House price bubble is biggest threat to Help to Buy success

Brokers and lenders are united in their belief that a house price bubble represents the biggest threat to Help to Buy’s success.

Research from the Intermediary Mortgage Lenders Association, which polled 300 brokers and 16 of its 20 members in July, shows 60 per cent of lenders and 59 per cent of brokers believe artificially inflated house prices are the biggest threat to the Help to Buy scheme. Imla members anticipate prices to rise by 2.7 per cent by the end of the year.

Imla executive director Peter Williams says: “There is a clear consensus that first-time buyers stand to benefit most from the second part of Help to Buy. But if house prices continue to rise for the duration of the scheme, then in essence we will be giving with one hand and taking away with the other.”

Source Money Marketing August 28th 2013

Premium Bond prize chances to be cut, NS&I says

The chances of winning a prize in the UK Premium Bonds draw will be reduced from 1 August, as savings rates continue to fall.

National Savings and Investments (NS&I) will cut the prize fund, arguing that it must balance the needs of savers, taxpayers, and the savings sector.

There will be only three prizes of £100,000 each month, rather than five. Other prize odds will also fall.

About £44bn is invested in Premium Bonds by 21.6 million people.

The number of people who have invested in Premium Bonds has fallen by about 1.4 million in the last 10 years, but the amount invested has more than doubled, excluding the effect of inflation.

Millions in prizes

Investors in Premium Bonds forgo interest in order to have the chance to win tax-free prizes.

However, following the changes in August, the odds of each £1 Premium Bond number winning a prize will change from 24,000 to one, to 26,000 to one.

Some 1.7 million tax-free prizes will still be paid each month, totalling £49m, from August. The total value of prizes at present is £57m.

NS&I said it needed to make the changes owing to its unique position being backed by the Treasury. It must reflect the market, and not be too competitive or out of line with the rest of the market.

"Rates across the savings market have fallen over recent months, resulting in NS&I savings being increasingly attractive," said Jane Platt, NS&I chief executive.

"In light of our framework to balance the needs of our savers, taxpayers and the stability of the broader financial services sector, we now need to reduce the Premium Bond prize fund rate."

Wins range from £25 to a single jackpot of £1m. The highest award will not be affected by the change in August.

read more: http://www.bbc.co.uk/news/business-23418034

Louise O'reilly of Intuitive FS says "investors need to understand the impact of changes to premium bond draws''

Carney: Rates to stay at 0.5% until unemployment drops below 7%

The Bank of England will keep the base rate at 0.5 per cent until the UK’s unemployment rate falls below 7 per cent unless inflation spikes, governor Mark Carney announced today.

Presenting the latest Inflation Report, Carney introduced a policy of “explicit state contingent guidance” when it comes to the Bank’s monetary stance, with a link to unemployment. He also revealed that quantitative easing will not be unwound while unemployment is above 7 per cent.

The Bank is also prepared to add to QE while the unemployment rate remains above its desired level.

However, Carney added that the monetary policy committee will have to consider rate changes if its inflation forecast goes beyond 0.5 per cent of its target over 18-24 months or if there are any threats to financial stability.

“It is important to be clear that bank rate will not automatically be increased when the unemployment threshold is reached. Nor is 7 per cent a target for unemployment,” Carney said.

“So 7 per cent is merely a ‘way station’ at which the MPC will reassess the state of the economy, the progress of the economic recovery, and, in that context, the appropriate stance of monetary policy.”

The use of forward guidance, which was widely expected by the market, follows similar action by the Bank of Japan in 1999 and the US Federal Reserve in 2012. Carney also implemented forward guidance at the Bank of Canada in 2009 when he was governor.

According to the Office for National Statistics, the UK’s unemployment rate currently stands at 7.8 per cent.

The Bank of England expects median unemployment to stand at 7.3 per cent over the next three years, the Inflation Report shows, meaning the base rate is likely to remain at its historic low throughout the forecast period.

Read more: http://www.moneymarketing.co.uk/1075578.article?cmpid=amalert_1300495574&cmptype=Carney%3A+Rates+to+stay+at+0.5%25+until+unemployment+drops+below+7%25

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Mervyn King warns against 'premature' interest rate rises

Bank of England governor Lord Mervyn King says it would be “premature” to raise interest rates now, adding they are set to remain low for some time to come.

Speaking at his final Treasury select committee hearing today, King said monetary policy should remain loose and defended the use of quantitative easing.

King, who is set to leave the role on 1 July, moved to calm global markets after a tumultuous week in which equities fell and Government bond yields rose on the back of signals by the Federal Reserve that it would start to unwind its QE programme.

Read More....  

"Savers should check interest being applied to their savings on cash urgently" - Intuitive FS

Which Retirement - Annuity Protection

When reviewing clients retirement choices and retirement pension many clients worry about committing to a lifetime annuity not knowing how long their lifetime will last! For many the annuity route is the most suitable and this area of concern can be answered by way of building in options for family and dependents.

Guaranteed Period - If the annuitant were to die soon after starting their annuity (and they had not selected a Guarantee Period, their income would stop and no further payments would be made.

A guarantee period will ensure that income will continue to be paid until the end of the guarantee period, which is usually five or 10 years from their first payment.

• Choose between one and 10 years (maximum), typically most people consider five or 10 year guarantees
• The longer the guarantee, the lower the initial income will be
• The annuitant can nominate anyone to receive the income from the guarantee either directly to the annuity provider or through a will
• If they live past the guarantee period their income continues, but when they die nothing will be passed on, the income will just stop (if no other options have been chosen)

Dependents Pension

This allows the benefit from an annuity to transfer to a dependent such as a spouse or civil partner, should they die before the dependent. Different amounts of the annuitant's income can be covered in this way, for example 50%, 100% or a particular percentage depending on their financial needs and circumstances.

• When the annuitant dies, the annuity income switches to pay the dependent, which pays them an income in the same way, for the rest of their life
• Your client can provide the medical details of their dependent so they can be factored into an enhanced quote
• It is worth considering this option in conjunction with any other provisions that may already be in place such as other pensions, savings or life assurance policies

Value Protection – As clients may be concerned they will not see full value from their annuity if they pass away in the early years following the initial purchase they may wish to consider Value Protection. With Value Protection, some money will be returned to your beneficiary(ies) should you die without having received the full value of your pension fund (subject to a tax recovery charge, currently at 55%).

When you take out your annuity, you can choose to protect a percentage of your pension fund, up to 100%*. The lump sum payable when you die is the percentage of

your pension fund that is protected, less the total gross annuity payments already paid to you.

Like all options with annuities you also have to way up any drawback, Adding these additional benefits from the start will reduce your annuity payments and it will depend on how many benefits you include. Therefore it is vital to look at affordability and the long term consequences of these benefits.

Tax treatment depends on individual circumstances and may be subject to change in the future.

By Louise O'Reilly

Take a look at the online services we offer here.

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Retirement Pension - 120% GAD limit

As quoted via many different pension providers the 120% GAD limit is back from the 26 March. However, if you are currently in a drawdown arrangement, you will not be able to benefit from the new 120% GAD limit until your next GAD anniversary.

When reviewing your income it will be worth noting

• What additional investment growth is needed to support the increased income?
• Will the existing investment portfolio support the additional returns needed, or will your client need something riskier?
• Does the Drawdown offer a guaranteed return of fund?

Your next review could be the perfect opportunity to consider what level of income is required and in what format, ie have you considered the merits of Fixed Term Annuities or have you had a change in health which may mean that you would qualify for an enhanced annuity? Annual reviews as well as the GAD anniversary reviews are vital for your every changing retirement needs not only to keep up to date with changing legislation and what affects these may have on your own retirement arrangements.

By Louise O'Reilly

To discuss your pension requirements please contact a member of our team now.

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Golf Day Charity Event

Intuitive FS are proud to partner with the Lily Mae Foundation - http://www.lilymaefoundation.com/ and to sponsor the Golf Day and Dinner at Solihull Arden Hotel on Friday 3rd May.

Join us for an excellent day of Golf at the beautiful Marriott Forest of Arden Hotel & Country Club, Warwickshire.

The Competition will be a Four Ball (Team) and Individual Stableford, with Team and Individual Prizes. There will also be a Team Yellow Ball competition.

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