Troubled Launch to Much Welcomed Pensioner Bonds

Keeping a promise made at the last Budget, and in response to lobbying from some pressure groups, January 2015 finally saw the launch of the so called Pensioner Bonds by the Treasury.

The government backed 65+ Pensioner Bond are available from National Savings & Investments, and only those over 65 are eligible to invest in the bonds. Investment is limited to £10,000 in each type of bond (making a maximum investment per individual being £20,000), and will be available in one year’s bonds with a 2.8% interest rate, and three year bonds with a rate of 4%. Despite savings rates having fallen since the bonds were announced last March, the Treasury has kept to the interest rates it predicted at that time.

The financial sector has praised the Pensioner Bonds, which have a market leading interest rate. Indeed, comparisons with similar, private bonds (or indeed other public bonds) show this clearly. The returns are very favourable. Those investing the maximum amount will get a return of £280 from the one-year bond pre-tax, £95 more than from the best equivalent bond currently available elsewhere. Investing the maximum in the three-year bond will see a pre-tax return of £1248, £480 more than from the best equivalent bond elsewhere.

However, despite the hype and capital gains, there are warnings and points for pensioners to consider. Indeed, some financial commentators have criticised the bonds, claiming that the government has prioritised pensioners over workers amidst other concerns. Additionally, and crucially, investors will be taxed on the significant yields from the bonds. For example, those on a basic rate tax will have 20% deducted from the interest they earn, therefore reducing the returns; a one-year bond will yield £224 after tax, and a three-year bond £991.

Despite that, and other caveats, the Pensioner Bonds have proved very popular. When they were first launched, demand caused problems with the N&SI servers. Within hours of the bonds going on sale, NS&I reported problems with their servers, and potential investors reported long waits trying to contact NS&I. This led to great frustrations from would be investors, who simply could not invest. Difficulties were compounded by uncertainty as to when the bonds actually did go on sale, and that over one million people had registered to receive information about the bonds. However, N&SI and the Treasury have advised not to panic, and apologised. Although there are a finite number of 65+ Pensioner Bonds, (£10 bn were put on sale) predictions were that it would take few weeks to sell out, not a few days.

The success of the launch and initial sale was evident immediately. Figures showed that 26,000 bonds had been sold in the first afternoon, raising £270m. After being launched on a Thursday, the Saturday saw £1.5 bn of the bonds sold already. Citing a probable rise in interest rates, Danny Cox, from investment firm Hargreaves Lansdown said that “back in 2011, the popular NS&I index-linked certificates sold £5bn in four months before being closed. This year’s bonds are a different product, but I would be highly surprised if the £10bn allocation lasts until the new tax year in April… these new bonds [are very] attractive and I expect them to sell like hotcakes.”

The bonds certainly have proved very popular, and have been warmly welcomed by savers and financial advisers alike. A good way to start the year as regards personal finances- and this an election year.




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Good news for households amidst economic optimism for 2015

After several years of economic gloom, turmoil, and bad news- finally some good news for the British worker and employee.
Recently released Office of National Statistics (ONS) figures from 2014 indicate a growth in real earnings.

According to the ONS data, the growth in average pay taken home by British workers overtook inflation for the first time in five years. Excluding bonuses, wages rose by 1.3% from January to September, beating the Consumer Prices Index inflation rate of 1.2%. Including bonuses, real earnings rose by 1% from 2013. Further figures show that unemployment from July to September was down 115,000 on the previous quarter- lowering the total unemployed to 1.96m.

Indeed, since the global financial crash, pay has lagged behind inflation and the cost of living. This has led to calls to a rise in National Minimum Wage (NMW- which has now increased to £6.50 per hour), and indeed a Living Wage. Those living in London have faced the worst such problems. However, the ONS figures indicate, for the first time, that real earnings were catching up with inflation. Essentially, growth has slowed, resulting in earnings and inflation catching up with each other.

According to Howard Archer, chief economist at HIS Global Insight, the news would be of relief to consumers and households. Despite that, he added that “this is still really more to do with low inflation than markedly improving earnings. However, earnings growth did take a much-needed decent step in the right direction in September.”

This is one of the few instances where the UK’s shaky but steady economic growth and recovery has been of benefit. The impact of the slower recovery and growth has, ironically, now become of benefit to consumers and households in this regard.

A further assessment of the figures puts this rise down to increased productivity. According to Martin Beck, senior economic adviser to the EY Item Club, “the surprise rise in pay growth may be in part stemming from signs that the productivity of the workforce is improving… While GDP grew by 0.7% in Q3, hours worked rose by only 0.1%. This left the quarterly rise in output per hour at 0.6%, the best performance since the middle of 2011.”

Governor of the Bank of Englnad- and some Good Figures for Consumers

Governor of the Bank of England- and some good figures for consumers

The Bank of England, usually better known for its caution as regards such predictions, stated that it expects earnings to continue outpacing inflation well into 2015. The Bank went further, with the Deputy Governor considering that the rate of inflation could fall below 1% in 2015, with earnings growth rising to around 3% at the same time.

The ONS figures also brought good tidings as regards employment. The figures show that those claiming Jobseeker’s Allowance was 931,700 in October. This was 20,400 less than in September, and a cut in numbers for the 24th consecutive month cut. Similarly, the last quarter showed employment rising by 112,000 to 30.7 million- the highest since employment figures were first compiled in 1971. According to the ONS figures, 4.5 million are self-employed (14.7% of workers); this is down by 88,000 on the quarter, but an overall rise of 279,000 on 2013’s figures. However, the number of part time workers stubbornly remained the same, at around 1.3 million.

These same and similar sources, whilst praising these figures, and seeing growth and economic development, are at the same time sceptical. Many economic institutions, analysts and commentators, are all also advocating caution as regards the 2015 UK economy, and revival overall. There are still serious issues, worries and concerns as regards the economy (youth unemployment and the housing market, to name but two)- and a lot of hard work to be done before the growth and faltering start becomes a recovery overall.

However, after the last few years of austerity, and households and consumers increasingly feeling the pinch, it is great to end 2014 with such encouraging news for such consumers and households- and a welcome economic change for the better.



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Pension Reforms: More Choice to Pensioners from 2015

Few people think too carefully about their pensions and savings for retirement. However, the Treasury and the government always seem to be thinking about those for the average citizen (and not always to the pensioner’s advantage). Indeed, Chancellor George Osborne only recently announced further changes to the current pension system.

Under proposals which will come into effect in 2015 (providing the necessary legislation becomes law), pensioners will have more freedom and choice as regards their pension arrangements. Or will they?

Previously, pensioners have always been able to take 25% of their pension in a tax free lump sum. However, usually that has involved buying an annuity with the remainder. Under the Chancellor’s proposals, from next April, those over 55 will be given the choice to take a series of smaller lump sums, as opposed to one; for both options, though, the first 25% will be tax free. Essentially, more freedom and choice will be given to savers. In a further spirit of generosity, under the Chancellor’s plans, the rule that you have to be 55 or older to get your pension has been relaxed- to an extent. If savers try to get to their pension before 55, the old tax rules will apply, with a minimum of 55% being taxed. Further to that, financial advisers and analysts are warning younger workers that the current trend will that 55 age limit being raised over the coming decade.

Additionally, you do not have to be retired to take the money. Those still working will be allowed access to their pension funds, be they public or private. People will be able to take small lump sums from their private, employer pension fund even while still contributing to it. However, the same taxation threshold (the first 25% of each drawdown being tax free) will still apply. Further to this, there is also no minimum income needed to be able to take the drawdowns, the Treasury has confirmed.

However, this is by no means compulsory; the changes are merely another choice for pensioners. Whether they want to drawdown their pension immediately, carefully over time, or keep it as it is, is entirely up to them. Those pensioners and savers who do want a guaranteed income for life will still be able to buy annuities. However, those annuities will be on their own terms, rather than being forced down that particular savings route. To consider these matters from a different perspective, insurance companies have for many years found selling annuities as profitable; as such, any drastic changes to that would not be welcomed by the big insurer or annuity providers. The fear from banking regulators are that the annuity providers might seek to miss sell such annuities. Regulators such as the FCA will be examining this matter closely, and ensuring consumer protection in this matter.

These proposals will essentially give pensioners more control and say over their hard earned pension funds. However, savers should be reminded that with such freedom and choice comes responsibility- in this case, the responsibility to take charge carefully and prudently of their savings.

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Starting a New Business: Keeping Costs Down

Whether you’re just setting up as a self-employed sole trader or starting a limited company complete with a workforce on your payroll, starting a business is an exciting time. But it is also a time that will usually involve a lot of costs, and keeping these costs down can be a big factor in making sure you succeed.

There are a number of ways  you can make the process of starting a business more affordable. Some key points to consider are:


One thing to consider is where your business will be housed. This has the potential to be one of your biggest expenses, but some businesses can benefit from much more affordable options. Perhaps the most obvious is to work from home if possible, ideally in a spare room used as a dedicated office. This will not only provide an effectively free working space, but allow you to offset a portion of your bills against tax. If this is not an option, then you may be able to use a workspace – a public space available for people who want a place to come and carry out their business activities on a pay-as-you-go or membership basis.

If you are not working from home because you have employees, then consider whether it would be possible for them to work from home as well. With phones, email and Skype it may be possible to keep in touch and coordinate everyone without being in the same place, and you can still meet up in a coffee shop or hired meeting space from time to time.


Equipment is another of the big expenses that will often face a new business. Depending on the type of business you are operating, you may need anything from a single computer – for which your home computer may suffice – to a workshop full of specialist machinery.

Whatever the case, buying second hand or refurbished equipment can result in big potential savings. Alternatively, hiring equipment  may be a more financially manageable, at least until your business has an established, reliable income stream. If you need basic or moderately advanced software tools for some of your activities, you may want to find out if any suitable free software is available.

Business Services

In the early days, it is likely your business will need some kind of external service provider. For example, you may need to have a website built, and then seek help from a specialist in putting together a marketing campaign. You may also need things such as accountancy services.

For most of these services, there is no reason you need a provider who is geographically close to you. Some services such as web design could be outsourced to overseas businesses for comparatively big savings, without compromising on quality. Others, such as accounting services, will likely need to come from a UK provider but by casting your net nationwide you will have a better chance of finding the most competitive prices.

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May Public Borrowing Higher Than Expected

Public borrowing in May was higher than forecast, and this fact left its mark on the efforts of the chancellor to cut the deficit. Overall, the month of May saw government borrowing pass £13 billion. This puts it almost 9% above the level seen at this point last year.

According to the Office of National Statistics, net borrowing activity by the public sector ultimately reached £13.4 billion in May of this year. Economists forecast much lower levels of borrowing, with the figure expected to only stand at around £9.35 billion. This puts the total deficit at £24.2 billion, which is up by 8.7% compared to twelve months ago.

According to the forecast of public sector borrowing from the Office of Budgetary Responsibility, public sector borrowing through the course of the 2014/2015 financial year was expected to stand at £96 billion. Some experts are questioning whether May’s figures might leave the treasury struggling to stick to its targets this year as it managed to do last year. A spokesperson, however, insisted that the figures for May were still “in line with the budget forecast.”

However, some experts remain sceptical. According to Samuel Tombs of Capital Economics: “May’s public borrowing figures contain tentative signs that the coalition may be beginning to struggle to bring down the deficit in line with the fiscal plans.” Tombs went on to say that the economic recovery, while “fairly strong,” is still “struggling to have much of an impact on the borrowing numbers.”

In attempting to explain borrowing figures that so far exceeded the expectations of experts, the Treasury in part blamed unusual receipts during the course of the month. In particular, they pointed to the Bank of England’s decision to transfer £3.9 billion of payments that due as interest on government bonds.

Government takings from income tax and national insurance receipts were also somewhat disappointing. In the month of May specifically, they were up by 0.3% compared to the same month in 2013. However, this was small consolation for the fact that total receipts for the year so far in terms of income tax and national insurance were overall down by 0.8%.

According to the Treasury, this was a result of individuals choosing to delay their bonus payments in 2013 until the tax cut for top rate payers took effect. As these people began taking their bonuses after the start of the new tax year, when the top rate fell from 50% to 40%, this resulted in higher tax receipts for April and May 2014.

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Money Saving Tips for Landlords

Buy-to-let is a popular and potentially profitable way to invest funds. With the property market’s reputation for relative security, more and more people are choosing buy-to-let over other investment options such as stocks and shares.  Of course, getting the best out of an investment involves a mixture of maximising returns and minimising outlay. There are several steps you can take to reduce spending on your buy-to-let investment.

Review Insurance and Utilities

It is often possible to save money on regular expenses such as landlord’s insurance and, if you are responsible for them rather than your tenants, utilities. Every time you come to renew or reach the end of a contract, research the market and see if you can get a better deal with another provider. The best deals are often reserved for new customers, so never automatically renew.

This area is particularly notable because if you transfer to an equivalent plan, you are not compromising or losing out in any way. You will receive exactly the same utilities or insurance cover, but will spend less. Price comparison sites are a great way both to find the best deal and to ensure it really is equivalent.

Watch Your Spending

Simply taking a close look at your spending can reveal expenses that would otherwise go unnoticed. Small costs, in particular, can frequently go ignored but can soon mount up. Look closely at your bank statement each month, and run through each individual item. See if you can identify any areas where spending could be reduced or eliminated altogether.

If you ever pay for any expenses relating to your property with cash, you will find this a bit harder to keep track of. Nonetheless, it is worth trying to keep an eye on where money goes and thinking about whether these costs can be reduced.

Maintain the Property Thoroughly

Both landlords and tenants find it easy to ignore minor repairs that a property might need. However, doing this can result in problems worsening. A bigger problem will cost more to fix, and if it ends up with an emergency call-out this can be even more expensive.

Make sure that the property is kept well-maintained and that all necessary jobs are completed promptly even if there does not seem to be a rush. This type of preventative maintenance can prevent costs from soaring. It can also, in extreme cases, prevent a property from becoming temporarily uninhabitable, in which case you would have to refund rent.

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Missold PPI Complaints Still Over 1,000 a Day

Despite a drop in the number of complaints relating to missold payment protection insurance (PPI) through the latter half of 2013, the Financial Ombudsman Service continues to receive more than 1,000 complaints every day.

According to chief ombudsman Tony Boorman: “The extraordinary volumes of financial complaints we saw in 2013 now look as if they are starting to level off at last… But we’re still a long way from being able to say that PPI is sorted once and for all.”

Lloyds TSB has lately been the organisation that the most complaints have been levelled against, according to the ombudsman. Runners-up included HSBC, Barclays and the Bank of Scotland. Lloyds, however, claimed that when the number of complaints was considered against the number of customers it had, they were proportionally lower than those of most other institutions.

For the past couple of years, the Financial Ombudsman Service has more than doubled its staff, and those making claims for missold PPI have faced significant delays. While the numbers remain high, the fact that they are levelling off means that those making PPI claims should hopefully see timescales for adjudication improve noticeably. In spite of the levelling off in claim numbers, with still more than 1,000 to deal with every day the ombudsman has claimed that there are no plans to lay off any staff. Furthermore, the service has said that most of its staff are on three year contracts, suggesting that their jobs will remain secure at least until the end of this period.

When it comes to the adjudications, there are massive differences between banks. Barclays was the subject of just over 36,500 complaints, and in 77% of these the ombudsman found in favour of the customer. By contrast, less than 6,436 complaints were aimed at Nationwide, and only 10% of those were upheld.

Furthermore, the number of cases being upheld overall is falling. Around 75% of complaints were upheld in the first half of 2013, but only 56% in the second half of the year. Around half of complaints are being made through a claims management company. In the wake of the scandal when the large scale of PPI misspelling was revealed, these companies were set up to guide the masses of customers through the process of lodging a complaint and making a claim for the money to be repaid.

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Common Investment Options

With low interest rates set to continue, many people are instead looking to invest their savings. Most bank accounts are delivering interest below the rate of inflation, so investment is not just a way to get more money from savings but to avoid depreciation.

There are a number of different options for investment, and each comes with its own advantages and risks. Some of the most common options for investment are:

Stocks and Shares

Stocks and shares are a popular option for investment. Stocks up to a certain value can be further boosted by placing them into a stocks and shares ISA, resulting in tax-free returns. However, the key risk is that stock values can go up as well as down. The degree of risk depends in part on where you invest. Some stocks are relatively consistent performers, others a prone to greater variation providing greater potential for profit but also greater risk.

Stocks and shares can potentially be a very profitable investment option, but it can be a high-maintenance one. This is especially true if you want to truly maximise returns and minimise risks, which will involve keeping a close eye on your portfolio and moving your investments around to catch value increases and avoid price drops. Ultimately, the stock market can be an excellent investment if it is right for you, but should not be entered into on a whim.


Property is also a popular choice for investment, particularly buy-to-let. Your original investment remains tied up in the property as equity, recoverable if you ever decide to sell, and you earn income in the form of rent. If the value of the property increases, you also get an effective increase in your assets as your investment becomes more valuable.

A good property in a good area with strong demand can be a very safe investment option. Much of the time, it will also be a low-maintenance source of income. However, there will be periods of higher-maintenance. Whenever a tenant leaves, you will need to find a new occupant. When work needs to be done on the property or there are problems, this will also require maintenance. There can also be unexpected difficulties and costs, for example if problems with the property arise that call for costly work or you have problem tenants. There is also a danger that the value of the property may decrease, depreciating the value of your original investment.


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Cheap Ways to Market a Small Business

When you are at the head of a small business, especially if you are just starting out, it can be hard to know how to properly market your services. This is often doubly true if you are self-employed, running the business on your own and with all costs coming out of your own pocket. Of course, not every marketing tactic works for every type of business, but there are a few ways to market a business with little or no financial outlay.

Direct Contact

If you are providing services to other businesses (known as “business to business” or “B2B”), the one of the most effective ways to market your services is to identify potential clients and then contact them directly. Email, post, and telephone are all good ways to do this. Identifying potential clients is often easiest to do online. However, even in this digital age the phone book can be a useful tool, as it will often include businesses that don’t have a website or don’t appear high-up in search results.

Often this tactic will cost you nothing but time. However, unless you are confident with business writing, you may want to pay a one-off fee to have a letter or email written professionally. This can drastically improve your chances of success.

Google Adwords Vouchers

Google Adwords is the most popular and useful Pay Per Click (PPC) advertising tool, and can be invaluable if your business has a website. When people search for relevant phrases on Google, adverts through Adwords are shown alongside search results. You only pay for the advert if somebody clicks on the advert and visits your site.

The problem with Adwords is that it can get expensive. However, there are a number of vouchers available, especially for people opening new accounts. These often come as a free gift with other business services, or are sold for less than their face value. This provides an easy, affordable way to try out Adwords and see if it will be a profitable tactic to stick with. Bear in mind that you have to be confident in your website for Adwords to work well, though. No matter how many visitors your website gets, it won’t do much good if they aren’t impressed with what they see.


Never underestimate the power of business networking when it comes to business. If you provide services to other businesses, attend local business networking events. If you provide them to the public, see if you can attend other relevant events. For example, a florist might attend wedding fairs to meet people who may be looking for wedding flowers.

Networking doesn’t have to be confined to strictly business settings, either. Your family and friends are also valuable networking contacts. Make sure they know what you do. If they later realise they know somebody who could use your products or services, they might introduce that person to you as a new customer.


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How to Cut a Small Business IT Budget

Whether you’re self-employed or the head of a small or medium enterprise, there’s a good chance you use a computer. In order to work effectively and keep your business running smoothly, you need to have access to reliable hardware, invest in all the necessary software, and keep both up-to-date. This can be expensive, especially if you are just starting out or have come up against the need to update several things at once. However, there are easy ways to lower the cost of your business’ IT needs.

Buy for the Future

This tactic may involve spending more initially, but it can often mean significant savings down the line. When you buy a new computer or update your software, think about your business’ future needs as well as your immediate ones. For example, choose a computer with a reputation for reliability and with higher spec than you need. It may cost you more right now, but a few years down the line it will still meet your needs where a cheaper computer might have already needed replacing. As always, there is debate among experts, but Toshiba and Asus are widely considered two of the most reliable brands.

Buy Last Year’s Versions

There are times when it makes sense to do almost the opposite of the suggestions above. Usually, this applies to software. For many software packages, an updated version is released every year. However, sometimes the differences between versions can be small, or simply not applicable to your business. This means that you can often save a lot of money by buying last year’s version. It may last just as long as the latest version, but if it does have a shorter lifespan the fact you can use the same tactic again will often still make for a saving.

Use Free Software

Many people dismiss free software, thinking it must not be as good as paid alternatives. However, this is frequently not the case. Many free software packages are made by dedicated and talented professionals as a personal project. A lot are also “open source,” meaning that thousands of professional and amateur programmers contribute to its creation. One of the notable examples is Libreoffice, a free alternative to Microsoft Office. It is fully cross-compatible with Microsoft’s popular office suite, and Libreoffice and  its ancestor have been adopted by local councils, government institutions and large companies around the world to cut costs while maintaining productivity. Free software packages are available for many purposes, and often are entirely suited to business use and offer all the functionality of their non-free counterparts. However, be aware that some software is only free for personal use and requires a paid licence for business use.

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