The past couple of years may have seemed about as rewarding for investors as being slapped around the face with a 3 day old dead trout, but spare a thought for our predecessors in the post-war era.
According to a survey by the Halifax, we’re five times better off overall than we were 50 years ago. The average household now has around £237,000 tied up in property, savings and investments, compared to the equivalent of just £73,000 in today’s prices in 1959.
Rising house prices and increases in average earnings are the main factors behind today’s apparent prosperity, while initiatives such as the right to buy council homes and the privatisation of nationalised industries meant the 1980s saw the most dramatic changes.
The survey, though, fails to take into account either increases in the cost of living – and the corresponding high level of mortgage debt – or the lack of correlation between property values and disposable income.
Growing old disgracefully
Indeed, it appears as if many of us could be heading for a return to the kind of austerity levels last seen in the post-war era if our current retirement planning habits continue as they are.
Data released by the Office for National Statistics claims the number of people in company pension schemes fell from 55% to 50% between 1997 and 2009, with the proportion of self-employed men paying into personal pensions decreasing from 64% to 45%.
The recession has taken its toll, too: figures from HM Revenue & Customs show the amount of money paid into personal and stakeholder plans fell by 5% in 2008-09 – the first drop since the 1990s – with lower employee contributions largely to blame.
Meanwhile, research by the Hewitt consultancy found the gap between what people thought they would earn in retirement and the actual amount they will receive has risen by 50% since the poll was last carried out in 2004.
Despite this, only 27% said they would be prepared to increase their contributions and just 10% would consider retiring on less money. Quite how the others intend to afford to retire is anyone’s guess, but we can expect to see a lot more 50-somethings queuing up for lottery tickets on Saturday nights.
Speaking of which, and not wanting to be outdone, the so-called pre-retirees aged between 55 and 64 – the baby boomer generation that grew up in 1950s austerity – have put in their own claim to be the hardest-done-by section of society.
A survey by Aviva claims average household income for this group has fallen to £1,352 a month as a result of the recession, taking it below the £1,360 figure for those aged between 65 and 74. A lack of return on investments and poor rates on savings and ISAs are to blame, with many planning to work well beyond 65 as a result.
Heady heights for savers
Meanwhile, in the week when the Office for National Statistics revealed that inflation hit a 17-month high of 3.7% in April, there was a bit of positive news for those in a position to put away a regular amount.
Northern Rock and Nottingham Building Society both launched accounts paying at least 5% AER, while Coventry Building Society introduced two best-buy fixed-rate bonds, over three and five years. Others are likely to follow as the battle to attract savers heats up.
Rising inflation also makes the prospect of a rise in interest rates later this year more likely. While this will be bad news for borrowers and those who have so far enjoyed floating on rock-bottom standard variable mortgage rates, it would at least provide some relief for those savers who have until now felt the full force of the recession. Earning more interest than the rate of inflation would certainly be a start towards normal service being resumed.
Hope for housing
There was better news, too, on the housing front. The Council of Mortgage Lenders revealed that the number of loans made to homebuyers increased by 25% between February and March, with first-time borrowers leading the way.
The body also warned that the UK faced years of mortgage-rationing due to an under-supply of credit but this does at least suggest the inevitable dip caused by abolition of the stamp duty exemption last December has been fairly short-lived.
The coalition government also confirmed this week that it was scrapping Home Information Packs, with immediate effect.
Estate agents, meanwhile, have reported a wave of interest in selling properties from buy-to-let landlords, ahead of the expected increase in capital gains tax from 18% to as much as 50% in the emergency budget that will be held in June. There may be bargains to be had in the next month for those in a position to move quickly.
PPI under fire (again)
Payment protection insurance (PPI) once again found itself under the spotlight – a position it has occupied much in recent years – after heading the list of complaints made to the financial ombudsman during 2009-10.
Around 30% of all new cases related to the controversial insurance, which allows borrowers to pay off loans or credit cards were they to lose their jobs or be unable to work. Chief financial ombudsman Natalie Ceeney said many people did not know such policies were not compulsory.
For its part, the Competition Commission has repeated its intention to ban the sale of PPI at the time the loans are granted, with a final decision due on this at the end of July.
The king of cash
Finally, sad news that the person who gave us the ability to get money out of a hole in the wall has died. John Shepherd-Barron passed away in Inverness’s Raigmore Hospital last weekend, at the age of 84.
He hit on the idea of a cash machine while in the bath and Barclays installed the first ATM in London in 1967.
In the pre-plastic cards era, the device initially used cheques that were individually marked with the radioactive substance carbon 14 and matched against a personal identification number (PIN).
Still able to remember his old army number, he had originally wanted to include six digits in PINs but his wife could only remember four. Those of us who have to stop and think every time we’re asked to pay by card owe them both a debt of gratitude.
