General insurance solutions –
motor, travel, home and even, in
the UK, pet insurance – are seen
as a greater priority than
addressing longer-term needs
around insuring health or
income, even when job security
is in question.
Despite global economic
uncertainty, only 2% in the UK
intend to take out income
protection insurance in the next
12 months, compared to 7% who
will be insuring their pets.
The Future of Retirement survey
shows, as a result of the
economic downturn, that in the
UK:
· 87%
of people have changed some
element of their finances
·
Only 18% will now retire as
planned
· 14%
are reducing retirement savings
or stopping saving for
retirement altogether
· 19%
have used savings to pay off
debt
· 11%
expect to delay their retirement
Mark Twigg, Director at
financial services consultancy
Cicero Consulting, which
undertook the survey for HSBC
Insurance, said: “It’s Time to
Prepare reveals the lack of
understanding people in the UK
have around their long-term
retirement needs. They are less
well educated or aware when
trying to understand these needs
and to act on them, than with
their short-term requirements.
“As the economic ‘perfect storm’
threatens it is important that
people are encouraged to
understand long-term risks and
to manage them effectively.
While people are taking more
responsibility for themselves,
there is also a definite role
for financial institutions to
continue, and to build on, their
work to educate and inform.”
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Poor Health Could Be
Good For You
Pensioners with
medical conditions and smokers
could get guaranteed pay rise
for life. But too many missing
out, warns Rockingham Retirement
- Pensioners
losing out because they do not
declare they have a medical
condition
- Impaired annuity can add
significant income based on
lower life expectancy
Pensioners
are missing out on substantial
sums in pension benefits because
they do not disclose their
health conditions to advisers,
warns independent retirement
income specialist Rockingham
Retirement.
Rising incidents of diabetes and
high blood pressure – linked to
more and more people becoming
overweight – means that more
pensioners should be able to buy
an impaired annuity.
A snapshot survey conducted by
Rockingham Retirement
revealed* that up to 70 per cent
of people applying for an
annuity are unaware they can
maximise their chances of
getting a higher income by
revealing any medical
conditions.
“Many people simply do not
realise they can significantly
increase their retirement income
if they have an illness or
smoke,” said Rockingham
Retirement managing director
Steve Hunt.
“Take the example of a Mr Smith,
a lifelong smoker with Type 2
diabetes: this typical profile
candidate could increase his
£3,162.84 a year pension income
to £3,714.12 a year (based on a
typical £50,000 pension fund) -
an increase of over 17%.
“In other words, Mr Smith has
qualified for a 17% pay rise,
for the rest of his life. We
have a number of clients whose
incomes have increased by over
100% - and all because of a
health condition.
“Yet we regularly see examples
of people – most of whom
desperately need higher income –
taking what they are offered
from their original pension
company,” added Hunt.
“More often than not this will
not include any enhanced rates
for smoking or illnesses. And
those that do ‘seek advice’ do
not go to a specialist
retirement income broker; it is
a bit like going to your GP to
have open heart surgery,” he
said..
Generally, the more serious the
condition, the more money the
applicant should get. Those
suffering from non-insulin
dependent diabetes and
occasional angina - two very
common conditions suffered by
those in their mid-60s - could
boost pension income by more
than £2,000 a year with an
impaired product.
“The actual rates payable do
depend on the actual illness and
the severity of the condition,
but if you don’t ask you don’t
get,” said Hunt.
“These increased rates are
applicable because of a shorter
life expectancy, and the fact
that any annuity payments are
anticipated to be payable for a
lesser period of time. It makes
sense. What does not make sense
is that so many people are in
the dark about the fact that
they can do so much better by
shopping around for the best
deal.”
Rockingham Retirement
recently conducted a survey of
its clients, where it found that
it had typically increased
clients’ incomes by more than 30
per cent by trawling the market.
“Our research shows that we can
typically increase the level of
annuity income by about £1,000 a
year on the average pension
fund, but a major problem is
getting the message to people
that they do not have to take
the first deal they are
offered,” said Hunt.
Rockingham Retirement,
which has long campaigned for
faster pension transfer times,
recently announced the scrapping
of its standard £195
administration fee to convert
all pension funds of £20,000 and
under to an annuity.
“We can always be relied upon to
search for the highest annuity
rates on the market, and we
guarantee to find the highest
income possible – at no cost -
regardless of the fund size,”
added Hunt.
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Real Help With Your
Council Tax & Rent Bills
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The Department of Work & Pensions is writing to
200,000 pensioners who get Pension Credit to
encourage them to contact their local council to
check if they are entitled to help with their
Council Tax or housing costs.
This comes after the Pension Credit standard
minimum guarantee increased this April by the
biggest amount since it was introduced, bringing
it to £130 a week for single pensioners or
£198.45 for a couple.
Pensions Minister Rt Hon Rosie Winterton MP
said:
"We want everyone to receive all the help that
they are entitled to, especially in these
difficult times. Some people on Pension Credit
might not be aware that they can also receive
help with their rent and Council Tax.
"It can make a real difference. A pensioner with
the guarantee element of Pension Credit, with
average rent and Council Tax liabilities, could
have a weekly income equivalent to around £215 a
week."
"I also want more people to claim all the
benefits they are entitled to which is why, from
last November, we have made it easier to claim
State Pension, Pension Credit, Housing Benefit
and Council Tax Benefit in just one easy free
phone call, without the need to sign and return
any claim forms."
Pensioners who receive the letters should
contact their local council. Any pensioner who
wants to apply for Pension Credit itself can
call the hotline on 0800 991234.
In the 2009 Budget the Chancellor announced that
the capital threshold in Pension Credit, Housing
Benefit and Council Tax Benefit for pensioners
will be increased from £6,000 to £10,000 from
November 2009. This means that the first £10,000
of capital will be fully disregarded. Half a
million of the poorest pensioners stand to
benefit from this change with an average weekly
gain across all three benefits of £4 a week.
The government is also repeating the increased
level of winter fuel payments. For winter
2009/2010, the Winter Fuel Payment for
households with someone aged 60-79 will increase
from £200 to £250 and from £300 to £400 for
households with someone aged 80 or over.
As at August 2008 around 2.7 million households
(3.3 million individuals) were receiving Pension
Credit, with an average weekly award of around
£52. The amount of weekly income a pensioner
might receive through these income-related
benefits will depend on his or her particular
circumstances.
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Credit Card Costs
Continue To Increase
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The average credit card purchase rate continues
to increase, today standing at 18.1%, up from
16.3% two years ago.
Michelle Slade, analyst at Moneyfacts.co.uk
commented:
“The increase comes from a combination of card
providers raising rates, withdrawing competitive
deals and the launch of new cards onto the
market with higher APRs than we previously may
have seen.
“In the last six month, twelve cards have
increased rates including cards from American
Express, Bank of Scotland, Capital One Bank,
Halifax and Nationwide BS.
“Customers who repay just the minimum will be
hardest hit with an additional £408 in interest
now being payable on a modest balance of £2,000.
“With only a handful of cards on the market
linked to tracking base rate, very few have seen
any benefit from the current all time low base
rate.
“Rising unemployment means that the risk of
customers defaulting on their card repayments
has increased, which is being passed on through
higher rates. If customers are struggling with
repayments, unsecured lending is one of first
casualties as customers fight to keep hold of
their property.
“Competitive credit card deals can still be
found on the market, with 0% balance transfer
deals available for 16 months and 0%
introductory purchase deals for 12 months, but
with the increased risk of default, only those
with exemplary credit histories are likely to be
accepted for the best deals.”
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Investors
Split between
Equities and Bonds for
Cash ISA Transfers
As
interest rates fell from 5% to an historic low
of 0.5% over the last six months of the last tax
year, investors dependent on their savings
sought new homes for their cash. Rule changes,
which came into effect in April 2008, meant that
it was possible to transfer cash mini ISAs into
stocks & shares ISAs.
Transferring should never be done without
considering the implications as, once moved, the
ISA cannot go back the other way again. Many
investors have taken advantage of the new rules
towards the latter half of the tax year. In fact
almost two thirds of cash ISA to stocks & shares
ISA transfers for the whole 2008/09 tax year
took place between January and March 2009.
Ben Lundie, Head of Vantage Development:
"The markets are continuing to offer
opportunities for those seeking a higher level
of income, albeit with a higher level of risk
than cash, and investors continue to take
advantage. Investors looking at transferring
should ensure they are happy with the risk
associated with equity or bond investments prior
to transferring."
The table below lists the preferred choice of
funds for those transferring (in alphabetical
order)since the start of January 2009 together
with the current yield. As can be seen, the
income on offer is far in excess of what is
available in cash ISAs:
|
Fund
|
Yield |
| Artemis
Income |
6.5% |
| Artemis
Strategic Bond |
8.3% |
| Invesco
Perpetual Corporate Bond |
6.77% |
| Invesco
Perpetual High Income |
4.61% |
|
Invesco Perpetual Monthly
Income |
10.97% |
|
Investec Sterling Bond Fund
|
5.71% |
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Jupiter Corporate Bond
|
5.04% |
|
M & G Optimal Income
|
6.1% |
|
Royal London Sterling Extra Yield Bond |
12.66% |
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Crunch Britannia - Are We
Letting Ourselves Go?
Research by mySupermarket.co.uk,
has found that the credit crunch
might be leading Britons to let
standards slip. With prices at
the supermarkets having risen
sharply over the past year on
lots of our weekly essentials,
the cut backs people are making
are becoming evident.
Whilst an Englishman's home has
traditionally been his castle,
since the credit crunch hit it
seems it may be grubbier than it
was twelve months ago. Over the
past year, sales of household
cleaning products have
fallen by 16%,
suggesting we are sacrificing on
keeping our home clean or
perhaps returning to more
traditional and natural cleaning
methods of the past.
Its not only our houses which
are being neglected, our bodies
may be facing a tough time too -
sales of fresh fruit and
vegetables are down 8% and 7%
respectively
whilst fruit juice is proving to
be an unaffordable luxury with
sales falling by a massive 17%.
With sales of
crisps and snacks rising by 12%
and frozen
pizza seeing a 6% upturn,
people appear to be comfort
eating their way through the
downturn. It may also be a case
of people drowning their sorrows
as
sales of white wine jump 9%,
replacing champagne and
sparkling wine which has seen
sales tumble by almost a quarter.
These results come as the latest
analysis from mySupermarket
shows the price of 'The Nation's
Trolley' has risen by only 13
pence over the last month and is
now only 7% dearer than it was
12 months ago.
These changes suggest food
prices are steadying out which
is good news for shoppers. Yet
it is possible to see the
correlation between prices and
sales - the fruit and vegetable
items from the trolley have
risen by an average of 20%
with sales falling by 7.5%.
Attached is the breakdown of the
trolley of goods. The trolley is
based on a true average weekly
shop of £85 and includes the
regular staple products along
with the nation's most regularly
purchased grocery items - and
for the first time includes
non-food. The prices listed are
an average of the price across
Sainsbury's, Tesco and ASDA - by
using an average we avoid any
anomalies caused by ad-hoc
special offers. This method will
produce more accurate pricing
analysis for this number of
products.
Jonny Steel, spokesperson for
mySupermarket, comments
"Over the past year shoppers
have faced unprecedented rises
in their cost of their grocery
bills and whilst the latest
figures from mySupermarket show
that we may now be over the
worst of it, it's clear that
people have changed their habits
and have had to make sacrifices
to beat the increases. It's
possible to see direct
correlations between the
sharpest rising prices and their
equivalent sales - fruit and
vegetables have shown huge jumps
in prices and now we can see
that the sales have since
fallen. So whilst people's
wallets may be getting thinner,
their waist line may be going in
the opposite direction! Price
hikes shouldn't have to mean a
sacrifice in terms of health
though, and by tracking the best
deals and offers it is possible
to save up to 20% on a weeks
shopping and beat the increases
on the products we want to buy." |
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