It seems that each day we hear that the state will not be able to support us in our old age and it is time that we all started to look at personal pension, but when should you start looking? Is it ever to soon to look at taking out a private pension plan?

The truth is that if you can afford to take out a private pension then you should be looking to do so as soon as possible. True, there may be “better things” you could spend you money on when you are younger, but let us not forget that each pound that you put into a pension plan today will have grown substantially by the time you retire – assuming that the UK does not go bankrupt!

There are a number of factors to consider when looking at your own private pension plan which include :-

Tax Incentives

Any contributions which you make to a pension plan will be tax free – whether taken gross at source, or the tax is reclaimed at a later date – making it very cost effective.

Regular Payments

If you set up a regular direct debit to cover your monthly premiums it will not be long before you do not even realise that the money is coming from your account.

Age

The sooner that you can start saving for your older years the better because the money that you put into a pension plan will be invested across a broad range of assets. By using this broad range approach this secures your funds from over exposure in one area and allows you to benefit from the long term growth in the UK economy.

Family

Many pension plans today will allow you to ensure that your family are still catered for in the event of your death. While the state pension has no direct provision for passing over your pension entitlement on death, it is common place for private pension plans to make provisions for the holders family.

While there are many people who would argue that there is no need to start saving for your pension when you are young because of other costs you might incur, e.g. setting up a home, etc, the longer you can contribute to your pension plan the better.

It is easy to look at the state pension now and think that at least you will have an income in later life but the truth is that the state pension has been falling in real terms for many years and is set to fall further in the future. As the UK population continues to grow and people continue to live longer, the strain on the state benefits system is getting greater and at some point it will reach breaking point.

There is also the added problem of closer ties with the EU and the likelihood that all EU partners will need to share a collective pensions burden across Europe. While the UK benefit system may be creaking, countries such as Italy have gone far beyond breaking point and have serious funding issues.

You are never too young to start thinking about your future!

As the pressure on the NHS continues to mount we are seeing more and more delays, more operations cancelled and a never ending array of treatments denied to more and more people. Is it now time to take a serious look at the Private Healthcare market, or is the NHS still capable of doing the task?

While there is no doubt that the NHS is more than capable of looking after the UK population, the pressure and stress being exerted onto more and more staff is growing. Nurses are leaving because of low pay, doctors are complaining of being attacked on their rounds and there have even been a number of incidents which have proved fatal. While the nucleus of the NHS is still there, it seems in many ways that the surface is being eroded.

One of the largest growth markets in the UK over the last decade has been private healthcare with more individuals and companies now taking this on as standard. It is not only the delays in medical treatment on the NHS which has forced many down this road it is the growing cost of actually going private. While we would all much prefer to depend upon the NHS for our needs and save enough to cover one off private health as and when needed, in many cases this is just not possible.

Unless you are prepared to fly thousands of miles to a foreign land and depend upon a medical system which may not be as robust as the UK, then you are stuck. Basic, affordable private healthcare is now something which is being discussed by the UK population at all levels, not just the top end of the income bracket which seemed to have exclusive rights to private healthcare only a decade ago.

As demand amongst the masses has grown we have seen the introduction of a number of affordable policies to “get you on the ladder”. Increased competition amongst the providers has also seen a reduction of prices (substantial in many cases) to levels which will tempt those in who may not otherwise have been interested. However, will the ongoing economic situation make a difference?

In a strange way the worsening economic environment may actually push more people towards private healthcare because they will know that for only a few pounds a month they are covered, where as more and more people will not have available cash to pay for operations in the event of a one off accident, without cover.

In the past the government have implemented a number of tax saving schemes to encourage the take up of private healthcare, but now that it is firmly in the mind of the public many of these benefits have been removed. In fact now the authorities are more than happy to add extra tax onto the cost of premiums – so much for encouraging us to move to private healthcare.

There is no doubt that the NHS is on its knees and the god father of the UK Health Service, Nye Bevan, will be turning in his grave!

The news of an impending summit between the government and the Council of UK Mortgage Lenders is rumoured to be taking place this week, but what will they decide? Will it make a difference to the person in the street?

At the same time as Chancellor Alistair Darling was dishing out words of wisdom to the mortgage industry which he has very much helped to destroy of late, it was announced that State owned Northern Rock were not even following the governments lead. Northern Rock have yet to decide whether their variable mortgage interest rate will be changed after last weeks base rate reduction, in direct to contrast to Darling’s call. So is this a case of do as I say, not as I do?

While the government will argue that this truly reflects the independent nature of the Northern Rock, which is supposed to be run at arms length from the authorities, how can they then criticise the rest of the industry?

The mortgage industry in the UK is literally on its knees with increased funding costs, a falling housing market and a government which seem keen to squeeze them as hard as they can in order to curry favour with the public. It is difficult to argue with some of the points which the government have made, but does this latest outburst not deflect the attention from the Treasury at a time when public spending is under pressure, government debt is rising and the economy is stalling?

It will be interesting to see if the minutes of the summit are released, showing the arguments from both sides, because from an outsider’s point of view it would be interesting to see what was said and any changes agreed for the future. However, is it not ironic that all talk of a one off banking sector tax charge (suggested when they were all doing well) has now been replaced by an atmosphere of “let us work together”.

The bottom line is that while the mortgage companies of the UK could no doubt reduce their rates a little further, there is still massive pressure on funding. Many have been critical of the Bank of England who have injected just a fraction of the liquidity which their US and European counterparts have, despite the obvious deterioration in the financial sector. But is this the fault of the Bank of England, the consumer or even the government?

Let is not forget that this is a government who have bragged about the increasingly bright economic future of the UK for some time, the fact that the boom and bust scenario had gone for good and kept wage inflation in the public sector to a minimal. Now the economy is failing quickly, the bust scenario is returning and we are seeing more and more strike action in the public sector, and all in just a couple of years.

Will Gordon Brown get the chance to breathe new life into the economy, will the mortgage lenders play ball or has the Prime Minister lost his iron tight grip on the UK economy?

It seems that every time the UK economy takes a dip many people start to question whether the stock market really is the place to invest your money in the long term. While the facts and figures speak for themselves, with the stock market out performing any other invest class over the long term, there are times when it might be best to stay out of the market, but in the long term where else would you invest your money?

The stock market is the barometer of the UK economy and whiles some asset classes will do better than others over different time spans, it is the mix of asset classes which offers investors comfort that the long term performance will mirror that of the UK economy. Many people seem to miss the bigger picture with the stock market, assuming that the main aim of the exchange is to allow investors to buy and sell shares, when in fact this is what is known as the secondary market. We hereby list some useful aspects of the stock market which often go unnoticed :-

Treasury Funding

The government use the GILTS market to raise funding to cover the peaks and troughs of government budget requirements. You will see that when the economy is doing well and public spending is under control, the government may actually redeem part of their GILTS portfolio which is held by fund managers and private investors alike. When the economy is under a little pressure as it is now, you will very often see the government selling off GILTS to investors in return for a fixed rate of return and money to fund public services.

GILTS are the most secure of any investment in the UK as they are backed by the government. If the government was ever to renege on repayment of a GILT then we would all be in deep trouble.

Primary Market

While we all see the headlines about new companies listing on the UK stock market, they can raise funds at this stage or it can be used as a way for a large investor to reduce or dispose of their holdings. More often than not the company coming to the market will sell new shares and raise extra capital but this is not always the case.

Secondary Market

The secondary market is probably one of the main attractions of the stock market to investors and companies alike, this is the time when companies will attempt to sell additional shares to investors for what could be a number of reasons, expansion plans, a take over bid or a desperate rescue rights issue to save a company.

A lot will depend upon the reason for the fund raising, how much they are trying to raise and the general state of the market. A company looking to raise funds at this moment in time, no matter how strong the argument, would probably struggle or need to price the new shares lower than a couple of years ago when the market was much stronger.

There is a lot more to the stock market than just buying and selling shares, it is the heart beat of the UK economy and assuming that you give yourself a good spread of investments it is possible to benefit from the long term economic growth which is expected in places such as the UK.

As if to highlight the limited affect that interest rate reductions are having on the economy, today’s quarter point up in UK base rates by the Bank of England has hardly registered in the financial services sector. While it seems likely that more will follow, possibly in July and September, the difficult situation in the UK financial sector is far from over.

The rate announcement was followed by a wall of silence from the main lenders in the UK with many insisting that they would only pass on rate cuts “where possible”, and some actually reacting by putting up their mortgage rates (and taking away many of their reduced rate offers). The reason for the lack of action can be explained by what is happening with the LIBOR rate (the London Inter Bank Offer Rate) which is the rate at which financial institutions will lend and borrow money between each other. Normally the LIBOR rate is about 0.25% higher than the UK base rate, but at the moment it is about 0.75% higher (reflecting the increased risk and lack of capital), although it did reach a high of 1.15% greater than base rates back in September when the credit crunch really began to register.

In the press we will no doubt see claims that the banks are making extra margin while the rest of us struggle but the fact is that lending and borrowing is a risk related action, and the greater the risk of default, the higher the rate will be compared to the base rate. As we have covered on this blog on a number of occasions, the credit crunch is far from over and slowly but surely it will need to work its way through the system. The main turning point will come when the affects start to diminish and the position of both the UK economy and base rates are at that time, as well as the worldwide picture, will be vital. So what happens in the meantime?

The situation for at least the next 12 months looks very bleak, and while we will see speculation of further rate cuts and assistance from the authorities, as today has shown, the affect of base rates on this current situation is limited. More people will go bankrupt, more people will lose their homes and while there are savings that many of us can make in our daily lives, these may not be enough to save many from hardship.

More and more people are comparing the current situation to the depression of the early 1900s when economies around the world fell for a sustained period of time and people struggled under mountains of debt. Whether the world economy will actually fall into a depression is very unlikely but if we were to receive any more bad news, e.g. another large hike in the oil price, then there is the potential for things to get much worse before they get better.

We all need to tighten our belts and ride out this difficult situation until we start to see the light at the end of the tunnel, although it may be a case of easier said than done for many of us.

They may have been quiet for a while, but the International Monetary Fund (IMF) have now stepped in to deliver a highly critical verdict on the current UK economy, outlook and the problems which lie ahead. While in the recent budget the chancellor stood up and claimed that the UK was well positioned to fight the ongoing credit crunch, and we would not fall into recession, the IMF have delivered a stark counter to those claims.

The UK government have been shown as severely over optimistic with their forecast of growth for 2008 quoted at over 2%, while the IMF believe that the UK economy will only grow by 1.6% this year – so what does it all mean, and will it impact upon everyday life in the UK?

Apart from the fact that a slowing economy will mean less jobs, more unemployment and more strain on the benefits system, if the IMF are correct in their calculations then that will leave a black hole of some £3 billion in the government’s spending plans. This figure is expected to widen to between £6 billion and £7 billion in 2009/10, leaving Gordon Brown in a mess as he approaches the next election. So what can the government do?

Time and time again the government have had the opportunity to try to tackle the worsening position head on, but each time they have buried their heads in the sand. Firstly we need the government to take off their political cap and admit that the UK economy is set to slow sharply over the next couple of years, roll up their sleeves and try to soften the blow as much as possible. Voters would rather they cut back ambitious spending plans now rather than find they have no choice in 12 months time, at which point people have begun to depend on these spending plans. Like King Canute, Gordon Brown and his advisers are trying to hold back the sea knowing that at some time it will surround and engulf them. So how will these funding plans be funded in the event of falling tax revenues?

While the UK authorities have for some time been very vocal in their belief of strong fiscal controls and systems, it seems that slowly but surely these will be loosened as the Treasury are forced to take on more and more debt to fund ambitious funding plans. This will see more and more future tax income used to pay the interest on mounting debts, leaving less and less to spend on public services and the like. As and when the worldwide economy starts to pick up this will mean that the UK is not in a position of strength and we could see other countries power past us, snatching more and more business. It is a very tricky situation…..

It would be wrong to pile all of the blame onto the UK government, who have been as much a victim of circumstance as anything else, but they did not make sufficient provisions in the good times to cover the lean. Out of control spending on public services has left very little in the Treasury pot, at a time when it has never been more vital.

While there has been much coverage of missing data discs, hackers cracking systems and the like, the full extent of the underground world of fraud has only just been revealed in a deeply disturbing report which was published today. Symantec, the leading internet security firm, have announced the results of their recent review of the criminal underground network which the police are finding so hard to crack. It seems that while we battle to maintain the security of our systems and personal details, those which have been stolen are on sale for as little as £5 to anyone who is interested!

Even though the UK has been in the news of late over a number of high profile data handling errors, this is something which is taking a grip right around the world. Top of the league, again, was the US with over 31% of worldwide fraudulent activity within their boundaries, China and Germany accounted for 7% each and while the share of fraudulent activity in the UK was only 4% of the worldwide figures, the details are still alarming. So what exactly is going on?

There are a number of issues which need to be addressed to improve online security which include :-

Social Networking Sites

As bizarre as this may sound, Social Network Sites are the first port of call for many of those looking to commit ID fraud or worse, with many users of these sites posting very detailed and personal information on their profiles. Using the details available it is then possible to obtain copies of birth certificates, etc and assume the life of someone else. This can lead to loan applications, mortgages, credit cards and much more, with the victims only finding out when it is too late.

Spyware

Spyware is something which we have all come across but it is still the tool of choice for so many fraudsters, offering the chance to upload software to a victim’s computer, access their files and in many cases use their computer to carryout more fraudulent activity in the name of someone else. It is vital that we all ensure that our machines are safe, our firewalls are up to date and carryout regular virus scans to see if any new threats have sneaked in.

Password Protection

How many of us use the same user name and password for a vast array of our secure accounts and websites? How many of us have not changed our passwords at any time in the last 6 months? How many of us think that it will never happen to me? These are the easy pickings for the hackers and the fraudsters, and it has proved very very simple to hack into a whole array of bank accounts and cause havoc.

The fact that personal information on a possible fraud victim is changing hands for anything from £5 in these online cyber crime shops is frightening enough, but the fact that many of us are making it so easy for them is even more alarming. Let us all do our bit and try to stamp out what could become a massive crime wave if we are not careful.

While the UK government have been heavily criticised in the past with regards to lost data, it seems that this phenomenon is not just limited to the public sector. News that HSBC has lost a disc containing the details of 370,000 customers has not only caused acute embarrassment for the Bank but will ultimately result in a massive fine. So what happened?

It seems that HSBC, who normally use an electronic system to transfer data, were forced to use the Royal Mail in this instance. However, it appears that the disc was not sent by recorded delivery and a frantic search of the offices involved has not yet yielded the missing information. One of the more alarming elements of this serious slip in security is the fact that it seems to have taken HSBC just over 1 month to realise that the data disc had not arrived at its destination.

The FSA have already stepped into the fray and when you consider that Norwich Union were fined £1.2 millions and Nationwide £1 million for smaller security breaches, HSBC can certainly expect to be on the receiving end of a large fine. However while the fine will be substantial, in the overall picture it will be small feed to a bank which makes billions of pounds each year. More worrying will be the affect that this has on the Banks customers, many of whom have yet to be officially informed whether or not their data was included in the batch of 370,000. In some ways the UK banking consumer has a very short memory and this situation could just blow over, however recent comments in the press have woken the public to the threat of ID fraud and other similar situations and this may have an impact on client figures for HSBC.

Just as the debate about the government losing data seemed to be calming down, this will put the whole issue back on the front pages. HSBC have assured the markets that there have been no signs of fraud with regards to the account data held on the disc, but they have admitted that while the data was password protected, it was not encrypted. It does not take rocket science to crack a password and if the disc was to fall into the wrong hands we may see some worse headlines to come.

The point must be made that it is not just HSBC who have lost data about customers, but the problem with this particular incident is the amount of data on the disc, and the renewed public awareness of the possible risks. Unless the banking sector is able to stem the flow of similar news features we could slowly but surely see the public confidence in the current system fall. The regulators are doing all that they can, imposing fines and advising about the future, but ultimately it will take more stringent procedures and more care before reduced confidence can be rebuilt.

While we hope that this is the last of such incidents for some time, there is a fear that this may not be the case.

Even though the UK and the worldwide economy may be on the slide there are still literally millions of people around the globe thinking of setting up their own businesses. The internet has brought a new dimension to start-ups and reduced the historic set-up costs which had scared off so many people in the past. However, even though set-up costs have fallen dramatically many people do not realise that there are still many opportunities to obtain start-up grants and assistance.

A quick check on Google will show you just how many opportunities there are to obtain financial and advisory assistance if you are looking to start-up your own online (or offline) business. But why are the authorities still looking to assist new businesses even though start-up costs have reduced substantially?

There are a number of reasons why the government and other associations are still keen to see new businesses develop and grow, reasons such as :-

Local Economy

The more successful a local business is the more chance of employment opportunities in the region. This takes pressure off the local authorities, puts money in people’s pockets and also ensures that there is a local work force on tap for those who need to increase staff numbers.

Country Economy

The more successful business which the UK assist the more taxes will flow into the Treasury coffers and the less funding will be required for social security / unemployment benefit, etc. Many research projects have also highlighted the personal boost to people who are working for their own money, people who have a reason to get up and go to work. Everyone likes to be part of a successful business.

Balance Of Payments

The stronger the UK economy the more money will flow in from outside companies who want to acquire services and goods from the UK. While this has a positive impact upon the exchange rate, it can also attract further tourism when people realise that the UK is once again a prosperous economy.

EC Grants

As part of the EC the UK, and other partners, will receive an annual budget to assist national business and start-ups. Very often this funding will be reclaimed or reduced if it is not fully invested so while the authorities need to be careful whom they are assisting, they also need to ensure that funding does actually find its way to the people who need it

Post Start-Up Costs

While we mentioned the reduction in traditional start-up costs because of the internet, there are still other costs which need to be considered post-launch. Advertising, promotion and investment for the future are just some areas where funding can be very useful – it is not just the start up period which is dangerous as figures have shown that the vast majority of businesses will struggle in the first year, with a large number actually going out of business.

Summary

So if you are looking to start-up your own business you need to think a little longer term than many at the moment. True, you may not need as much start-up funding as we have seen in the past, but there is still a requirement to invest for the future and ensure you are not another statistic that suffers in the first 12 months and goes out of business.

While we continue to see a stream of mortgage offers withdrawn from the market, with HSBC the latest to pull some of their mortgage deals, there are real concerns that the UK property sector could very well go into meltdown over the next 12 months. As more and more mortgage lenders rush for the exit doors we are seeing a number of things happening in the market place such as :-

Increased Rates

While base rates in the UK continue to come under downwards pressure we are seeing mortgage rates actually rise, something which many of the UK population seem to be missing. The banks claim that due to a lack of available credit they are seeing increased funding expenses and increased risk, hence the rise in rates. It should also be noted that this widening of the gap between the cost of mortgage finance and mortgage rates being charged to the public has given the banks more “profit margin” on their mortgage agreements.

Lack Of Competition In The Market

As we see mortgage providers looking to pull more short term deals, competition in the sector is decreasing, something which is allowing many mortgage providers to increase their rates. One factor which has gone largely unnoticed is the Northern Rock affair and the fact that they are actively encouraging mortgage customers to remortgage with other financial institutions, thereby reducing their own mortgage book and releasing funds to repay some of the debt due to the government.

Demand Falling

While the markets have been expecting some kind of fall back in the housing market, after a relentless rise over the last few years, few would have forecast exactly what would cause this retreat. Even though demand has not yet fallen substantially we are starting to see the wave of sellers building, with more and more people desperate to reduce their exposure and scale down their property assets. Historically property owners have reacted very much with the herd mentality and this time is likely to be no different. There will come a breaking point when the sellers grow in number and the buyers retreat knowing that a property they like today will likely be cheaper to tomorrow, so why rush?

Employment

Even though there has been no real mention about the employment situation of late, there is no doubt that as the economy slows we will see more and more redundancies. Those who lose their jobs will then be under more and more pressure to cover their mortgages, with repossessions likely to rise substantially over the next year. This rise in repossessions will also put further pressure on the housing market, with prices falling further and further. Indeed there has been a report today which suggests that over 3 million UK home owners will enter a negative equity situation over the next 12 months.

The mortgage market is literally dying on its feet and even those who are brave enough to buy will struggle to find affordable mortgages at the moment. Over 40% of mortgage providers have recently indicated that they will be pulling some of their mortgage offers from the market over the next few weeks and months, meaning the cost of borrowing will go higher and higher. Unfortunately, we are nowhere near the end game as far as the credit crunch is concerned.