“Budget for Growth” cut its forecast for growth in 2011 down from 2.1pc to 1.7pc. Prediction for 2012 to 2014 remains between 2.5 and 3pc each year. Budget for Growth? what’s behind Chancellor’s headline grabbing title?

Don’t rush to conclusions before you read the other two related headline numbers.

  • Borrowings in 2011 will be £146bn – £3bn below target, £122bn next year, and finally £29bn by 2015-16.
  • National debt is forecasted to be at 60% of national income this year, 71% in 2012 and finally 69% by 2015.

In summary, hold-on tight until 2015, but how will be the journey? are we going to have an easy ride or a bumpy one… read on…

Some of the key areas of impact are as follows:

Investors and Businesses:

  1. Corporation Tax will fall from 28% to 26% from April 2011. The rate will then be reduced by a further 1% in each of the following three years and will reach 23% by 2014 – it now makes more sense to declare true profits.
  2. Reduction in fuel duty has the potential to curb the rising business operational costs – good news and will help everyone.
  3. Private jet users to pay passenger duty for first time – well you can afford it anyway.
  4. Levy of up to £50,000 on ‘non-doms’ resident in the UK for 12 years – you guys have really got off the hook here, but hey we need you to continue investing here.
  5. Tax avoidance clampdown to raise £1bn this year – the message cannot be simpler!
  6. Plans to switch air passenger duty from passengers to planes have been dropped – this will help not only businesses that have staff jetting across the world but also the lucky ones who manage to still squeeze out their annual international vacation. 

Individuals:

  1. Most families with income earners will have to chip in a bit to fund the state costs – it is estimated that the recent announcements could cost families almost £ 30 Billion.
  2. The 1p reduction in fuel duty rather than a 4p increase - sigh of relief for most families who see their fuel bills climb every time they fill in their tanks.
  3. The forecast for unemployment has been increased for the period 2012 to 2015 -  watch out, not the time to be complacent. If you are in public sector, sorry too late to even buy your redundancy cover as most insurers do not offer it anymore to public sector employees, save what you can and jump the sinking ship as fast as you can.
  4. If you are under 25 and looking for apprenticeship – well you may find your break soon as the Budget announced 100,000 additional work experience placements over the next two years – no more excuses or blaming the state.
  5. If you are a pensioner and depend on state pension, watch out, you could miss out on almost £700 of income from the state pension – sorry you should have saved a bit more.
  6. Just hope that you are not amongst the 40,000 who might have to pay National Insurance – Bad luck if you are, not a lot you can do anyway.
  7. If you are at the bottom end of the ladder or an entrepreneur and can choose to be flexible with what you draw (declare!) as a salary  - good news as the annual personal allowance will rise to £8,105.
  8. Thresholds for various direct taxes would be linked to the consumer price index from April 2012. So what does this really mean?  The Government expects t o save £ 1.5bn by making this switch – benefits and pensions will increase more slowly while more of our income is eaten away by taxes.  
  9. The Treasury insisted the change did not affect income tax thresholds. Officials estimate that it will rake in almost £2bn in extra National Insurance by April 2016 – Clever!
  10. In the 2015-16 year the total savings is expected to be £10.6bn bringing total savings over the five years to an astonishing £27.6bn – Really?
  11. No additional changes to alcohol duty rates. Tobacco duty rates up by 2% above inflation, duty regime to be reformed – rolling tobacco targeted – sorry guys (who roll tobacco), you will not be ignored.
  12. Government-backed shared equity scheme to help 10,000 first-time buyers to purchase properties – well, finally your dream to get onto the housing ladder might well come true…
  13.  Gift Aid benefits limits to increase to £2,500 (from its current £ 500). No form filling for small donations – this will benefit charities by £240m – laudible, last thing you want is block people who are chartiatble with unnecessary forms.
  14. From 6 April 2012, there will be a reduced rate of inheritance tax of 36 per cent for estates leaving 10% or more to
    charity - The Big Society rewards you if you help the needy!

Finally, if you are a landlord … what does Budget 2011 mean to you?

Your tenants will continue to be tenants for the foreseeable future. Good news – probably but remember, you cannot continue to increase your rents just because there is more than one offer to rent your property, affordability is on the decline – so in the current climate, if a tenant offers to pay a rent that is too good to be true – it probably is.

I would always say this, albeit at the risk of boring you. Do not be pennywise… Best Rent Guarantee costs less than £ 120 for 12 months. Less than 30p per day can assure you a good sleep, cause if your tenant fails and you have taken our rent guarantee, WE will be worrying about the rent and collections if the tenant defaults.

Lastly, we cannot afford to beat Directline with those expensive TV advertisements on landlords buildings and contents insurance, but we can definitely beat them on pricing. We promise you a price beat guarantee, so please shout for us – we will be grateful to you and also offer you a £ 25 M & S cash voucher completely free if you.

 

The latest reports from the Office for National Statistics (ONS) shows that Consumer Price Index rose (CPI) to 4.4% in February. This is not only a 28 month high but also higher than the 4.2% that was being forecasted by the various analysts and economists. The more worrying figure is actually the Retail Price Index (RPI) which rose to 5.5% and is currently at its highest level for 20 years!

Swap rates always have a story to tell in terms of the future interest rates. One-year swaps surged from 1.27% to 1.34% while five-year swaps were up from 2.79% to 2.90%.

Average diesel prices crossed the 140p mark and average cost of petrol is now about 134p. Brent crude at its two-year highs of $120 due to the unrest in Libya and other oil producing countries in North Africa and the Middle East.  The price of commodities such as wheat and cotton has also increased dramatically in the past twelve months due to the growing demand from emerging markets. And to compound these issues, weakness of British Pound in the foreign exchange markets makes the good more expensive. Some analysts would also argue that the VAT increase has had a profound and long term impact on the inflation rises.

The only silver lining could be the confidence of Mervyn King, the Bank of England’s Governor who insists that the inflation will rise upto 5% in the short term before rapidly falling back to its target of 2% in about two years’ time. This puts doubts in minds of people yet again as to whether the Bank of England will put its rates up next month or will it wait for a few more months say until end of the year before putting the rates up. Stagnant incomes, rising inflation and stringent lending by the banks is just making the situation of UK households worse by the day.

So what does this really mean for landlords?

The fact that first time buyers are not finding it any easier to get their mortgages approved and the combination of low stock of new builds coming to the market means that rental demand is here to stay for the longer term. However landlords should not assume that more tenants means that rents will go up. Rising inflation and stagnant wages limits the affordability of tenants and there is a growing tendency amongst tenants to compromise on their requirements rather than pay more to get their ideal home. In my view, landlords should also be wary of the fact that inflation adds to unemployment and there is an increased risk of tenants losing jobs. Hence, whether landlords like it or not, rent guarantee insurance is almost a necessity, the last thing any landlord wants is miss their rents and the aggravation of delays and defaults.

So in effect for landlords, while inflation might indirectly help with a rise in demand for rental properties, it may not translate into higher rents.

 

Latest research figures published by LSL property services indicate that the rents have risen for the first time in 2011 going up by 0.2% leading to an annual increase of about 3.9%.

It is interesting to note that the average yield from buy to let investments increased to five per cent in February 2011, as the rent increased at a faster pace than rental property values during the month.

London continues to lead the pack and average rentals across London has gone up by 7.7 per cent in the last 12 months. This is almost twice the national average and the increase has surprised many analysts given the tight market that exists in London.

There are several factors that are contributing to such a consistent and steady growth of buy to let investment returns. The first time buyer market is far from recovery. Tight lending criteria, low LTVs and uncertainty in the job markets being some of the major factors. Many potential renters who ended up staying with parents or sharing accommodation are coming to terms with reality and now settling down as tenants for the medium term. Shortage of social housing is also continuing to fuel the demand. Until the lending market eases up a bit or employment situation improves, there will be steady growth in the buy to let market in the medium term.

While the news is overall very positive for buy to let landlords, the story is not that rosy in some areas. I have seen landlords who have large portfolio i.e. more than 40-50 properties but struggle to meet their mortgage payments on time. There are also smaller landlords who are struggling to let their properties. Keeping things simple, it boils down to two basic things aspects – location of the properties and whether the tenants are paying rents on time.

Latest figures show that landlords suffered setbacks in the shape of increased tenant arrears, with 12.6% of all UK rent unpaid or late by the end of February – an increase from 11% the previous month. Unpaid rent totalled £296m across the UK in February, up from £258m in January. Increasing rental arrears is a real risk for landlords. With increased public sector job losses and the continuing spate of redundancies in the private sector, landlords have to be very cautious on who they choose to let to. It is common practice now for landlords to reference their tenants and buy a good rent guarantee. However, some landlords I have come across, treat such risk management tools as unnecessary as they have never had a bad experience. There are in-numerable instances and examples and past is never a basis for predicting the future and hence my view is that landlords should increasingly adopt a belt and braces approach rather than just depending on their gut feeling and intuition.

Nevertheless, as the old adage in property goes – brick and mortar never fails… let us hope that the rental returns sustain at current levels. With some careful risk management, one can safely say that landlords are in for a good year in 2011.

 

The UK’s biggest banks have signed an agreement with the government this week. Many say that this is just what is required in order to help small business in this very difficult trading period.

The landmark agreement which has been signed by HSBC Bank, Barclays Bank, Lloyds Banking Group, Royal Bank of Scotland and Santander is designed to provide business with £190bn of lending which includes £76bn to small business. It is said this will improve the relationship between the government and the banks considerably.

After much debate and negotiating between the two it was also agreed that the banks will also put a curb on bonus pay. Senior Financial officials have advised that they have taken into consideration the “Public Mood” and feel that this will really help SME’s to start to grow throughout 2011 and beyond.

It is essential that small business receives the required capital to grow in such desperate times, as banks have been extremely restrictive with lending criteria and the transparency required when making their decisions. At present most small business owners feel they are being slowly strangled which is reverberating throughout the country and can be seen at its most prominent and manifesting in high rises in unemployment.

The questions remains, have the banks and government reacted quickly enough so they can implement their plans and release funds to the many business owners who require it?

Many experts predict that whilst the banks may agree to meet the government guidelines on lending to SME’s they will impose more stringent lending criteria which will continue to alienate most business owners.

Unless the banks release their stranglehold many more companies will fail and individuals will suffer. The rise in unemployment will increase and more families across the UK will suffer.

It is essential business owners protect their business by making cuts and it is crucial that the individual employees protect their income. As unemployment rises it is protection insurance that can provide that lifeline to the individual when they need it most.

Income protection insurance or payment protection cover will provide a 12 month, tax-free monthly benefit giving the individual time to find another position in this very competitive job sector.

 

Challenging times for the employment market in the UK

On February 25, 2011, in Uncategorized, by Kesh Thukaram

Two major reports released by the Office of National Statistics (ONS) this week just re- affirms the challenges that lies ahead for the employment market in the UK.

Firstly, the inflation figures released deflated the hopes of many people who were hoping that interest rates would be left untouched for some time. The inflation at its current levels of 4% is double the target rate set by the government for Bank of Inflation. Most analysts believe that the Bank of England has to increase the base rate of interest from its historical low levels of 0.5% by at least a quarter or half a point to curb increasing inflation. Though the Governor of Bank of England made a few comments that has dampened the expectations of an early rise, it is inevitable that an interest rate rise is in the offing in the near future.

Secondly, the unemployment in UK for the last quarter of 2010 was 7.9% up a tenth of point from the third quarter of 2010. The major challenge is with the 18 – 24 years olds, wherein about 755,000 people are unemployed, up 42,000 when compared to the third quarter of 2010.

While on one hand the inflation increases the cost of doing business for most small to medium scale businesses which will force them to cut costs even further which may result in more redundancies, the impending cuts of the government of the public sector is only going to make matters worse as there will be more unemployed people in the UK. The government has made repeated statements that the private sector should be able to absorb some of the people made redundant by the public sector, but how much of that is practical is anybody’s guess.

Banks have to be liberal in lending in order to get some momentum in the UK market. But the early signs of the banks implementation of recent agreements with the government for lending to small to medium-sized businesses are far from satisfactory. In the short-term, it is very important for people to consider and invest in a good quality payment protection or income protection insurance so that if they lose jobs, they at least have an alternate cash flow to support themselves and their families.

The next 12 months will be very challenging across almost all sectors of the UK employment sectors and unfortunately there are no easy answers.

 

Interesting News For the industry

On February 25, 2011, in Uncategorized, by Stuart Boseley

Interested in Redundancy Protection Insurance….

A few days back I heard some very interesting news of an announcement made by the government, today I have had that announcement confirmed by a very reliable source.

Currently all individuals making a claim for Unemployment / redundancy insurance are required as part of the claims process to register themselves with jobseeker as unemployed and actively seeking work. The AB1 form as its known is the form provided by jobseeker’s to the individual confirming they have registered. The AB1 is then requested by the insurer and forms an integral part of the insurer’s claims handling and verification process.

The government announcement confirms that they will no longer issue AB1 forms from the 1st April. I am not sure how this will affect individuals who have purchased income protection insurance policies or for that matter the insurer. It will certainly be one less worry or concern for the individual at what is an already difficult time, knowing you have been made unemployed is always stressful so from a clients perspective this is good news.

From an insurers perspective it will cause concern for that I am sure, they have not repsonded across the industry just yet but rest assured I will keep you updated when they do.

I’m looking forward to your views an comments on this news as it’s certainly an important question or topic that most customers want to discuss and understand clearly when they buy a policy. My guess is it will certainly raise a few eyebrows across the industry.

 

Income Protection vs Payment Protection Insurance

On February 25, 2011, in Uncategorized, by Kesh Thukaram

What is the difference between income protection and payment protection insurance?

I have not come across a simple, clear, well defined explanation of these two most commonly used terms in the protection industry. Though I have read reams of policy wordings, key fact documents of Best Insurance and our competitors, its baffling that the difference is not well explained. I have all sympathies for my insurance colleagues who due to nature of their work, the difference would seem very obvious and I remember some of them looked baffled when I asked this and the expression on their faces was all about – how come this person does not even understand such a fundamental difference. However when I asked around my friends and people I know who are not in the industry almost mis-took one for the other. A section of them thought whats all this fuss all about and the ones who cared to reflect on my question, thought it was not trivial – afterall both are insurance policies which pay out when one loses job or has an accident or sickness leading to loss of pay.

So what is the answer really?

Both Income and payment protection protect – accident, sickness and unemployment (ASU) and both pay out for 12 months or 18 months depending on the benefit period chosen. The fundamental and most important difference is the basis on which the policy is issued. In terms of payment protection – the monthly benefit amount is always based on the re-payment instalment of mortgage, rent or a secured loan but income protection does not have any of those requirements. Income protection is based on your income rather than the payments you are due to make every month. When a claim has to be paid out, the payment protection insurer will seek proof of mortgage, rent or loan payments payments due to be made by you and an income protection insurer would like to see proof of your income. From an insurer’s perspective, in a typical underwriting language – it all comes down to “insurable interest”. I will not bore you on that.

So it is really simple. If you want to get your accident, sickness and unemployment insurance on the basis of your monthly outgoings – then go for payment protection if not it is income protection for you.

Hope the above few words helps in understanding these often used (wrongly used) terminologies.

Keep sending your comments, your feedback helps us improve and hopefully write better articles.

 

Santander is recruiting 600 new staff…

On September 6, 2010, in Employment opportunities, by Kesh Thukaram

Some positive news at last.

It has been reported widely in the media today that Santander plans to recruit about 600 new staff.

The Spanish bank Santander – acquired 318 branches and 1.8m customers from RBS last month. Though the FT reported this morning that Santander would recruit upto 6,000 people, Santander slammed the reports as “inaccurate”.

These roles are in addition to the normal recruitment which replaces the regular staff turnover.

So with that positive news in the begining of the week, let us hope the gloom and doom in the job sector and the UK economy changes to a positive spiral. I know this is wishful thinking – given that other indicators such as the new automobile purchases have fallen down for a second month in a row, house prices have fallen down for a second month in a row … and the increasing fear of a prolonged economic depresssion if not a double dip.

Nevertheless, as you would have found out over the weekend, successful people always make plans to protect themselves for the unforeseen and at Best Insurance we are always ready to give you the right support to protect yourselves against such unforeseen and unplanned happenings in life such as redundancy, loss of employment, accident or sickness.

 

The FT today has made an attempt to highlight the key issues with public sector middle level managers who are facing the threat of job losses. It is inevitable that the job losses will be more than 600,000 as for every public sector worker in the UK, there is at least one more in the private sector whose role is dependant on the activities of the public sector.

The issue is which segment i.e. what roles in the public sector are at maximum risk of redundancy. The risk being made redundant by the public sector and not possessing the skill sets to enter the private sector. Over the last 20 years, amongst students and aspirants of high growth careers, there has been a major focus on skills such as business administration, management etc – commonly referred to as “Generalists”. Times have definitely changed; it is clear from the latest analysis of various recruitment consultants that it is this “Generalist” segment that will receive the brunt of job losses. It is now an era of “specialist skills”

Recruitment consultants have predominantly two sets of views. Some feel that employees of public sector have lost the ability to re-adjust and are stereotyped as poorly motivated clock-watchers. The others feel that it is actually all about the mindset of the public sector employees. Most of them are sitting in the hope of receiving payouts and not moving out spontaneously to a good opportunity they may be able to find.

The million dollar question – what skill sets from the public sector are transferable to the private sector? – Very difficult question to answer, almost like gazing at a crystal ball. However, the ones that seem obvious are IT specialists, accountants and engineers.

Again there are several schools of thought on how to assist the public sector employees who will be impacted. These ranges from having government sponsored programmes that will assist employees learn new skills to transitional help which will help people to cope with multi-dimensional organisations whose structure is different from the singularly focussed, familiar and structured environments that the public sector typically offers.

Some wise man once said the best help is “Self help”. It is time people take responsibilities for their lives; accept that future is a place where things will change more than ever and faster. What is self help then… get re-skilled and get adequate protection to look after yourself i.e. Income protection insurance (I would say that wouldn’t I – but you cannot dismiss it either as it is a sensible point). There is a wide range of products that is available from mortgage protection, income protection, redundancy and unemployment insurance to simple loan protection or credit card protection insurance. Again as part of self help – do not buy blindly based on advice of your friends… shop around, speak to advisors. At Best Insurance, we are even happy to call you back for our no-obligation free advice… so why not take advantage of these. Compare the cover, read the policies and key facts summaries.

Lastly, a thought for the weekend – pick any four or five success people around you and analyse their traits – a common one would be …successful people never leave anything to chance… so why should you?

 

RBS Slashes more than 3,500 jobs – the impact…

On September 2, 2010, in Redundancy, by Kesh Thukaram

The latest announcement of RBS cutting 3,500 jobs is part of its programme to shed over 9,000 people that was announced last year. Last week RBS announced that 14 of its 27 offices in its insurance division that comprises of Churchill and Direct Line will be closed.

There will be little impact of these announcements in the next few months. The jobs cull would start next year and run through to the end of 2012. The impact and domino effect of these job losses from mid next year is bound to have severe impact on the cities where these job cuts are made. It obviously will impact UK job market on the whole.

RBS is 85% owned by the tax payers and in my view it has a moral responsibility to ensure that jobs are not off-shored and British workers made redundant. Several sources indicate that more than 500 jobs have been moved to Far East, India and the US. It is important that the corporate board rooms display a lot more empathy towards their local economy and take a long term approach when it comes to redundancies rather than just focussing on short term results and their own bonuses.

The question really is what kind of jobs are under threat. Inevitably the redundancy fear is for jobs in IT and back office as announced by RBS today.

While there is no doubt that people in the mature economies especially such as Western Europe, Australia and USA have to focus more on specialised skills to have job certainty, it will take a generation to get this correction right and by then who knows which sectors would perform. In short, the survival of fittest will always remain.

Unlike the last decade, job security is a thing of the past. Regardless of function and role, it has become imperative for people to ensure that if the worst happens, they have a fall back option and a cash flow that will help weather the job loss. The two fundamental options are either people re-train themselves or find another job. As the old saying goes, it is prudent to save for the rainy day. It is never a bad idea to get a good mortgage protection or income protection insurance to protect against loss of income.

At Best Insurance, we specialise in such products and strive hard to ensure that we provide our customers with the best policies for redundancy, accident, sickness and unemployment at affordable monthly payment plans. It is always a good idea to compare the prices, take a few quotes, read the policy covers, understand the benefits and be comfortable with your decision. One tip – speak to the company you are buying from and re-confirm the information you have gathered online… one phone call can give you more information than browsing for hours.

Anyway getting back to the RBS story of today, it just seems that the flood of companies announcing job cuts is never going to stop…I am hoping for the day when I can read a newspaper with some positive news on growth and job creation…