Pension fund worry for UK firms

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Mark Walsh: “I could be working until I’m 70″

More companies could go bust if they fail to plug the gap in their pension funds.That is the warning from a firm of leading pensions experts, which comes just over a week after the UK arm of magazine Reader’s Digest went into administration under a large pension burden. Readers Digest UK, which was founded in 1938, was for decades a successful magazine with readers all over the world. But the group’s pension deficit hit £125m and a deal could not be reached to pay it off. Around 1,000 members on the firm’s pension plan are still waiting to hear how they will fund their retirement. Not aloneThe Reader’s Digest story has reignited fears about the safety of pensions for millions of employees relying on schemes with big deficits. And pensions consultants Lane, Clarke and Peacock say it is a real possibility that the same thing could happen to other firms.

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Mortgage rates to rise as Mervyn King rules out liquidity scheme extension

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Published: 3:11PM GMT 10 Feb 2010

During the Bank of England’s Inflation Report briefing, Mervyn King confirmed
that the Special Liquidity Scheme which has helped lenders fund mortgages
during the crisis would end in January 2011 as scheduled.

This has triggered fears that mortgages will dry up and rates will rise
sharply towards the end of the year because lenders will struggle to borrow
from wholesale markets to fund deals.

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Married men earn a third more than their single counterparts

By
Keri Sutherland
Last updated at 10:01 PM on 30th January 2010

Married men earn nearly one third more than single males because they work harder, new research reveals.Tying the knot means men get paid seven per cent more than unmarried men even if differences in age, education and experience are taken into account. They also earn four per cent more than men who live with their partners, according to a 12,000-strong survey.
Married men earn nearly one third more than single males because they work harder, research reveals (picture posed by models)
Experts say the pay gap could be because men develop a stronger work ethic after they marry. ‘Results indicate that a lower level of pay satisfaction induces married men to put more effort into their work, which leads to higher wages,’ said academics at the University of Bielefeld in Germany. They analysed data from 12,245 interviewees on a wide range of subjects including household composition, employment status, working hours, income and time spent on household tasks.Overall, wages for married men were around a third higher, while co-habiting men earned 15 to 20 per cent more than single men. Differences between single and married men were taken into account. For example married men are likely to be older and better educated. Researchers also found that married men are less satisfied with their income and so are more likely to feel underpaid than single men. One theory suggests that it is dissatisfaction which drives men to work harder and earn more – triggered by changes in attitudes that occur after marriage.Researchers said: ‘Lifestyle changes related to marriage may give rise to the purchase of a home and its furnishings, entailing increased household expenditures, and so on.’ 

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Tax deadline boosts December mortgage figures

Bank lending on residential property doubled at the end of 2009, reflecting a last-minute surge of applications for mortgages in December.
The end of the stamp duty holiday on properties costing up to £175,000 caused many transactions that might have taken place in January and February to be brought forward.
The British Bankers’ Association (BBA) said that 45,897 mortgage applications were approved last month, slightly higher than the 44,965 loans approved in November and up 102.2 per cent from December 2008. Total mortgage advances rose by 6 per cent to reach £10.2 billion, a level last seen in November 2008.
“The high street banks continued to lend substantial amounts in the weaker mortgage market of 2009, approving more than 440,000 loans for house purchase,” David Dooks, the statistics director of the BBA, said. “Their share of gross lending went up from a historical level of about two thirds to three quarters, due to specialist lenders largely withdrawing from the market and building society finance contracting.”

Howard Archer, chief UK and European economist at IHS Global Insight, said that, despite the rise, approvals in December were still “appreciably below” the average monthly level of 60,314 seen since 1997.
While house prices have fallen from their peak in 2007, lending criteria have been tightened, leaving many first-time buyers facing a seemingly unbridgeable gap, according to the British Property Federation (BPF). Figures from the BPF published today will show that 80 per cent of those who rent their home cannot afford to buy.
Housing market experts suggest that lending in the first two months of 2010 could fall sharply after the artificial lift in December. Many predict that a rise in interest rates could result in more homes up for sale and another fall in prices by the end of the year.
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Ericsson’s profits tumble

Published: 8:27AM GMT 25 Jan 2010

The Swedish company saw net profits decline to 314m kronor ($43.4m) from
3.89bn kronor a year earlier. Analysts had expected profits of 2.5bn kronor,
according to Bloomberg.

Ericsson has seen its customers cut their spending on older networks without
speeding up spending on newer, high-capacity networks enough to plug the
gap. Shares in Ericsson fell 3pc in trading in Stockholm.

“It’s going to be challenging to both maintain market share and
secure healthy financial development, with Chinese equipment manufacturers
being so aggressive and the latest contracts likely having been signed on
cut-throat margins,” Fredrik Thoresen, an Oslo-based analyst with DnB
NOR Markets, told Bloomberg.

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Union anger at Staythorpe power station workers’ pay gap

Italian construction workers building a power station in the East Midlands have been paid on average €1,300 (£1,140) a month less than their British colleagues, an audit of wages at the site has found.
Workers building Staythorpe, a gas-fired station for RWE nPower at Newark in Nottinghamshire, received significantly less in wages than British workers from April to December last year, according to an audit conducted at the insistence of the GMB and Unite unions.
The pay gap between British and Italian workers uncovered by the unions is likely to inflame tensions further in the construction industry. Official strike action organised by GMB and Unite, which would have affected 30,000 workers involved in the building and maintenance of power stations and oil refineries, was called off in November.
Throughout last year, a series of unofficial strikes, including action at Staythorpe, spread across construction sites. These were sparked by fears that foreign sub-contractors were undercutting British ones by bringing their own workers in and paying them less.

The controversy came at a time when many construction workers were jobless amid a collapse in the housing market. Unions argued that Britons were not being given the chance to apply for jobs, while immigrant labour was being exploited.
At the Lindsey oil refinery, in North Lincolnshire, almost 650 workers were dismissed for taking part in a wildcat strike in protest at the use of Italian and Portuguese workers. The dispute was settled when more than 100 jobs on a £200 million upgrade were made available for British workers.
At the time of last year’s strikes at Staythorpe, Alstom, the French infrastructure group that is the main contractor at Staythorpe, and Lord Mandelson, the Business Secretary, denied that foreign workers were being paid less than their British counterparts. The GMB is demanding that Lord Mandelson return to the House of Lords to correct a statement he made on the issue last year.
CMN, the Italian sub-contractor at Staythorpe, has agreed to bring its workers in line with the appropriate pay grade and to make back-payments to correct the shortfall.
Union leaders are angry that contractors that stick to national agreements may be disadvantaged in winning construction work in the future, just when Britain is on the brink of a big programme of building power stations.
Andy Fletcher, the GMB’s regional officer, said that the audit’s findings would exacerbate a “very tense” situation on the Staythorpe site. The union is already balloting its members for strike action in a row over pay and the redundancy process.
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Banks hike credit card interest rates over Christmas to highest level in four years

By
Sean Poulter
Last updated at 9:41 AM on 13th January 2010

If you used your credit card to pay for Christmas, this next bit is going to hurt.
The average credit card interest rate rose from 15.89 per cent to 16.28 per cent in December, according to the Bank of England.
The increase came despite the fact the Bank held the base rate at a record low of 0.5per cent over the same period.

Splashing the cash: Christmas shoppers pack Oxford Street. Many will have used a credit card
The resulting gap of 15.78 per cent between the official bank rate and the average amount charged on credit cards is now the highest ever recorded.  The increase will be a heavy blow to the estimated nine million Britons who relied on their credit card to fund Christmas. It will also hurt the one million people who have used a card to cover a mortgage or rent payment in the past year.

The Daily Mail revealed before Christmas that Capital One, which is one of the biggest credit cards in circulation, was increasing rates for many customers.Its rates soared by as much as seven percentage points in December, while some customers are now being charged almost 40 per cent.
Worry: The UK owes just over £54billion in outstanding balances on their cards
The Bank of England figures suggest that other banks imposed similar stealth charges in the run-up to Christmas and the January sales.The average credit card interest rate is now at its highest since September 2006, delivering a profit bonanza for the banks.The increase in the cost of using a credit card follows a study by accountants PricewaterhouseCoopers, which warned that banks are set to hit millions of customers with higher interest rates and annual fees.The nation currently owes just over £54billion in outstanding balances on their credit cards. Consequently, even small increases in average interest rates generates millions of extra income.The PwC study suggested the total amount of bad debt on these cards is likely to jump 50 per cent by the end of 2010 to reach almost £5billion.It warned: ‘Credit will become more expensive as lenders attempt to claw back revenue lost as a result of economic and regulatory pressures.’This will be felt through increased APRs, an introduction of fee-based lending, or both.’Customers at the sharp end of the rate rises at Capital One have described the increases as ‘legalised extortion’. Others have spoken of their rage and disgust at the tactic.The increases make a mockery of claims by Gordon Brown, Lord Mandelson and fellow ministers that they would take steps to ensure credit card firms treat customers fairly.In October, Gordon Brown promised  a ‘new responsible approach to lending’.He said: ”We are announcing measures to make the credit and store card companies clean up their act to get you a fairer deal. ‘Sharp practices by lenders - such as hiking interest rates on existing debts without explanation, sending out unsolicited credit card cheques and raising credit card limits without being asked - these sharp practices should end.’Credit cards are not the only way banks are turning the screw. Interest rates on personal loans of £10,000 remained at 11.08 per cent in December. That was up from 9.3 per cent a year earlier and the highest level since August 2002.Interest charged on a £5,000 loan also rose by more than 1 per cent during the year, climbing from 12.08 to 13.38 per cent, while average overdraft rates rose from 18.04 to 18.96 per cent.The increases will fuel the perception that ordinary people are paying the bills for the blunders of the bank chiefs who lost billions through suspect loans in the U.S.housing market and beyond.The official figures contained little cheer for savers, with the average rate paid on a branch-based instant access account remaining close to its recent record low at 0.17 per cent, while interest on notice accounts dropped by 0.03 per cent to 0.31per cent.Returns paid on fixed-rate bonds, currently the most competitive area of the savings market, fell for the fourth month in a row, dropping to 2.51 per cent, down from a recent peak of 3.05 per cent in August last year.Tax-free ISA rates have also fallen steeply during the past year to average just 0.41per cent in December, down from 2.1per cent in the same month of 2008.

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Trade shows why US can grow, and UK can’t

By Ian Campbell, Reuters Breakingviews

Published: 9:23PM GMT 12 Jan 2010

Dollar humiliation has helped to cut the US trade gap almost in half. The weak
dollar made the country more competitive, so it is exporting more and
importing less. The US trade deficit was still a substantial $36bn in
November, about 3 percent of GDP. But the monthly deficits were in excess of
$60bn during the first half of 2008.

Yes, ideally, the American deficit would be smaller still. Revaluation of the
Chinese yuan would help; more than half the US trade gap is with China. And
so, too, would a reduction in the huge US fiscal deficit. But US exports are
rising briskly and are an engine for an economy that looks set to grow.

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Public sector staff earn 7% more than private workers

By
Andrew Levy and Daniel Bates
Last updated at 8:25 AM on 04th January 2010

‘Different planet’: Critics say civil servants are sending the wrong message to the publicPublic sector employees have entered a ‘golden age’ of employment, with better pay, pensions, holidays and working hours than private sector staff.Civil servants, NHS staff, council officials and other state-employed staff last year earned £22,405 on average, compared with £20,988 for employees at private firms.The 7 per cent pay gap has more than doubled from the 3 per cent difference in the previous year.The official figures show wages in the public sector - whose ranks have swelled by 914,000 to six million since 1997 - are rising by 2.8 per cent a year, compared with 1.1 per cent in the private sector.Public sector staff are also working fewer days each week - 35 hours on average, against 37.5 hours for workers in privately owned firms - and have three or four more days annual leave.

At the same time, productivity fell 3.4 per cent in the ten years from 1997, compared with an increase of 28 per cent over the same period in the private sector.And while those in the public sector can look forward to a guaranteed proportion of their income in old age, private sector workers approaching retirement are facing the lowest pension payouts in history. Pubic sector staff are also able to claim gold-plated final salary pensions from the age of 58 on average.These are typically worth three times as much as those available to private sector workers, who must wait until they are 65.
Lib Dems: Health spokesman Norman Lamb said the party was a display of ’staggering profligacy’Research shows that because of falling annuity rates, they are likely to get just half the income they would have received if they had saved the same amount of money 15 years ago.Non-state workers who want to retire are facing a ‘nightmare’ that no previous generation has had to cope with.  Many will have no option but to keep working into their seventies or sell their family homes to survive.Nigel Hawkes, of Straight Statistics, which validated the figures for the Sunday Times, said: ‘Public sector workers have done better than most in the private sector over the past decade - and the gap is widening.’David Frost, director-general of the British Chambers of Commerce, said the idea that public sector workers were being paid less in return for other perks such as better pensions and job security were ‘long gone’.'Right across the spectrum of pay and conditions the public sector is now outstripping the private sector,’ he said.’Small and medium-sized businesses - the firms who will be vital for the economy’s recovery - lose staff to the public sector because they cannot compete with the pay and benefits big state employers offer.’Graeme Leach, chief economist at the Institute of Directors, added: ‘The gravy train now has to come to an end.’

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Gap between public and private sector pay DOUBLES

By
Chris Lawrence
Last updated at 3:04 PM on 03rd January 2010

‘Different planet’: Critics say civil servants are sending the wrong message to the public
The gap between public and private sector wages has doubled since the start of the recession, figures reveal.The Office of National Statistics confirmed that public sector workers now earn seven per cent more than in the private sector.The data was published as details emerged of a lavish £20,000 party held by civil servants.The Central Office of Information spent £21,598 on its summer party in 2007, a Sunday newspaper has revealed.Guests described an ‘incredibly lavish’ event, including fine wines and champagne at a time when the government was urging department cutbacks.A COI spokesman said the department, which is in charge of guaranteeing public awareness campaigns provide ‘value for money‘ was celebrating the publication of its annual report and accounts.

The department also admitted spending £10,000 on its Christmas party in 2008.COI chief executive, Mark Lund, had previously said the department spent just £42.82 per person entertaining staff for the whole of 2008.
Lib Dems: Health spokesman Norman Lamb said the party was a display of ’staggering profligacy’
Liberal Democrat health spokesman, Norman Lamb, who has raised the issue in Parliament, told the Observer that the hedonistic spending ‘beggared belief.’He urged Whitehall departments to look closely at their spending priorities: ‘What planet are they on? After everything we’ve been through in the last 12 months, how can can there be such staggering profligacy.’ He said government departments were sending the wrong message to the country.Last year the average public sector employee worked for 25 hours a week
- a fall of an hour on the previous year, and two and a half hours less
than private sector workers, according to the Sunday Times.As well as working fewer hours, public sector workers are also getting bigger pay rises and receiving pensions far in excess of the private sector.The data indicates that average earnings in the public sector rose to £22,405 last year, compared to £20,988 in the private sector. The previous year non-state employees were just 3% behind on this measure, and until 2005 they were receiving more.Since Labour came to power, the number of public sector workers increased by 914,000 to more than six million - around a fifth of the workforceThe average state employee also enjoys three or four more days of holiday a year and civil servants get employer pension contributions worth 19.4% of their salary paid into final salary schemes each year. This is more than three times the average of 6% paid by private sector firms into their employees defined contributions schemes.The data was validated by Straight Statistics, a group that campaigns for the accurate reporting of official data.Director Nigel Hawkes said: “However you look at it, public sector workers have done better over the past decade - and the gap is widening.”

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