Friday 9th February 2007

Top money stories - 5 Feb ~ 9 Feb 2007

Top Tip: This week British Gas announced plans to lower its charges for electricity and gas from March 12th. This could be a great opportunity to save some extra money – money that you could perhaps put into a savings account to benefit from this year’s high interest rates. Could you save money by switching suppliers? Use a site such as Uswitch ( www.uswitch.com) to compare prices to find out.

Tuesday 6 Feb

High Street Boom

The consumer’s New Year resolution seems to have been . . . to shop! High Street retailers reported that sales in the first three weeks of the year grew at the fastest rate for three years.

Other data released at the beginning of the week indicate that both the service and manufacturing industry are performing well at the moment. In short, the British economy is in pretty good shape. Whilst this is good news for the jobs market – with so many sectors doing well there are lots of jobs on offer, given the expected rise in personal bankruptcies reported last week, it’s important that this growth is not financed by consumers borrowing more than they can afford. It would be a tragedy if, for some people, this boom ended in a bust.

Banking on Housing

A two year report commissioned by the Economic, Social and Arts Research Councils reported that 59% of those interviewed had invested all their savings in their house and pension. Thus a downturn in the housing market would leave almost 2/3 of homeowners facing significant losses.

Concentrating all your savings in a few assets (e.g. house and pension) leaves you exposed to losing your money if that asset starts to fall in value. To reduce this risk, consider spreading your savings between different types of assets (property, ISAs, shares) so that a fall in the value of one won’t affect the value of all your savings.

Wednesday 7 Feb

Problematic Pensions

Another week, another company announcing problems with their pension scheme. In 2005 one of the Big 5 banks estimated their pensions deficit at £1.1bn, however actuaries retained by the staff union announced on Wednesday that in reality the deficit might be as high as £3.3bn. 

Employment Boom in Financial Services

There’s never been a better time to be an accountant! A joint report by the Recruitment and Employment Confederation and KPMG published on Wednesday reported high demand for employees in the financial services industry, with accountants in particularly short supply.

This is good news for those working in financial services, as take home pay across the industry increased in January, and for those considering a career in this area, as there are lots of jobs going and qualified professionals are in short supply.

However, for the rest of us, wage inflation in the financial services sector only makes it more likely that the Bank of England will raise interest rates again.

Thursday 8 Feb

The Bank of England keeps Interest Rates at 5.25% The Bank of England decided not to raise its base interest rate, which sets the cost of borrowing throughout the UK, any further at its quarterly meeting on Thursday. The cost of borrowing may be constant for now but, analysts estimate, may well increase in the future to prevent the economy from over-heating.

Interest rates at 5.25% mean that borrowing is very expensive – the interest payments on your debt will be high. On the other hand, a high interest rate means that saving offers high returns. Our prediction for 2007? A difficult year to borrow, a great year to save!

Bills, Bills, Bills

And finally, good news for bill payers from British Gas, who announced on Thursday that it will reduce its charges for gas by 17% and its charges for electricity by 11% from March 12, offering consumers the chance to make some savings on their household expenditures.

Prepared for MoneyBasics by Adela Read