Starting from October 2012, employers will enrol workers into a workplace pension, if they meet the criteria below. When you pay into your pension, your employer and the government will contribute too. Find out how this affects you, when this will happen and the benefits.

If nothing changes in the way in which tuition fees and expenses have become part of the cost of being a university undergraduate, then the annual cost in 18 years time, according to a number of media sources, could average £120,000!

In the past, some parents have chosen to save for the cost of a place at an independent fee paying school, after putting the child’s name down for the school of their choice, in order to get what they felt would be the best school experience and education for their child.

Now, whilst you can’t put your child’s name down for a university place, access to higher education is also likely to come with a large price tag. Those parents wanting both places for their children at fee paying schools and university could find themselves with dramatically increasing outlays year on year, for a considerable part of their lives. With such long-term costs, limiting the size of one’s family might become a decision mainly determined by the anticipation of future affordability.

New parents now might need to consider investing around £3,000 a year to cover the cost of sending one of their children to university, a figure which might need to be considered by some alongside the cost of school fees. On past performance of long term investment funds, £3,000 might just about grow to yield £120,000 in 18 years time!

It is possible that if the national financial situation improves, then the need for universal and affordable access to higher education in universities could become a greater priority across the UK. Is the Scottish model a dying last attempt to control the cost to individuals or is it a beacon for future change elsewhere? In the UK, we have for the last 100 years sought to provide fair and affordable access to educational opportunities.

Has this now changed permanently or can parents rely on a future national change of heart and circumstances, within the next 18 years, to restore universal access to university as an affordable entitlement? If not and you want the best education for your children to include a university place, then you must already be able to see your way to paying for it, or you had better think how you might do it and start saving!

If you want to find out more or need advice about long-term savings and investments for families and educational futures, contact one of the team who will be happy to help.

The Monetary Policy Committee, MPC, is made up of nine members – the Governor, Sir Mervyn King; the two Deputy Governors; the Bank’s Chief Economist; the Executive Director for Markets and four external members appointed directly by the Chancellor. The appointment of external members is designed to ensure that the MPC benefits from thinking and expertise in addition to that gained inside the Bank of England.

The MPC meets every month to set the interest rate. Throughout the month, the MPC receives extensive briefing on the economy from Bank of England staff. This includes a half-day meeting – known as the pre-MPC meeting – which usually takes place on the Friday before the MPC’s interest rate setting meeting. The nine members of the Committee are made aware of all the latest data on the economy and hear explanations of recent trends and analysis of relevant issues. The Committee also hears about business conditions around the UK from the Bank’s Agents. The Agents’ talk directly to business, to gain insight into current and future economic developments and prospects.

Whilst the MPC members each have expertise in the field of economics and monetary policy, each does not represent an individual group or finance area – they are required to be independent. Each member of the Committee has a vote to set interest rates at the level they believe is consistent with meeting the inflation target. The MPC’s decision is made on the basis of one person, one vote. It is not based on a consensus of opinion. It reflects the votes of each individual member of the Committee.

A representative from the Treasury also sits with the Committee at its meetings. The Treasury representative can discuss policy issues but is not allowed to vote. The purpose is to ensure that the MPC is fully briefed on fiscal policy developments and other aspects of the Government’s economic policies, and that the Chancellor is kept fully informed about monetary policy.

The monthly MPC meeting itself is a two-day affair. On the first day, the meeting starts with an update on the most recent economic data. A series of issues is then identified for discussion. On the following day, a summary of the previous day’s discussion is provided and the MPC members individually explain their views on what policy should be. The Governor then puts to the meeting the policy which he believes will command a majority and members of the MPC vote. Any member in a minority is asked to say what level of interest rates he or she would have preferred, and this is recorded in the minutes of the meeting. The interest rate decision is announced at 12 noon on the second day.

The MPC goes to great lengths to explain its thinking and decisions. The minutes of the MPC meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. The Committee has to explain its actions regularly to parliamentary committees, particularly the Treasury Committee. MPC members also speak to audiences throughout the country, explaining the MPC’s policy decisions and thinking. This is a two-way dialogue. Regional visits also give members of the MPC a chance to gather first-hand intelligence about the economic situation from businesses and other organisations.

In addition to the monthly MPC minutes, the Bank publishes its Inflation Report every quarter. This report gives an analysis of the UK economy and the factors influencing policy decisions. The Inflation Report also includes the MPC’s latest forecasts for inflation and output growth. Because monetary policy operates with a time lag of about two years, it is necessary for the MPC to form judgements about the outlook for output and inflation. The MPC uses a model of the economy to help produce its projections. The model provides a framework to organise thinking on how the economy works and how different economic developments might affect future inflation. But this is not a mechanical exercise: given all the uncertainties and unknowns of the future, the MPC’s forecast has to involve the input of individual member judgements about the economy.

If you want to find out more or need advice about the implications of the MPC decisions for you or your business, contact one of the team who will be happy to help

An ABI consumer survey recently suggested that the introduction of auto-enrolment from October 2012 could not come fast enough for many, as a way of bringing them out of the ‘savings stalemate’. Not missing out on employer pension contributions (47%) and on tax relief from contributions (14%) were the most popular reasons encouraging people to remain ‘opted-in’ to workplace schemes. This clearly shows that people see the value of their money being made to work harder by the extra top ups they will get from their employer and the Government.

The ABI reports that overall, more than half (53%) of people not already in a company pension scheme say they will remain ‘opted-in’ when their employers begin automatically enrolling them in eight months’ time, and this comes before any significant promotion of the new scheme. With a further 30% of people still undecided, the Association could see even more remaining ‘opted-in’ and saving for their future.

The research also reported that a similar scheme to auto-enrolment in New Zealand has seen the number of workers saving for their pension more than double, with more than half of the country’s working population now enrolled. We could see even higher figures as the UK auto-enrolment arrangements will cover all eligible workers, whereas in New Zealand the scheme has only applied to those changing jobs or just starting work.

Around half of workers are currently either not saving into a pension or not saving enough, in the current financial climate. Auto-enrolment will give many people an opportunity to save for their retirement, which cannot be put on the back-burner or ignored, with the added value to their pension savings pot of employer contributions and tax relief on their own contributions.

If you want to find out more or need advice about the pensions scheme automatic enrolment roll-out for your business, contact one of the team who will be happy to help.

In its wake lie investment theories which have been turned on their head, pain for anyone trying to earn a return that at least covers the cost of rising living expenses and market moves which reflected investors complete focus on buying any asset which they considered to be safe while scaling back exposure to anything they considered risky.

For example we’ve seen the 10-year bonds of safe governments at around or below 2%, we’ve seen the virtual elimination of any real yield on UK index-linked securities while certain countries have had to pay 9%+ on their bonds in order to entice investors to buy them.

The biggest change that all investors are starting to appreciate is that market valuations whether it’s the FTSE All Share, Dow Jones Index or any of the European indices are no longer determined solely by fundamentals such as asset type or company valuations but also by the actions of policy makers.

It is this greater dependence on politicians and central bankers rather than old fashioned fundamentals that has torn up the rule book and made the outcome far more uncertain and the one thing that is guaranteed to upset the markets more than anything else is uncertainty.

Uncertainty means volatility and we are currently witnessing unprecedented short term market volatility and irrespective of how many Euro summits are held, or how much money is pumped into the economies of the western world it doesn’t look like we will be returning to a period of sustained economic growth any time soon.

So what does all this mean for anyone investing money into a pension plan? Well an increase in market volatility means that the range of potential returns that investments can earn is much wider.

However while the sharp falls that can be experienced at such times can be unsettling it can benefit investors who make regular payments into their pensions. When markets are lower contributions buy more units and this can help to smooth out the effect of market falls over the longer term.

So in the face of all this noise and uncertainty remember that while stock markets will move up and down from time to time a pension is a long term investment and its final value will take into account movements in the value of the investments over the whole term of the policy.

The best thing to do is focus on investing in a diversified portfolio of assets which are suitable for the amount of risk your customer is willing to take and remember that sooner or later common sense will prevail and normal market service will be resumed.

The Mortgage Market Review aims to prevent a recurrence of the irresponsible lending which resulted in some borrowers taking on mortgages which only seemed affordable on the assumption that house prices would always rise. Many of those borrowers ended up struggling to repay their mortgage and in danger of losing their home.

The proposals will see prospective borrowers – whether they are first time buyers, right-to-buy tenants or home movers – get the right information and advice at the right time, and ensure mortgage lenders will be properly checking each applicant’s realistic ability to repay their mortgage.

The FSA has significantly amended the proposals following detailed feedback from lenders, consumer groups and other stakeholders and informed by a cost benefit analysis which is also published today. The FSA is now encouraging consumers, industry and all other interested parties to give their opinions on this new, full, set of proposals as well as on the accompanying cost benefit analysis.

Following consultation, the FSA Board will make a decision on the final form of rules in the summer of 2012, but implementation will not be before 2013.

At the core of the proposals are three principles of good mortgage underwriting:

• Mortgages and loans should only be advanced where there is a reasonable expectation that the customer can repay without relying on uncertain future house price rises.
• Lenders should assess affordability and allow for the possibility that interest rates might rise in future. Borrowers should not enter contracts which are only affordable on the assumption that low initial interest rates will last forever.
• Interest-only mortgages should be assessed on a repayment basis unless there is a believable strategy for repaying out of capital resources that does not rely on the assumption that house prices will rise.

The FSA believes it is important to have the rules well established long before any future upturns in the economy.  Key features of the proposed future regime include:

• Income will have to be verified in every mortgage application;
• Lenders do not have to consider in detail what borrowers spend but cannot ignore unavoidable bills, such as heating and council tax;
• Interest-only mortgages can still be offered as long as borrowers have a credible plan to repay the capital. But relying on hopes of rising property values is not enough;
• Lenders will have to consider the impact of increases in interest rates in line with current market expectations;
• Some applicants, such as those trying to consolidate debts with a mortgage, will have to get advice to ensure they understand the full implications and costs;
• Existing borrowers will be unaffected and lenders will have the flexibility to provide new mortgages to some existing customers even where they do not meet the new affordability requirements;

The FSA is also calling for feedback on developing a specific approach for entrepreneurs who borrow against their home to fund their business.
The consultation is open until March 30 2012.

If you want to find out more or need advice about mortgages, contact one of the team who will be happy to help.

He re-affirmed the Government’s commitment that automatic enrolment will start on time, from October 2012, and apply to all employers. He also confirmed the adjustment of the timetable so that small businesses are not affected by the reforms during this Parliament, thus providing them with some additional breathing space to prepare for the reforms whilst operating in tough economic times.

Within the revised Automatic Enrolment timetable:

• All employers with an existing staging date of on or before 1st February 2014 are unaffected. This means that no large employer will have to make any changes to their plans, which in many cases, are already advanced.
• Medium-sized employers will be re-allocated automatic enrolment dates between 1st April 2014 and 1st April 2015. This means that the implementation dates of some of these employers will be up to nine months later. However, around 70% of eligible workers will still be automatically enrolled before the end of this Parliament compared with around 75% under previous arrangements.
• Small employers will be allocated automatic enrolment dates between 1st June 2015 and 1st April 2017.
• New employers setting up business between 1st April 2012 and 30th September 2017 will have automatic enrolment dates between 1st May 2017 and 1st February 2018 inclusive. Any new employer setting up from 1st October 2017 onwards will be required to comply immediately if paying earnings which attract PAYE deductions in respect of any worker.
• In addition, a proposal that the increase in the minimum rate of employer pension contributions, from 1% to 2% of banded earnings, be delayed by one year; from 1st October 2016 to 1st October 2017. Contributions will increase to 3% from 1st October 2018.

The DWP plan to publish a consultation document on the detail of these changes following this announcement and draft regulations and an impact assessment will be published alongside this consultation document.

If you want to find out more or need advice about the implications of the pension scheme automatic enrolment, for your business, contact one of the team who will be happy to help.

The Financial Services Authority is implementing the Retail Distribution Review (RDR as it’s commonly known) in December 2012, after which time advisers will either give ‘independent’ or ‘restricted’ advice. Simply put, ‘independent’ advisers will be give advice on the full range of retail products and investments: advisers giving ‘restricted’ advice will – as the name suggests – only advises on a limited range of products.

Certain conditions (including higher qualifications) will need to be met for an adviser to continue to be classed as ‘independent’ and it is therefore entirely possible that your independent adviser will no longer be independent as we enter 2013. If it is important to you that you continue to receive independent – as opposed to ‘restricted’ – advice, here are the three key questions you should ask your current adviser now:

1.Do you plan to offer independent or restricted advice after December 31st 2012?

2.Do you already have the higher qualifications you’ll need to continue giving independent advice? If not, when do you expect to achieve them?

3.Could you explain to me how I’ll pay you from 2013 – and how will this be different from the way I pay you now?

Hopefully you’ll receive the answers you want, and you’ll be able to carry on dealing with the same adviser. But supposing you don’t? Supposing, for example, that your current adviser is only going to offer restricted advice when you want fully independent advice and – however regrettably – you feel that you need to find a new adviser? In addition to the questions above, here are five questions that might help you settle on a new independent financial adviser.

Do you specialise in any particular area of financial advice? This is important for two reasons – firstly, there’s no point dealing with an IFA who specialises in say, mortgages if your main need is going to be for investment advice. Secondly, if an IFA does specialise in a particular area, they should have specialist qualifications in that area; for example, there is an advanced qualification for IFAs who specialise in pension planning.

Could you describe a typical client of yours? If, for example, you’re a private individual you might not want to be the client of an adviser who concentrates on the corporate market. It makes sense to try and find an adviser who deals with ‘people like you.’

Could you describe your advice process to me? A good IFA will take time to make sure he’s gathered all the relevant facts; he’ll do all the necessary research and he’ll give you written recommendations. Most importantly, he should give you plenty of time to make a decision and you definitely shouldn’t feel under any pressure to invest or to purchase any products.

Will you work with my other advisers, such as my solicitor and accountant? There are bound to be times when this is necessary: the answer should be an uncompromising ‘yes.’

Finally, are you in this for the long term? Hopefully, you’re going to be working with your IFA for several years, so you want one that’s committed to his or her business and in it for the long haul. Go ahead and ask your existing or potential IFA when he’s planning to retire – after all, if he doesn’t have an idea about his own financial future, he’s unlikely to have one about yours!

Other countries greeted 2012 less sluggishly and China and India reported a strong start to the year, with an increase in domestic demand helping to compensate for reduced orders from Europe.

Virtually all world stock markets turned in a positive performance in the first month of the year. The only fallers were Malaysia, Slovenia, Portugal and Spain, with several markets seeing rises approaching (or even slightly exceeding) 10%. Among the more established markets Hong Kong led the way, rising by 10.61%.

UK

The news from the UK was almost unremittingly bad throughout January – and yet the FTSE 100 index managed a healthy rise of just under 4% to finish the month at 5,681.

Unemployment in the UK reached a 17-year high at 2.68 million, with youth unemployment continuing to be above one million. On January 24th the Guardian reported that the national debt had reached £1tn and in a more prosaic demonstration of the national malaise, Little Chef reported a round of job cutting, perhaps reflecting the fact that there are far fewer reps and delivery drivers on Britain’s roads.

Most worrying though was the reported slump in Tesco’s sales over the Christmas period. The company’s shares slumped 15% on the news as Tesco warned of ‘minimal growth’ – a sentiment echoed by other retail chains such as Argos, Mothercare and Halfords.

Then on the very last day of January came news that Britain’s manufacturers had enjoyed a “strong start” to the year, with output growing at the fastest rate for a year. The closely-watched Purchasing Managers Index survey for January was upbeat, and even had some economists suggesting that a ‘double-dip’ recession could be avoided. Another strong performance in February would be a very positive indicator for the UK.

Europe

As noted in the introduction, M. Sarkozy and Frau Merkel didn’t meet until well into the new year, but then it was business as usual with yet more talks aimed at solving the Greek debt crisis and the EU bailout fund being boosted further to $1tn. Several learned commentators are now actively discussing the means by which Greece could leave the euro but – for the moment – the talks go on.

More worrying in the short term was the fact that the ratings agencies continue to downgrade both European countries and European banks. France lost its AAA rating in the middle of the month, and by the end of the month Italy and Spain had also been downgraded. Among the smaller economies, Belgium, Slovenia and Cyprus were all told to sit on the naughty step.

Speaking at the Davos Economic Forum, legendary financier George Soros warned of a “lost decade” for Europe, similar to that which affected South America in the 1980s.

Like the UK, however, European stock markets shrugged off all the worries to post strong gains in January: Germany’s DAX index rising by 8.91% to finish the month at 6,617.

United States

It was easy to be confused in the US, in a month which saw headlines about SOPA and SOTU. The first was the Stop Online Privacy Act, eventually withdrawn in Congress after much protest from Google, Facebook and countless other online luminaries. SOTU was the annual State of the Union address, and it was widely seen as the start of Barack Obama’s campaign for re-election. It may be that in the run up to the election the President finds himself repeating Bill Clinton’s mantra – “It’s the economy, stupid” – as the economic indicators coming from the US seem to be giving increasingly good news.

Despite this, the Dow Jones index posted only a modest rise compared to some world markets – up 3.6% to 12,632. However, American investors do have several reasons to be cheerful, with the economy expanding by 2.8% in the fourth quarter of 2011. Figures for December showed that inflation and unemployment both fell in the month and the US Federal reserve stated that there would be “no interest rate rises before 2014.”

The Far East

All the major markets in the Far East – China, Japan and Hong Kong – saw gains in January, and as noted above, Hong Kong’s Hang Seng index rose by more than 10%.

Japan did post its first annual trade deficit for more than 30 years, but given the disruption caused by the tsunami of March 2011, that was hardly surprising.

China’s economy “only” expanded by 8.9% in the last quarter of 2011: export growth was lower as a result of the problems in Europe, but as noted elsewhere, there are signs that domestic and regional demand is beginning to compensate for this.

Emerging Economies

January was a tremendous month for those stock markets usually filed under ‘emerging markets’ with Brazil, Argentina and India all posting double-digit rises. The Russian stock market rose by just over 7% as the anti-Putin protests subsided (perhaps because of the Moscow temperature in January…), but there was a less impressive performance from 2011’s stellar performer, Venezuela, where the rise was only 4%.

Whilst the IMF cut its overall growth forecasts for 2012 – trimming its forecast of world economic growth from 4.1% to 3.3% – it inevitably sees the major contractions in Europe and the developed world. Emerging and developing economies in Asia, Latin America and Eastern Europe are still predicted to see growth of 5% or above.

And finally…

January was a quite outstanding month for the financial headline writers. Blacks Leisure found itself in trouble and was eventually bought by JD Sports for £20m. Last minute price reductions failed to save Blacks but did prompt the headline, “Now is the winter of our discount tents.” And Sir Fred Goodwin found himself back to plain old ‘Mister’ as his knighthood was removed for the RBS debacle. However, Mr Goodwin was to hang on to his massive and much-envied pension pot – prompting the English edition of the ‘Volga News’ to report, “Queen takes Knight but no cheque, mate