Which? agrees with Winston

Following on from my blog about what Winston Churchill had to say about people insuring themselves correctly, here is what Which? had to say - so again, don't take my word for it!

Which? has included life insurance and income protection (IP) on its list of the best financial products.

The consumer association previously listed IP as a preferred alternative to payment protection insurance when PPI made its worst financial products list.

It described income protection as "vital if your employer doesn't cover your salary when you are sick, or you don't have a big savings pot."

Which? added that life insurance is a must-have if you have dependants, saying: "It's not a pleasant thought, but, if you die young, you need to make sure your family is covered. Don't put it off either, the younger you are, the cheaper it is."

It also highlighted the importance of having a comprehensive will to protect your wishes.

"Wills aren't something you really want to think about, but not writing one could mean real financial worry for your family. Making a will ensures your money goes to who you want it to," it concluded.

One area that i am undertaking a lot of work on just now with my current clients who want or have any life insurances is the area of trusts which can have a very significant impact in terms of both probate and inheritance tax mitigation in terms of ones financial independence and financial planning.

If you wanted to find out more about any of the above, please do feel free to get in touch.

a voice from history

Winston Churchill once said

“If I had my way I would write the word ‘Insure‘ upon the door of every cottage and upon the blotting book of every public man, because I am convinced for sacrifices which are inconceivably small, families and estates can be protected against catastrophes which would otherwise smash them up forever. It is our duty to arrest the ghastly waste, not merely of human happiness, but of national health and strength, which follows when, through the death of a breadwinner, the frail boat in which the family are embarked, founders, and women and children of estates are left to struggle in the dark waters of a friendless world”

In 2010 almost half of Britons are jeopardising their financial futures by neglecting to take out insurance to cover loss of income through illness or death, new data shows.

Twenty four million people are thought to have no cover in place for such an event, according to research.


Those without cover who said they had considered taking out an insurance policy to provide if the main earner of a household was unable to work or died, would be underinsured by an average of £14,500 a year.


A third of people estimated that they could live on less than 35% of their take home pay if they suffered a serious injury or illness. 


That equates to just £171 per week for an average earner – £300 less than the current average household expenditure of £471.

So did we listen to Churchill?…….apparently not.

Three MPC members vote for rate rise

The Monetary Policy Committee (MPC) vote was split over a rate rise in February with one more member, or three out of nine, voting for a rise.

The keenly anticipated minutes revealed Spencer Dale joined hawk Martin Weale, to vote for a 0.25% rate rise, with Andrew Sentence voting for a 0.50% move upwards.

Bank of England governor Mervyn King voted alongside six other members to hold the interest rate at 0.5%.

The Governor invited the Committee to vote on the propositions that Bank rate should be maintained at 0.5% and the stock of asset purchases financed would stay at £200bn.

Just one member, Adam Posen voted to increase the size of the asset purchase programme by £50bn to £250bn.

Howard Archer, chief UK and European economist, IHS Global Insight said: "The hawks within the MPC are growing in numbers and gaining ground, with an interest rate hike looking ever more likely within the next few months."

Archer said Dale was always the most likely to be the first Bank of England internal member of the MPC to break ranks as he has shown more hawkish tendencies before.

Howard added: "Furthermore, Andrew Sentance has upped the ante by voting to raise interest rates by 50 basis points to 1% rather than the 25 basis point rise to 0.75% favoured by Dale and Weale. This puts Sentance even more into conflict with Bank of England Governor Mervyn King who gives the impression that he currently is still against any early interest rate hike."

According to the minutes, other members did not feel the case had been made for a rise yet.

This inflationary risk was limited said members, according to the minutes, because the recent rises in inflation could be explained by the increases in energy, other commodity and world export prices.

However, of the members who voted against a rate rise, some thought that the case for an increase had strengthened.

Nevertheless, the Committee concluded: "A rise at this juncture could damage household and consumer confidence, which remained fragile."

MPC member calls for immediate rate rise

Monetary Policy Committee (MPC) member Martin Weale has said interest rates must move now in order to contain inflation and prevent sharper, more damaging increases in the future.

Speaking to BBC Radio 4, Weale said raising base rate would protect the country from a "squeeze" later on and reduce consumers' inflation expectations back towards 2%.

However, Weale said that raising rates would not mean inflation will fall quickly, with the Bank of England forecasting that CPI could hit 5% after rising to 4% in January.

He said: "I certainly wouldn't expect raising interest rates in the short term to bring the inflation rate rapidly back to target."

Weale, who joined the MPC in 2010, warned that the recent rise in inflation could affect 

people's expectations of future inflation and make price rises self-perpetuating.

He said: "If businesses and people bargaining for wages expect high rates of inflation, then there's a risk that they may build those expectations into their current behaviour."

Weale joined MPC hawk Andrew Sentance in January in calling for Bank base rate to be increased to 0.75%.

King hints of 1.25% Base Rate before year end

The Telegraph reports today that the Governor of the Bank of England has given his clearest indication yet that the Base Rate will need to rise by up to three quarters of one percent before the end of the year.


Any rise in interest rates would end nearly two years of stability with record low interest rates of 0.5 per cent, hitting the majority of mortgage holders, but giving some hope to hard-pressed savers.

Leading economists seized on a key passage in the governor's letter to George Osborne, the Chancellor, explaining why inflation was above target for the 13th consecutive month. They said Mr King's words were a clear signal that interest rates could rise three times before the end of the year, to hit 1.25 per cent.

The official data revealed that inflation, as measured by the Consumer Prices Index, climbed from 3.7 per cent in December last year to 4 per cent in January, the highest level for over two years. The surging price of oil, petrol and the increase in the rate of VAT, which pushed up the price of alcohol and restaurant meals, were the main reasons for the jump.

Mr King warned that the immediate outlook was one of continuing rise in prices, because of the high price of oil, wheat, copper and other commodities on the global markets.

Mr King said: "Inflation is likely to continue to pick up to somewhere between 4 per cent and 5 per cent over the next few months, appreciably higher than when I last wrote to you. That primarily reflects further pass through from recent increases in world commodity and energy prices."

However, he then explained that inflation was equally likely to be above or below the target two or three years away, crucially, “under the assumption that Bank Rate increases in line with market expectations”.

Economists said this key phrase meant that Mr King had backed market predictions that interest rates would rise on three occasions before the end of the year.

Philip Rush, economist at Nomura. He said Mr King’s letter saw the governor “come as close as he can to support market rate expectations” without explicitly giving away the Bank's plans.

Michael Saunders, the respected economist at Citigroup, said: "This in effect is an endorsement of the market rate profile – which projects three hikes by year end– as a roughly appropriate path for policy."

An increase in interest rates would cause further problems for the already slow mortgage market. An increase to 1.25 per cent would add £54 to the average first time buyer's monthly mortgage payments, taking them up to £722 per month, according to Capital Economics, the think tank. It said: "For new borrowers who are already being asked to stump up historically high deposits, that is not a trivial amount."

High inflation is bad news too for most families, whose average wages are not keeping track with the increases in the cost of living. The Office for Budget Responsibility has forecast that average earnings this year will increase by just 2.2 per cent, followed by an increase of 2.4 per cent in 2012, raising the prospect that workers will suffer from effective wage cuts for the next two years.

Ann Robinson, the director of Consumer Policy at uSwitch.com, a price comparison site, said: “Consumers are facing a perfect storm that could see household finances knocked for six this year. When salaries fail to keep up with inflation it spells misery for consumers. These figures could be a cruel and costly combination for households, many of whom are already struggling to stay afloat in these stormy economic times."

The Retail Prices Index, a measure of inflation that many believe more accurately reflects the true cost of living because it contains housing costs, increased from 4.8 per cent to 5.1 per cent. The RPI is often used by companies and trade unions to negotiate salaries. At 5.1 per cent it is now 3 percentage points higher than national average wage increases.

Many households have already felt the full effects of inflation when they come to fill up their cars at the petrol pumps, with the price of petrol hitting a fresh high almost every day in January, because of the rising price of oil and higher fuel duty.Beer, too, has shot higher in price, with the average pint of lager climbing the £3 barrier for the first time. Publicans warned it would increase even more after the Budget next month when an inflation-busting duty increase is expected to add a further 10p to the price for pint.

Many claimed that elderly people, especially those who relied on their savings as a key source of income, were the hardest hit.Basic rate taxpayer with £10,000 in instant access savings account, which now pays an average of just 0.67 per cent, earns £53.60 a year net, but effectively loses £400 once inflation is taken into account. It produces a total net loss of £346.40 in a year in real terms.For a higher rate taxpayer, the net loss in real terms is equivalent to £359.80, according to the calculations by personal finance website Moneynet.

Ros Altmann, director general of Saga, said: "This latest surge in the CPI is a further kick in teeth for older people who often live on fixed incomes and who rely on their savings for additional income. If the Bank of England needed further evidence of the need to increase interest rates sooner rather than later, it surely now has it."The retired population spends more of its income on food and transportation costs, which has been a big contributor to the inflation increase and their spending power is being severely squeezed."

Intermediaries and Brokers remain crucial to the mortgage market

The Intermediary Mortgage Lenders Association has welcomed evidence that shows intermediaries continued to play a crucial role in the UK mortgage market in 2010

Figures from the Council of Mortgage Lenders show that intermediaries proved a key source of advice and support for people buying their first home during 2010, with lending via intermediaries accounting for 66% of mortgage sales in terms of the total number of loans in the year and 65% by the value of those loans.

The figures also highlight the value that homebuyers and remortgagers continue to place on the expertise and service levels offered by the mortgage broker community. Intermediaries were responsible for introducing 53% of all home mover loans, rising to 55% by value, and 59% of remortgages, rising to 62% by value.

IMLA, the specialist trade body representing the interests of lenders who market their products through brokers, has declared 2011 as the year the mortgage industry needs to return to confidence and it is imperative that lenders and intermediaries work closely to achieve that.

Peter Williams, IMLA's Executive Director, says:

"The mortgage market can be a confusing and daunting prospect for people looking to buy their first home, those looking to move and those looking to refinance their existing property. There is a paucity of mortgage availability and consumers need help and support when searching for a suitable product.

"This is where mortgage intermediaries excel and add value to borrowers and mortgage lenders. They are adept at matching a borrower with a lender, saving time and money for both parties and it underlines the fundamental importance of this channel, not just to consumers but also to lenders as a flexible and highly effective route to market.

"2010 was a difficult year in terms of mortgage supply but, even so, mortgage intermediaries dominated the market in terms of sales. We expect this channel to perform equally strongly in 2011." 

Bank of England are missing the warning signs

The Bank of England’s (BoE) decision to hold interest rates at 0.5% yesterday for the 23rd straight month represents yet another missed opportunity to combat rising inflation, experts believe.

The BoE's Monetary Policy Committee has been under mounting pressure to increase borrowing costs to fight off rising inflation, but opted against a base rate rise.

Dr Ros Altmann, director general of Saga, says the MPC again failed to show it wants to control inflation."It is disappointing the Bank of England has once again ignored the warning signs," she says."With the UK economy showing every intention of shrugging off December's poor GDP figures, and with high and ever-increasing inflation strengthening its already firm grip on the UK economy, the MPC has missed yet another opportunity to signal that it really is serious about controlling inflation."It also missed a chance to give savers at least some crumb of comfort that their suffering may be nearer an end."

Meanwhile, Royal London Asset Management economist Ian Kernohan believes the MPC must now increase rates soon if recent economic trends continue.

"We were not expecting a move at this meeting, however, assuming the economic recovery signalled by the main business surveys remains on track, interest rates look set to rise later in the year," he says."Next week's Inflation Report should help prepare the ground for such a move and will be a tad more hawkish than the November report."