Money news, advice and predictions for savers and spenders.
By Jeremy Gates
If you stuck to betting on football or horse racing this year, it's likely you did far better than investors who punted on bonds or left their money in building society savings schemes.
When former England striker Michael Owen - who has lucrative interests in both sports - nabbed the last-gasp winner in the Manchester derby for United against City, he underlined a trend that's left bookmakers in tears.
The bookies' agony began at Cheltenham's racing festival in March, when a string of favourites romped home. But their real nightmare is soccer teams chasing a winner to the final whistle, slashing the number of drawn games.
Some blame Liverpool manager Rafa Benitez. Last season his team probably lost the Premier League title due to 11 drawn games, while champions United were held in just six matches.
So everybody has been going flat-out for wins - and three points - this time around.
Bookies, expecting one in four Premier League games to end in a draw, were horrified to get only four in the first 66 matches.
Chelsea's defeat at Wigan has been the bookies' only source of comfort this season, according to The Financial Times, because it saved them from paying out large amounts on accumulator bets, in which punters win tidy sums by correctly predicting the outcome of a combination of matches.
The punters' triumph may have contributed to the decision by Ladbroke, a market leader alongside William Hill, to ask shareholders for £275 million in a surprise rights issue after profits plunged 58%.
Ladbroke also scrapped a full-year dividend for 2009.
William Hill admits it suffered losses at every big race meet except the Grand National - and even lost £1m on its flagship event, the William Hill Lincoln at Doncaster.
Problems are more acute, says William Hill, because recession and unemployment have slashed the number of weekend customers, sometimes called "mugs" in the business.
You might expect bookies to adjust the odds, but maths, says the FT, has not been their strong point in the past.
Until that changes, punters are likely to continue their dazzling returns compared to the wretched terms inflicted on building-society savers and Premium Bond holders in the past year.
Pensions are set for major change
Workers in their fifties (men aged 51-58, women 51-54) are early losers if Shadow Chancellor George Osborne lifts the state pension age from 65 to 66 in 2016, as he promised at the Conservative Party conference.
But the grim fact is that most workers, outside final salary company pension schemes and or public sector pension schemes underwritten by taxpayers, have lost a big chunk of the income they might have expected when they stop work.
Brian Wood, co-author of the book Beat The Pensions Crisis, says there has been a fundamental shift in the cost of pensions in the last generation.
"Many savers face a gap between what they thought they would get, and what they will get," he says.
Pensions expert Dr Ros Altmann agrees.
"Most people will never save enough, during a normal working lifetime, to get a decent pension at 60 or 65," she says.
Her solution? Part-time jobs for those 60-plus, for two or three days a week, to top up pension income.
Tom McPhail, head of pensions research at financial advisor Hargreaves Lansdown, welcomes the Tory plans.
"Existing Government plans to raise the state pension age are already widely seen as too little, too late," he says.
Labour aims to raise the state pension age to 66 in 2026, to 67 in 2036 and to 68 in 2046 - only affecting people in their mid-40s and below.
Women's state pension age, currently 60, starts rising by six months a year from 2010, reaching 65 in 2020.
Osborne thinks 2020 is the earliest possible date to make women wait until 66 for their state pension, four years after the new limit is imposed on men.
Intended to save £13 billion, his plan does not mean we must all forget the joys of retirement.
According to the Government Actuary's Department, a man reaching 66 in 2016 can expect to live a further 18.9 years, while a woman could expect another 20.9 years of life. Both retirements will be much longer than those enjoyed by previous generations.
How should older workers cope with Osborne's plan?
"If we assume people still stop work at 65, a 58-year-old today set to retire in 2016 needs to save an additional £55 per month for the next seven years to produce a lump sum which covers the lost year's Basic State Pension which he might not get until 2017," says McPhail.
"A 49-year-old needs to save an additional £23 per month for the next 16 years to ensure he can stop work at 65."
But these measures hardly solve the so-called 'pensions crisis'.
On a basic state pension of £95.25 a week, rising with the Retail Price Index, millions face their later years on fairly low incomes.
The irony is that some with no savings, and thus eligible for pension credit, may be better off than those who saved.
Entitlement to pension credit, introduced by Gordon Brown in 2003, is affected by any savings over £6,000. An application form, with notes, running to 63 pages, might explain why two million pensioners who might qualify never bother to apply.
"Those who have not bothered to save and do not keep working may be paid more by the State than those who have paid contributions for decades," says Altmann.
Paul Goodwin, head of pensions at Aviva, the UK's largest insurer, urges major changes to the pension system as the only way to restore "confidence and trust" in it.
The average payment into an Aviva pension is £220 per month, plus the employer's contribution, in many cases. But the average pension pot at retirement - only £30,000-£40,000 - means annual income of only £2,000-2,500.
Around 47% of pensioners say, in the first year of retirement, that they wished they had put more into their pension pot, says Goodwin. But by then it is too late.
Goodwin says that many people can't see the point of a pension when it is more than 40 years away.
So Aviva wants employers to provide shorter-term workplace savings schemes for under-25s as an alternative to pensions, possibly Individual Savings Accounts (ISAs) to provide tax breaks.
Goodwin also believes savers should have the power to withdraw part of the pension earlier in their lives, if they face hardship or want to give money to children to avoid huge student debts.
"It can be difficult to explain to people that they cannot access £30,000 in a pension fund to escape trouble," he says.
Aviva urges the abolition of pension credit, to give everybody a flat £130 per week instead.
And it suggests scrapping higher-rate tax relief on pension savings by higher earners, to encourage the majority (85%) who are basic-rate taxpayers, who might see 14% added to the value of their fund at retirement.
Goodwin says our pension system was built for another age.
"People try to save in a pension system with rigid rules geared to doing two or three jobs through an entire lifetime. Now jobs typically last four or five years, before career breaks or maternity leave."
For today's 20 to 50-year-olds, the future of pensions is horribly uncertain. For too many, the old system no longer delivers.
McPhail says it is vital to start saving as early as possible - the difference between starting a pension at 20 and 25 could mean an extra 28% of income at age 68.
The fact is that pensions are attractive only to those who can build sizeable, six-figure pots.
For many on lower incomes, the attractions are less obvious, which may be why Aviva wants a radical rethink.
:: Information: Hargreaves Lansdown (0117 900 9000 and www.H-L.co.uk); Aviva (01603 622 200 and www.aviva.co.uk); Pension Credit information (0800 991 234 and www.the pensionservice.gov.uk); Age Concern (0800 009 966 and www.ageconcern.co.uk).
To find out about your state pension, call the Pension Service on 0845 3000 168 and www.thepensionservice.gov.uk).
:: Beat The Pensions Crisis by Brian Wood and Claire Brinn is published by Prentice Hall, priced £14.99. Available now.
Poundnotes
:: As the Bank of England leaves interest rates unchanged, Ray Boulger at mortgage brokers John Charcol reckons that new lifetime tracker deals are cheaper than nearly all the two, three and five-year trackers or discounts available.
However, he says that if house prices continue to rise at their current rate, there is "serious risk" of an earlier-than-expected rise in Bank Rate - maybe an argument for a fix for borrowers who want certainty.
Annie Shaw at CashQuestions.com also sees a case for fixing.
"If markets start to lose faith in the UK economy and a sterling crisis erupts, rates could soar further and faster than any political party has so far reckoned on," she says.
:: At last, energy suppliers are cutting prices, says Will Marples at comparison service uSwitch.com. First: Utility undercut E.ON to become Britain's cheapest online supplier (although First: Utility's plan is only available in 12 out of 14 energy regions), then further cuts came on Scottish Power's Online Energy Saver7 and OVO Energy's New Energy, while EDF now offers the cheapest dual-fuel standard plan paying monthly by direct debit, and the cheapest gas-only supplier.
"Get one of these competitive plans to benefit from lower prices in time for winter," says Marples.
:: Small investors are looking for bargains in energy and mining stocks amid popular speculation that oil prices will rise, says leading execution-only broker TD Waterhouse.
But the top-five buys this week remain dominated by banks, with Lloyds Banking Group in top position, followed by Royal Bank of Scotland Group, Gulf Keystone Petroleum, Xstrata and Barclays.
Enquiries: 0845 607 6002 and www.tdwaterhouse.co.uk.
:: Some 51% of the over-50s still hold non-mortgage debt, with the average debt standing at nearly £7,000, says moneysupermarket.com.
"Those aged over 50 have to factor how long they can continue earning, and begin thinking seriously about their finances in retirement," says its head of loans and debt, Tim Moss.
:: High-five savers:
Phone No Rate Account Period Deposit Interest paid
Yorkshire BS 0845 1200 840 5.30% (F) Fixed Rate Bond 31/12/14 £100 Yly
Barclays via branch 5.25% Savings Bond 46 Five Year Bond £500 Yly
West Bromwich BS via branch 3.65% Branch Bonus Instant £100 Yly
Investec Bank 0845 366 6333 3.35% High 5 Three Month (P) £25,000 Mly
Citibank www.citibank.co.uk 3.30% Flexible Saver 6 Instant £1 Mly
:: Top-five borrowers
Phone No Rate Period Max% Adv Fee Incentive
HSBC (Rem) 0800 494999 1.99% discounted for two years 60% £1,199 Yes
ING Direct (UK) 0845 603 8888 3.o9% for term 75% £695 Yes
First Direct (Rem) 0845 610 0100 3.14% variable for term 75% £699 Yes
Co-operative Bank 0800 633 5286 3.24% to 30/09/12 75% £995 Yes
The One account 0845 610 1060 3.75% for term 75% none Yes
Code:
*F - Fixed
*P - Operated by Post
*B - Operated by Post/Telephone
*T - Operated by Telephone
*W - Operated by Internet
*H - Operated by Internet/Telephone
*S - Available only to those aged 50 or over
*R - Available to those aged 60 and over.
:: Source: Money£acts - Tel: 01603 476 476 (All rates subject to change without notice).
