Is a flat £140 weekly state pension viable?

How viable is the Government's plan for a flat £140 weekly pension? And might you benefit or lose out from such a scheme?.

The Government has said it'd like to introduce a flat £140 per week state pension by 2015. This means doing away with additional state pension entitlement, i.e. the state second pension (S2P), and the current pension tax credit system that guarantees a minimum weekly income of £132.60 for those with low incomes. It also seems qualification could be based on residence rather than National Insurance (NI) contribution history (in which case immigration controls would need to be tightened to reduce drain on the system).

On the one hand a simple system is good and costs less to administer, the current SERPS/S2P and tax credits regime is ridiculously complex. And those on lower incomes should get a higher pension. But a flat state pension could cause a lot of confusion and potential inequity. And effectively represents yet another tax rise for higher earners.

Will it apply to everyone, or only those retiring from 2015?

Unknown at present. I guess it depends on whether the net cost to the Government ends up being positive or negative. However, if it doesn't also apply to those who've retired before 2015 then it'll create an inequitable two tier system.

What happens if your additional pension entitlement is higher than £140 per week?

Again unknown. Reports suggest the Government would look to preserve benefits for those with SERPS/S2P entitlement that pushes their state pension above £140 per week. However, given proposals for the flat pension have yet to be published I think it's fair to say this is all hot air, so we'll just have to wait for more solid proposals further down the line.

What if you've contracted-out of SERPS/S2P?

You guessed it, unknown. It seems logical that the £140 pension would be reduced based on how long you've contracted out, else those who've contracted-out could profit versus those who haven't (and conventional wisdom in recent years has been not to contract out). But if plans for a flat state pension turn out to be serious then you might profit from contracting-out until 2015, depending on how the pension is eventually implemented.

What if you've purchased extra years of NI contributions?

Unless the flat pension plans build in provision for this then your extra contributions might turn out to be a waste of money. But again, we'll have to wait and see...

How can the Government afford to pay a higher state pension?

It can't unless it reduces the overall cost going forwards. We're living longer on average and our ageing population means there'll be fewer people working to fund those in retirement over the next 30-40 years, which will seriously stretch the state pension system. The retirement age is rising to combat this, but it probably won't be enough alone. So the Government must be pretty confident that a £140 flat weekly pension will cost less overall than the existing system over time - else taxes and the retirement age will have to continue rising to fund it.

Read this article at http://www.candidmoney.com/articles/article167.aspx

NEST trundles along

Will the univeral NEST pension save us all from a cash-strapped retrement? Or will it end up yet another doomed attempt at solving the pension gap? .

The National Employment Savings Trust (NEST) is a national pension scheme that all employees earning over a certain sum will be automatically enrolled into. The scheme, due to start in 2012, has been on the drawing board for several years now.

The Government has announced the income threshold for joiners will be £7,745 (although contributions will be based on earnings above the National Insurance threshold, currently £5,715) from 1 October 2012 and the scheme will be phased in over 4 years, with only those companies employing 120,000 or more people having to implement the scheme from day 1 (which is probably not that many).

By 2017 employees will have to contribute 4% and employers 3%, with 1% tax relief. But at the start it seems overall contributions will only have to be 2% - far too low for a decent pension. There are a number of potential issues surrounding NEST (see the bottom of our pension page for more info), especially the Government's proposed 2% charge on contributions intended to claw back the costs of setting up the scheme - although 0.3% annual charges should prove very competitive.

The ideal is worthy, but I've yet to be convinced that NEST will be a success.

Read this article at http://www.candidmoney.com/articles/article166.aspx

Equitable Life compensation

It's going to be paid next year, but don't expect a satisfactory compensation cheque unless you're a guaranteed annuity customer..

The Government has said it will set aside £1.5 billion to pay compensation to Equitable Life policyholders affected by the company’s financial implosion.

From the information currently available it seems £620 million of the money will be used to compensate those with guaranteed annuities in full, leaving £880 million for everyone else.

So unless you're a guaranteed annuity customer compensation could be thin on the ground - I'd guess less than half actual losses. On the bright side it appears the payment will be tax-free – you’d expect them to be, but there were fears the Government would do otherwise.

Compensation levels are expected to be announced early next year with payments commencing in the summer. The process is supposed to be automatic, so affected Equitable policyholders should expect to receive information in the post once the Government has finalised the details - if you're in this boat then make sure Equitable Life has up to date contact details for you.

Read this article at http://www.candidmoney.com/articles/article165.aspx

Sell investment bond for unit trusts?

Question
I am approaching 65 and have a joint Investment Bond (my wife 61) with St James' Place. It has only grown from £40 to 90K over 14 years - I am a basic rate tax payer (my wife is non) and I have been advised by an independent finacial adviser to cash it in and reinvest it unit trusts and ISAs.

I am uncertain about the best course of action and would welcome your opinion. Our SJP partner seems to be more interested in what remunerates him best.
Answer
Assuming you've not made any withdrawals or taken an income then £40,000 into £90,000 over 14 years equates to an annual return of 6%, after basic rate tax. Not great, but certainly not bad either.

My greater concern is that your wife is a non-taxpayer yet you have an investment on which growth and income is automatically taxed at basic rate tax which can never be reclaimed, not even by a non-taxpayer.

If your wife was a non-taxpayer when the St James' Place adviser originally recommended the bond then you may have a strong mis-selling case. They sold you an investment that was probably less tax efficient than alternatives. By all means pursue this with St James' Place and request suitable compensation if you feel appropriate.

Meanwhile, an investment bond probably remains tax inefficient given your position. The reason I say probably is that once you reach 65 you'll enjoy a higher personal income tax allowance. If your overall income exceeds £22,900 (under current limits) then this allowance will reduce by £1 for every £2 your income exceeds the allowance (subject to not falling below the standard personal allowance). Investment bonds have the advantage that annual withdrawals up to 5% of the original investment don't count as income in this context, so won't affect your allowance. However, when the bond is eventually encashed it could affect your allowance, effectively costing you 30% tax on income (which would include all withdrawals and gains on the bond) between £22,900 and £28,930 (based on current tax rates/limits).

Of course, even if you will benefit from the above your wife will be losing out, so it's still questionable whether the bond is worthwhile from an overall tax point of view. And if you decide to encash then probably better to do so before you reach 65 to protect your increased personal allowance (as described above).

Moving to unit trusts, within ISAs where possible, should be more tax efficient. Gains and interest (e.g. from corporate bonds) will be tax-free within ISAs and interest should be tax-free outside of ISAs when held in your wife's name (provided it doesn't push her above her income tax personal allowance).

Dividends from shares are effectively taxed at basic rate whether held inside or outside of an ISA, so no saving there. But at least gains from shares can be offset against your annual capital gains tax allowance (£10,100 during 2010/11), so with careful management growth should be tax-free, even outside of an ISA.

So, on the surface, the advice you've received to switch sounds sensible. However, a couple of caveats:

Tax savings are pretty pointless if performance is poor. So it's vital the adviser you use has decent expertise at selecting and monitoring/managing investments. If they're simply trying to make an initial sale and not bother looking after your investments in future I would be concerned.

Secondly, establish exactly how much switching could end up costing you, including any commissions paid to the adviser. For example, an adviser would usually receive 3% commission upfront followed by 0.5% a year for selling unit trusts. On £90,000 this means £2,700 initially and £450 a year - which you'll pay via investment via charges. Such initial commission would be excessive for what is a fairly straightforward piece of advice, so I'd be inclined to use a fee-based adviser who'll waive/rebate all commissions to reduce your fund charges. I think around £1,000 would be a fair fee (at most) for this advice followed by a few hundred pounds a year if the adviser will provide a proper ongoing service.

Good luck sorting this out.

Read this Q and A at http://www.candidmoney.com/questions/question313.aspx

How do I offset a loss against capital gains tax?

Question
I know that losses on shares can be offset against future capital gains, but does this include losses made in Unit Trusts or OEIC's and can these losses be offset against capital gains made on a second property?

When you inform HMRC do you have to name the shares/unit trust, the buying/selling cost, etc, etc. Answer
Yes. Provided an asset is subject to capital gains tax then you can offset losses against other gains when calculating your tax bill.

The losses can be from an earlier tax year than the gain and there are two steps you need to follow: claim the loss (i.e. make HMRC aware of it) then use it against gains.

To claim a loss you must inform HMRC within 4 years of the end of the tax year in which the loss was realised (it used to be 5 years after the 31 January following the end of the tax year). If you complete a self-assessment tax return you simply need to enter the loss on the return for the relevant tax year, otherwise you'll need to write to your tax office. It's worthwhile detailing the loss in the 'any other information' box on the tax return or in the letter to your tax office - show the price and date at purchase and sale along with the name and loss being claimed.

A loss must first be used against any gains made in the same tax year, but you only have to reduce gains down to the annual capital gains tax exemption (£10,100 for 2010/11) and any remaining loss can then be carried forward to use in future tax years.

So, for example, if you realise losses of £25,000 on unit trusts during the 2010/11 tax year and make a gain of £50,000 on a second home during the same year you can offset the losses to reduce your gain to £25,000 for this tax year. If the property is instead sold in a later tax year you could claim the losses when they occur and then carry them forward (assuming no other gains to offset against) to the tax year in which the property is sold.

Suppose the unit trust loss was £50,000 and the property gain only £25,000, then you would use the loss to reduce the gain to the £10,100 annual exemption and carry forward the loss balance of £35,100 to use in future tax years.

Most investments, including unit trusts and oeics are subject to capital gains tax, so losses can be used to offset gains. The main exceptions are your main residence, jewellery/art/antiques that are individually worth £6,000 or less, gilts and investments held within ISAs, pensions and venture capital trusts.

Read this Q and A at http://www.candidmoney.com/questions/question314.aspx

Will the £140 state pension affect my SERPS/S2P?

Question
Will this new government initiative to pay everybody £140 per week have a detrimental effect on people whose combined old age pension exceeds that amount? I have no objection to people receiving more to improve the lifestyle of the poorest but object if it is to the detriment of others who have paid into the system for many years to receive an enhanced pension.Answer
I'm afraid the answer to your question is unknown at present. The Government has said it will publish proposals to replace the current state pension system with a flat £140 weekly payment by 2015, but until the proposals see the light of day it's anyone's guess as to what might happen.

It would seem mightily unfair to me if those who accumulated additional pension benefits under SERPS/S2P saw those benefits reduced or wiped out. So building in an additional pension for those where these benefits exceed £140 a week under the current system would seem sensible.

But it's not quite that simple, as those who 'contracted-out' of SERPS/S2P will have built up an independent pension pot that could leave them better off versus those who've remained in SERPS/S2P, if they receive the £140 weekly pension. One option would be to reduce their £140 state pension based on how long they've been contracted-out, but this will start to make the simplification plans very confusing and potentially unfair.

Also, it would seem unfair if the Government makes retrospective changes to additional state pension top-up schemes that most of us have used in good faith.

Although conventional wisdom in recent years has been to remain contracted-into the S2P, if the Government is serious about a flat state pension then contracting-out could make sense, although I'd wait until the proposals are published before making a decision.

If a flat state pension does see the light of day I envisage a lot of protest. However it's implemented there's bound to be a group a people who are left worse off and they'll probably have every right to complain very loudly.

Read this Q and A at http://www.candidmoney.com/questions/question308.aspx

How can I invest in Silver?

Question
Can you suggest me a a couple of Silver ETFs than I can purchase from London broker?Answer
The only silver exchange traded funds (ETFs) traded on the London Stock Exchange that I know of are the range from ETF Securities.

They offer 4 fund that might be of interest:

ETFS Physical Silver - available in either dollars or sterling, the fund aims to track the silver spot price, i.e. similar to holding actual silver.

ETFS Silver - traded in dollars and aims to track the Dow Jones-UBS Silver Sub Index. This means the fund effectively tracks the price of silver based on rolling futures contracts.

ETFS Leveraged Silver - as per the above fund but aims to deliver twice the return. Great if the price rises, but will double your losses if the price falls.

ETFS Short Silver - as per the silver fund but aims to deliver the opposite return to the index, i.e. you'll make money if the silver price falls.

However, I'd be wary about piling too heavily into silver at the moment. Price performance has been strong this year and it appears China may have less silver to export due to growing domestic demand, good for the silver price. But if global growth slows then industrial demand (the biggest single source of demand for silver) may drop, hurting the price. And there are also fears that speculative demand has pushed the silver price artificially high, but then the same could be said for gold too and its price remains robust, for now at least.

Read this Q and A at http://www.candidmoney.com/questions/question307.aspx

Can I profit on my mortgage?

Question
Can you please help, I have an interst only mortgage of £119,000 at under 1.75% which expires in 8 years. I have the money to pay it off. However as I am retired it may make sense to put this money into a safe savings/bond/gilt etc account for the eight year period, at a greater rate of interest . I am risk averse so may pay of £19,000 now to cover any interst rise and invest the £100k 50/50 in a couple of savings accounts. I would want to be sure as can be that I get the principle sum back no matter what. Any advice would be much appreciated.Answer
On the surface this looks like a good idea. With 5 year fixed rate bonds currently paying around 4.5% before tax and your mortgage costing under 1.75% you should be quids in.

But, a few points to bear in mind:

Firstly, your mortgage probably charges a variable interest rate. So, if interest rates shoot up you could find the mortgage starts to cost more than you'd earn on your savings - there's no guarantee of profit over the full 8 years.
Although soaring rates look unlikely, it would be foolish to rule this out. Provided you stick to savings accounts that allow you to withdraw money at short notice this shouldn't be a problem, as you could quickly repay the mortgage (check whether there's a penalty for doing so). But the highest interest rates are currently offered on 5 year fixed rate bonds - which lock you in somewhat. If you do opt for a fixed rate bond then choose one that lets you access your money before maturity, you might face an interest penalty but at least you can get your hands on the money in an emergency or to pay off the mortgage if it becomes unprofitable. When a fixed rate matures you can then shop around for the best deals at that time until the mortgage is due for repayment.

If you're a taxpayer then the interest earned on the savings will be taxed. So a 4.5% gross rate would fall to 3.6% for a basic rate taxpayer and 2.7% for a higher rate taxpayer. Still profitable, but less than you might initially think. On £100,000, assuming a gross savings rate of 4.5% and mortgage rate of 1.75% you'd expect to profit by around £2,750 a year if you're a non-taxpayer, falling to £1,850 after basic rate tax and £950 after higher rate tax.

If you're aged 65 or over you should also consider any impact on your age-related personal allowance. During the current tax year someone aged between 65-74 enjoys a higher personal income tax allowance of £9,490 rather than the standard £6,475. However, this reduces by £1 for every £2 you earn above £22,900 (down to a minimum £6,475). So if the interest earned on your savings pushes your income above £22,900 you'll not only pay basic rate tax (20%) as normal but also lose some personal allowance, making an effective overall tax rate of 30%. Again, you should still profit overall but just bear this in mind.

As for security, you're wise to hold no more than is covered by the Financial Services Compensation Scheme (FSCS), currently £50,000 per institution per person. Although this is rising to €100,000 (around £85,000) from next year, you'll still need two accounts to ensure your money is fully covered. If a bank or building society does go under then you'll get your money back, hopefully within a few weeks, but won't receive any interest for the period of time between the bank going into default and you receiving compensation.

Take a look at a comparison site such as Moneyfacts for the best savings rates currently on offer. But at the time of write the AA is offering 4.55% fixed for 5 years (allows access with penalty) while United Trust Bank, ICICI and State Bank of India all offer 4.50% (but no access allowed). There are a number of accounts offering easy access variable rates of around 2.5%-3%, but as these rates tend to wane over time you'll need to review regularly and be prepared to move elsewhere if need be, especially if the rate includes a temporary bonus.

Finally, if a taxpayer you could consider cash ISAs to ensure tax-free interest, but as the amount you can contribute is capped at £5,200 this tax-year per person, rising to £5,340 next year, you're restricted on how much of the money you can shield from the taxman.

Hope you end up making a nice profit!

Read this Q and A at http://www.candidmoney.com/questions/question310.aspx

How do currency movements affect investments?

Question
In light of the Pound falling against other currencies how will the U K investor fare with savings held in ISAs, holding funds of bonds/currencies or equities invested abroad?Answer
Currency movements affect investments in two main ways.

At its most basic, any investments held in another currency will change in value when converted back into pounds following a change in the exchange rate. For example, suppose you own $1,000 of US shares, at an exchange rate of £1 = $1.5, the shares are worth £667. If the exchange rate moves to £1 = $1.6 (i.e. a stronger pound) the shares will decrease to £625 while an exchange rate of £1 = $1.4 (i.e. a weaker pound) would see the shares increase to £714.

The more complex half of the answer is how do currency movements affect the actual investments themselves?

An obvious area is imports and exports. British companies that export should benefit from a weak pound as it make their goods less expensive overseas and vice-versa when the pound is strong. And British companies that rely on imports (either raw materials or goods to sell) will have to pay more when the pound is weak and less when it's strong. In practice some companies might protect against shorter term currency movements by hedging, but even then it's unlikely they'll escape the impact of currency movements altogether.

If you own shares in foreign companies that trade with Britain then the opposite will be true, i.e. a weak pound reduces the cost of British imports but increases the cost of their exports to Britain.

A strong currency means demand for that currency is high, usually a sign of high export demand and/or belief the country is financially robust. If the latter this might bode well for government bonds, i.e. gilts in the UK, and vice-versa when the currency is weak.

In practice there are obviously many other factors that could come into play, but I think those outlined above will likely have the biggest impact on your investments. Predicting currency movements is no easier than predicting stockmarkets, but it's nice when both move in your favour.

Read this Q and A at http://www.candidmoney.com/questions/question309.aspx

How are scrip dividends taxed?

Question
Can you tell me how shares received via a scrip dividend are treated for CGT purposes when sold?

I have assumed I should use the price at which they were allocated to calculate the CGT but have read somewhere else that HMRC actually use the price paid for the original share purchase.Answer
For the benefit of other readers scrip dividends are when a company pays its dividend in shares (normally new) rather than cash, e.g. 100 shares at 100p each rather than a £100 dividend. If fractions of a share would need to be issued to equal the cash dividend then the number of shares is rounded down to the nearest whole and any balance carried forward as cash to the next dividend. So if the share price was 105p you’d receive 95 shares with 25p carried forward.

For capital gains tax purposes the acquisition price of the shares is deemed to be the cash equivalent of the shares, i.e. the value of the dividend (100p in the above example). However, if the market value of the shares, measured using the new shares' opening price on the first day of trading, is more than 15% higher or lower than the dividend then the market value of the shares is instead used as the acquisition price.

Income is taxed in the same way as normal dividends – the cash equivalent being calculated as per above.

Read this Q and A at http://www.candidmoney.com/questions/question311.aspx

Will I get Equitable Life compensation?

Question
I had my personal pension plan with Equitable Life and as soon as I was able chose to take an annuity approx 3 years ago with AXA.

Whilst I was with Equitable I lost at least 25%+ from my plan - will I be eligible for any compensation?Answer
In theory, yes, you should be due some compensation. But despite the Government announcing it will set aside £1.5 billion to pay compensation to Equitable Life policyholders affected by the company’s financial implosion, detail is still thin on the ground.

What seems to be clear is that £620 million of the money will be used to compensate those with guaranteed annuities in full, leaving £880 million for everyone else. So given your loss stems from a pension invested in the with-profits fund rather than a guaranteed annuity it looks like your compensation will only cover a proportion of your loss – I’d guess less than half. On the bright side it appears the payment will be tax-free – you’d expect them to be, but there were fears the Government would do otherwise.

Compensation levels are expected to be announced early next year with payments commencing in the summer. The process should be automatic, so expect to receive information in the post once the Government has finalised the details and make sure Equitable Life has up to date contact details for you.

Read this Q and A at http://www.candidmoney.com/questions/question305.aspx

Can I save money on my existing ISAs?

Question
My wife and I have an ISA each and invest directly with the providers, (Jupiter and Invesco) i have been reading that we could make a saving through investing via an independent broker, thereby saving on initial and annual charges.

Is it possible to change to a broker (and keep investing in the same funds) mid financial year, or is it best to wait until the next year to do this

Any assistance gratefully received.
Answer
Yes, you should be able to make a saving by using a discount broker who rebates both initial and ongoing annual (‘trail’) commission.

A discount broker will simply arrange the transaction for you. Because there’s very little effort on their part they’ll refund the initial commission (usually 3% for funds) and some or all of the trail commission (typically 0.5% a year). Those who refund all trail commission will charge a small ‘admin’ fee else they’ll end up with nothing.

To benefit from commission rebates you simply need to sign a letter or form that transfers the ‘agency’ across to the discount broker (they’ll supply this). This means they’re then entitled to receive the commission, which they can waive (effectively reducing your fund charges) or refund to you. This should cover your existing investments and ongoing savings into those funds.

Because you’ve purchased funds directly from the manager you won’t be getting any advice, so using a discount broker instead is really a no-brainer. You’ll save some money that would otherwise be pocketed by the fund manager.

The discounts should start to apply within weeks of initiating the process and the funds themselves will be unaffected, so there’s no need to delay. Once you’ve chosen a broker it’d make sense to proceed straight away. If, for any reason, you wish to change to a different broker in future you simply repeat the process.

Which discount broker should you use? If you’re happy as things are (i.e. you don’t need research information and guidance) I’d opt for a bare-bones service that gives maximum discounts/commission rebates.

You can view a comprehensive list of discount brokers along with typical discounts given in our ISA Discounts Action Plan. You may also find our Trail Commission Rebates Action Plan helpful.

Read this Q and A at http://www.candidmoney.com/questions/question304.aspx

Spending Review - how departments are affected

Which Government departments will be hit most by spending cuts?.

Today's Spending Review details exactly how the various Government departments will be affected by the Government's proposed spending plans over the next 4 years.

Types of spending

The Government separates spending into two categories: resource and capital.

Resource spending is money spent on providing day to day services, such as teachers, nurses, police, army and benefits.

Capital spending is money invested in improving equipment and infrastructure, for example new/improved buildings, transport, technology systems and defence equipment.

As you'll see from the figures below capital expenditure has generally borne the brunt of the cuts (as a percentage of current levels). But as resource spending is by the far the bigger of the two overall, it's arguably the more important top look at.

Spending change projections for the major Government departments

The table below shows the projected change in spending, after inflation, over the next 4 years for the main Government departments:

Department	2010-11 Total Spend (billion)*	Resources Spending Change	Capital Spending Change
Work & Pensions	£158.5	+2.3%	-5.5%
NHS	£101.8	+1.3%	-17%
Education	£60.6	-3.4%	-60%
HMRC	£39.7	-15%	-44%
Defence	£35.6	-7.5%	-7.5%
Local Government	£29.0	-27%	-100%
Scotland	£28.2	-6.8%	-38%
Business, Innovation & Skills	£19.4	-25%	-52%
Northern Ireland	£15.7	-6.9%	-37%
Wales	£14.9	-7.5%	-41%
Transport	£12.8	-21%	-11%
Home Office	£10.8	-23%	-49%
Justice	£8.9	-23%	-50%
International Development	£8.0	+37%	+20%
Culture, Media & Sport	£6.2	24%	-32%
Energy & Climate Change	£3.0	-18%	+41%
Environment, Food & Rural Affairs	£3.0	-29%	-34%
Source: Spending Review 2010. * includes baseline resources, capital and annually managed expenditure.

Should we be worried?

Of course. Even a modest 3.4% fall in education resource spending over the next 4 years (after assumed inflation) is a concern. Yes, the Government insists it will drive efficiency and save money to reduce the strain on services that are experiencing cuts (in actual or real terms) - but all Governments make a lot of noise about cutting waste and improving efficiency only to make little difference in practice.

How will Government departments cope with less money?

In many cases by shedding jobs - the Government estimates around 490,000 public sector jobs will be lost over the next 4 years. And there's an argument that the private sector could be hit similarly as Government outsourcing and contracts are cut back.

There's little doubt the cuts will place a greater strain on the public sector and some services will suffer. There may currently be some fat on the bone, but culling jobs, freezing pay and reducing pension benefits will decimate public sector morale, so I fear lots of unrest, industrial action and a general decline in quality of service before things maybe pick up in a few years time.

How will the cuts affect me?

I'll be posting an article covering this very shortly.

Read this article at http://www.candidmoney.com/articles/article161.aspx

Spending Review - the big picture

Will spending cuts and tax rises help balance the books or simply make maters worse?.

Today's Spending Review put more flesh on the bones on how the Government plans to cut spending over the next 4 years.

But the big picture remains largely unchanged from June's emergency Budget, so let's take a look at the figures for a quick reminder:

Government accounts

Forecasts for the Government's current budget:

	2010/11	2011/12	2012/13	2013/14	2014/15	2015/16
Revenue	£548bn	£584bn	£622bn	£662bn	£700bn	£737bn
Spending	£637bn	£651bn	£665bn	£679bn	£693bn	£711bn
Depreciation	£21bn	£22bn	£22bn	£23bn	£24bn	£25bn
Annual Balance	£-110bn	£-88bn	£-65bn	£-40bn	£-17bn	£0bn
Total Deficit	-£932bn	-£1,059bn	-£1,162bn	-£1,235bn	-£1,284bn	-£1,316bn
Annual Debt Interest	£43bn	£46bn	£52bn	£58bn	£63bn	£66bn
Source: OBR Budget Forecast. (Depreciation is an accounting method that spreads the cost of assets over their lifetime).

Yes, spending is still projected to increase, but at a slower rate than under the previous government. Tax revenues are projected to grow by more than a third over the next five years.

Even if these targets are met, the total deficit will still swell, from an estimated £932 billion this year to £1,316 billion by 2015/16. And so will debt interest payments, from an estimated £43.3 billion this year to £66.5 billion in 2015/16 – the annual interest equivalent to over £2,500 per household.

So the going will be very tough, but the saving grace is that if the plan works then we should start to see the overall deficit start to fall from 2016/17.

However, the plan is based on a number of assumptions about economic growth, including employment, inflation and how much we all spend.

The assumptions

The forecasts behind the Budget plans include (figures show annual change unless specified):

	2010	2011	2012	2013	2014	2015
UK GDP	1.2%	2.3%	2.8%	2.9%	2.7%	2.7%
Household Consumption	0.2%	1.3%	1.7%	2.1%	2.2%	2.2%
Government Consumption	1.7%	-1.1%	-2.0%	-2.3%	-3.0%	-2.1%
Business Investment	1.4%	8.1%	10.0%	10.9%	9.5%	8.2%
Inflation (CPI)	2.7%	2.4%	1.9%	2.0%	2.0%	2.0%
Inflation (RPI)	3.7%	3.2%	3.2%	3.3%	3.4%	3.5%
Average Earnings	2.1%	1.9%	2.3%	3.8%	4.4%	4.4%
Real Household Disposable Income	0.2%	1.2%	1.3%	1.5%	1.7%	1.8%
Unemployment (rate)	8.1%	8.0%	7.6%	7.0%	6.5%	6.1%
House Prices	5.9%	1.6%	3.9%	4.5%	4.5%	4.5%
Source: OBR Budget Forecast

I think it’s fair to say the assumptions are pretty optimistic. Gross Domestic Product (GDP), a measure of our economy’s health, is assumed to grow consistently, by over 2% a year from 2011 – by contrast European GDP is predicted to grow at less than 2% over the next 3 years.

If we slip back into recession (i.e. GDP falls rather than grows) then we can throw most of the assumptions out of the window, as they’re all interlinked with economic growth the lynchpin.

For example: economic growth means higher employment, which fuels wage rises, giving us more disposable income to spend, increasing household consumption which helps stop inflation from falling too low – with all of this boosting tax revenues via VAT, income tax, NI and corporation tax etc along the way. Take out economic growth and the house of cards might collapse.

So, can the economy grow?

Labour argues the Government's cuts are too swift, jeopardising the much needed economic growth. And there's a very real chance they could be right (although I'm not sure there are other sensible options open to the Government).

With the public sector expected to shed around 490,000 jobs over the next four years the Government is placing a massive bet on the private sector growing sufficiently to compensate for this. if it doesn't then our economy could end up between a rock and a hard place as revenues, especially those from taxes, will likely fall and make the deficit gap very difficult to close.

Conclusion

I think the Government is doing the right thing by trying to slash spending and curb the deficit. But it's an almost impossible task - there's a fair chance it will fail and leave our economy in recession with rising unemployment AND little change in the growth of the deficit.

But then there's really very little alternative. If the deficit isn't curbed the cost of the debt could continue to soar and place an even greater strain on Government finances. Yes, the Government could keeping issuing debt (i.e. gilts) to fund borrowing and low inflation (likely given rising unemployment) could help boost demand for gilts. But ultimately this all comes at a cost (interest) which cannot be ignored indefinitely.

Bottom line, there is no guaranteed fix and we face some potentially painful years ahead. I think the best we can hope for is just managing to avoid falling back into recession and the Government getting close to its targets. But I'm not holding my breath...

More Spending Review info to follow shortly.

Read this article at http://www.candidmoney.com/articles/article160.aspx

AXA variable annuity a good idea?

Question
AXA has apparently launched Lifetime Income and Capital products, which they say "allow customers to get a guaranteed income while preserving control of the assets and the potential for upside growth in those income payments over the life of the contract."

I couldn't find any details on AXA's website (perhaps because I wasn't sure what I was looking for), but I suspect that, as with most 'guaranteed' products, I would want to avoid them, either because they cost more or they limit in some way the level of growth you get.

What exactly are these products and how do they differ from guaranteed annuities or income drawdown?Answer
I think what you're referring to are the two recently launched AXA 'Secure Advantage' products.

The first aims to protect your capital over 10 years, so might be used in the run up to retirement or during retirement if you don't need to convert your entire fund to income straight away.

The second offers a lifetime of income, like a conventional annuity, but leaves your money invested so you could benefit from any future growth - a so-called 'variable annuity'. Unlike a conventional annuity, it's not a one-off decision. If you change your mind in future you should be able to get a cash transfer value that you can take elsewhere (because your money is still invested).

I can't get any information either via AXA at present, but the main issue with these types of policy tends to be charges. You'll face charges for the underlying investments (typically 1% - 1.5% a year) plus the cost of protection and other pension charges, which could be another 2% or more. My concern is that if costs run at between 3% - 4% a year the chances of making any worthwhile headway are slim.

The underlying investments usually have a cap on how much can be invested in stockmarkets (I've read that AXA is limiting the capital protected plan at 50% and the lifetime income plan at 60%) which, coupled with high charges doesn't bode well for longer term returns.

Conventional annuities might be getting bad press at present due to the low rates on offer, but they do benefit from being simple and you'll know exactly how much income you'll receive for the rest of your life.

Drawdown means leaving your pension invested and instead drawing an income, within certain limits, as required. If performance is good then you might do better versus buying an annuity, but of course the reverse might be true. Basically, it means taking a risk.

Variable annuities use drawdown, but various investment techniques (in some cases the purchase of a short term annuity) are used alongside conventional investments to provide a minimum income guarantee while leaving your money invested (as described above). While this sounds like an ideal compromise, if performance is poor and/or charges are high you could still end up worse off versus buying an annuity, so there's still some risk.

I've yet to be convinced by variable annuities. Insurers and advisers might like them as they're generally more profitable than conventional annuities (for them, not necessarily you!), but I think there's still too much potential uncertainty (after charges) over future returns and income levels for them to be a worthwhile mainstream alternative to conventional annuities or drawdown.

Read this Q and A at http://www.candidmoney.com/questions/question301.aspx

New limit for pensions tax relief

The Government has announced that the annual allowance for pension contributions that enjoy tax relief will fall from £255,000 to £50,000 from 6 April 2011..

This reduction was widely expected and replaces the confusing system proposed by the previous government, which involved giving taper relief on contributions over £130,000. It's also better than no higher rate tax relief at all, which had been proposed by the Liberal Democrats.

There seems to be provision for individuals to carry forward unused annual allowance from previous years if they exceed the allowance due to a 'one-off spike in accruals', e.g. increased pension benefits due to ill health or redundancy in an occupational scheme.

The pension lifetime allowance is also due to be cut, from £1.8 million to £1.5 million, from 6 April 2012. This heightens the risk of being caught out by high taxes if you save too much into your pension and/or enjoy exceptionally good investment performance.

Any pension fund in excess of the lifetime allowance at retirement is currently taxed at an effective rate of 55%. There's a 25% 'recovery charge' followed by a 40% tax charge. So if your pension exceeds the allowance by £100,000, the 25% tax charge will reduce the excess to £75,000 and the 40% charge to just £45,000.

Although not ideal, these changes are actually a pretty good result for higher earners considering the backdrop against which they're being introduced. The new limits will still allow a more than reasonable level of pension contributions and they keep things simple.

With the Government's Spending Review due next Wednesday we can expect news of cuts and potential tax rises to come thick and fast over the next week or two. And I expect little, if any, good news.

Given the bleak outlook that almost certainly awaits us I'm puzzled as to why stockmarkets are still riding high.

Read this article at http://www.candidmoney.com/articles/article159.aspx

University fees controversy

University fees have hit the news this week as a controversial report proposing an increase in both fees and the interest charged on student loans was unveiled. What could the propsosed changes mean for your offspring?.

The Independent Review of Higher Education Funding and Student Finance Report, by Lord Browne, effectively aims to curb government spending on university costs.

What are the proposals

In a nutshell the proposals are:

• Removing the current £3,290 cap on annual university fees.


• Increasing the interest charged on student loans from inflation to inflation plus the government's cost of borrowing (currently estimated at 2.2%).


• Increasing the income threshold for repaying student loans from £15,000 to £21,000.


• Replacing current maintenance loans (to cover living costs) of £4,950 - £6,928 a year with a flat annual loan of £3,750.

Why are spending cuts required?

Under the current system the Report estimates that of the typical £6,100 annual tab for proving a course, the taxpayer pays around 54% of cost for students from higher income families rising to 72% for students from lower income families.

Add in the cost of subsidised maintenance loans and the bill to the taxpayer is around £6.2 billion.

With higher education growing in popularity and government debt standing at £823 billion (forecast forecast to grow to £1,316 billion by 2015/16) the current position is unsustainable. Hence the cuts.

Do the proposals mean universities could charge as much they want?

Yes, but the Government would discourage universities from charging more than £6,000 a year by taking between 40-75% of any fees above this level.

How significant would the proposed increase in student loan interest be?

Very. At present interest is charged at the lower of either inflation (measured by the Retail Price Index) or the base rate charged by several banks plus 1%. The proposals would increase this by the cost of government borrowing, estimated at 2.2% in the Report (it's not clear whether inflation will be measured by RPI or CPI in future), once the student starts repaying the loan.

This means that whereas a current loan of £20,000 would cost around £25,500 to repay including interest (assuming inflation of 3%), under the new proposals the total costs could soar to over £39,000. This reflects not only the higher interest rate, but also the reduced rate at which the loan is repaid if the income threshold for repayments rises from £15,000 to £21,000.

And what about the proposed reduction in maintenance loans?

This too could hurt as the money that students can currently borrow cheaply may have to be borrowed commercially (via banks) at much higher rates of interest.

Do the proposals include support for students from low income households?

Students from households with an income of up to £25,000 could be eligible for an annual grant towards living costs of £3,250. But they'll have to foot the bill for tuition fees via a student loan as per other students.

When could any changes be introduced?

In theory they could come into force by the 2011/12 academic year. But this is a hot potato that could cause a big rift in the coalition Government, so expect lots of debate and pressure for alternatives. Nevertheless, the Government needs to cut spending, fast, so I think their introduction (broadly in line with the Browne Report proposals) is fairly likely within the next two years.

What can I do to prepare for the possible rise in costs?

Parents can try to set aside some money to help contribute towards living costs while their offspring are at university. The key is for students to avoid building up non-student loan debt that could prove very costly over time.

Once the student graduates and earns above £21,000 (under the proposals) then student loan interest will increase by the cost of government borrowing. This may still be a fairly cheap way to borrow in the scheme of things, but the sooner the graduate can clear the loan the better (unless they have more expensive debt elsewhere). So any assistance from parents/grandparents in doing so would no doubt prove very helpful.

Read this article at http://www.candidmoney.com/articles/article158.aspx

Will Kent Reliance members get a fair deal?

Question
Kent Reliance Building Society is hoping to receive investment from a private equity source. In return this investor will own most of the equity in the enterprise. Current members have been told that they will continue to be members of a mutual society. Can this be so, or are members being deprived of their fair share of the society's value?Answer
My initial reaction is one of caution. Venture capitalists are a pretty mercenary bunch who focus primarily on how much money they can make by growing a company's value over 4-5 years before selling out and banking their profit. The welfare of customers only tends to be on their agenda in so far as unhappy customers may affect profitability.

So make no bones about it, JC Flowers would be entering into any deal primarily to make money for themselves. I believe member's welfare would be very much a secondary concern.

And why does the board of Kent Reliance want to strike a deal? It seems they want capital to grow the business and, I suspect, there'll be healthy financial incentives via the venture capitalists to do so (not that they're impoverished at present, chief executive Mike Lazenby enjoyed total remuneration of around half a million pounds last year).

There's nothing wrong with Kent Reliance's desire to grow, but there's no guarantee it'll have a happy ending - Northern Rock grew ambitiously for several years until its house of cards collapsed...

Of course, all that really matters to existing Kent Reliance customers is whether the interest on their savings/borrowing remains competitive and whether they'll benefit from a fair share in the business.

It's too soon to tell how private equity investment will affect interest rates. I'd guess there'll be some very competitive 'best buys' as a carrot to attract new customers and some downright awful rates on older accounts to boost profits. But then this is pretty much the norm for banks and building societies anyway.

Whether members will get their fair share of the business (via an eventual windfall) is difficult to determine. There'll be no windfall at outset if the investment goes ahead as Kent Reliance will remain mutual. Customers will be hived off into 'Kent Reliance Provident Society' while their assets (i.e. savings and mortgages) will be placed into a new bank in which JC Flowers will hold a stake believed to be around 40% and Kent Reliance (hence it's members) 60%.

So in theory members share of the business will shrink to 60%, but it's a slice of a potentially bigger pie. If the business grows successfully and is either floated or sold in future, so JC Flowers can take their profits, then a decent windfall might follow. But if the business struggles then the prospects of any windfall would be slim.

Bear in mind that venture capitalists usually fund their investments with borrowed money. So Kent Reliance could suddenly find itself paying a hefty interest bill on the £50 million investment, a potentially large drag on profits. And if things turn sour on a venture capital deal the debt usually ends up being the straw that breaks the camel's back.

The deal might work. But if it does the big winners are likely to be JC Flowers and the Kent Reliance board. While members may eventually enjoy a windfall, there's no guarantee their share will be fair compared to present - that will depend on business performance and whether their share is further diluted in future (perhaps following other acquisitions).

Read this Q and A at http://www.candidmoney.com/questions/question299.aspx

Direct Line bundled travel insurance sufficient?

Question
My wife and I have recently changed our home and contents insurance to Direct Line's Home Insurance Plus policy. This includes Worldwide annual travel insurance (we are under 65 years old). Is this OK by itself or would we be better to take out separate travel insurance - it looks a good deal but is there a catch?Answer
On the whole the policy (which covers those under 65) looks pretty reasonable. I t covers worldwide travel, including 22 days of winter sports, and the excess payable on claims is only £35 (many policies are £50-£100 or more).

From a quick look at the policy there are a few points to be aware of:

Medical expenses are covered up to £5 million. This should be adequate for almost all eventualities and I must admit I'm not sure in what circumstances you'd incur expenses above this, but some other policies cover £10 million or more so I suppose this should, in theory, give greater peace of mind.

The insurance covers individual trips lasting up to 42 days, with a 120 day limit on total time away during the year. You and your wife will also be covered if you travel independently of each other.

The cancellation cover is a reasonable £5,000, but note you won't be covered in the event of travel being cancelled by an official authority (e.g. volcanic ash clouds).

Your baggage and personal items are covered by the main home insurance policy and not the travel insurance. So I suggest checking exactly how much cover you have to ensure it's adequate.

Unless any of the above points give you cause for concern then the policy (from my cursory look) seems to be worthwhile and will hopefully cover your needs.

Read this Q and A at http://www.candidmoney.com/questions/question298.aspx

Avoiding the 1.5% stakeholder charge

If you have a stakeholder pension then be sure to avoid the potential 1.5% annual charge after 10 years..

The more you repeat a lie, the more people end up believing it. Some 12 years ago, the Government invented the stakeholder pension and told everyone it was cheap, which in fact it wasn’t. Later, they allowed providers of these policies to increase charges from 1% of the fund invested to 1.5% after ten years. Reading one of the personal finance rags the other day, I came across one of our better known pundits writing about ‘cheap’ stakeholder.

Here is some advice, which probably ought to be regulated. If you have a stakeholder pension, and you have been contributing for, say, five years, you have paid hardly any charges. If your pot is £10,000, you’ll be paying £2 a week, which is still not bad. If the funds in which you are invested are doing really well, it might make sense to stay put. But if they’re not so hot, you might well look around for something better, and the chances are that a decent adviser will find you something better.

At the very least, if you are among those coming up to an increase in charges to 1.5%, you should time your exit so you never pay it. If everyone uses stakeholder to start off with, and then transfers out as soon as the charges start to rise, the stakeholder providers will lose a fortune. Serves them right for pandering to a daft Government.

Read this article at http://www.candidmoney.com/articles/article157.aspx

UK inheritance tax when I live in India?

Question
I am not a UK resident for tax purpose. I used to be a student in the UK from 1979 to 1984. I then worked in Brunei for many years and retired from govt job and now live in India. I visit my children who live and work in the UK about two months every year. I have investements in the UK and Jersey(CI) and do trading on the London market. I also have investments in India and pay taxes on the income earned in India.

What I would like to know is about my Inheritance Tax Positon. Answer
If you live overseas then the key to determining your UK inheritance tax position is your 'domicile'.

In general you inherit your domicile from your father, being the country where he was a permanent resident. But once you're over age 16 you can change your country of domicile by living there permanently. The important points here are that it must be a permanent move and you can only have one domicile at any point in time.

So if your move to India is permanent and you have no intention of moving to either the UK or elsewhere in future then your domicile should be regarded as India.

I don't think this will apply to you - but even you are domiciled in India, HMRC could treat you as being 'deemed domicile' in the UK if you were domiciled in the UK within three years of transferring assets/dying or you were tax resident in the UK for at least 17 of the last 20 tax years before transferring assets/dying (provided your visits to the UK average no more than 91 days a year then you should remain non-resident).

Assuming you are domiciled in India then only your assets held in the UK will be subject to UK inheritance tax (if you're domiciled in the UK the tax will apply to your worldwide assets).

Assets will be deemed to be held in the UK if they're physically held or registered here, so this includes UK bank accounts and shares registered in the UK. But note, certain gilts (called FORTA - free of tax to residents abroad) and authorised unit trusts are usually treated by HMRC as being exempt from inheritance tax if you're a non-domicile.

As far as I'm aware India does not levy inheritance tax, so your main concern will be the UK based assets. There is some good news as HMRC gives an inheritance tax exemption (called 'nil rate band'), currently £325,000, regardless of your domicile, so assets below this exemption will not be subject to UK inheritance tax.

Read this Q and A at http://www.candidmoney.com/questions/question296.aspx

Nationwide FlexAccount travel insurance good deal?

Question
Is the new free Nationwide travel insurance a good deal, or are you better getting extra insurance? - i.e. is it full of hidden catches???Answer
The travel insurance, which comes free with a Nationwide FlexAccount current account, is a decent policy subject to a few main restrictions:

• it only covers travel in Europe - not worldwide.
• it doesn't cover winter sports, e.g. skiing.


• it's only available to those aged 64 and under.
• you must be resident in the UK.
• you'll need to pay at least £750 into the FlexAccount each month for the cover to remain valid.
• you only get cover if you transfer all your existing direct debits and standing orders from another bank to the FlexAccount.

If none of the above are an issue then it's a good 'freebie' provided you wanted to open a Nationwide FlexAccount anyway.

The travel insurance covers multiple trips subject to a maximum of 31 days per trip, which is pretty standard, and coverage is mostly more generous than average. Medical expenses coverage is £10 million, personal liability £2 million, cancellation charges £5,000 and baggage £1,500. While the excess charge (i.e. the amount you must pay per claim) is generally £50 or less.

To buy a similar policy would cost around £30 a year per person, or around £45 if you want winter sports cover.

As there's no monthly fee on the FlexAccount the bundled travel insurance seems a good deal. If you're likely to travel outside Europe or take a winter sports holiday then Nationwide allows you to upgrade your cover, but the cost of doing so might be higher than simply buying another policy elsewhere - in which case the bundled insurance would be rather pointless.

If you're likely to use an overdraft then the FlexAccount might not be the cheapest option - the interest rate is 18.9% which could soon erode the benefit of the free insurance.

Read this Q and A at http://www.candidmoney.com/questions/question295.aspx

Complaints made complicated

Complaining should be simple, so why does the Financial Services Authority seem intent on making it more complicated?.

There is nothing quite like the Financial Services Authority website for a good belly laugh. One of the latest outpourings is an absurdly complicated paper with associated appendices all about how a firm should and should not handle complaints.

There follows, for the benefit of the FSA, a simple guide to what we consumers actually want.

If we have a complaint, we want to be able to address it to a person, a human being. We want that person to respond. At its simplest, a letter to acknowledge the complaint. We want that person to commit to doing something. Promising to pass the complaint onto someone else doesn’t count. We want that person to get on and fix it, and we want them to remember to tell us that they’ve fixed it. The quicker all this happens, the happier we are.

The regulator, of course, wants a separate department and a mass of statistics, with standard times and heaven alone knows what, to bureaucratise a process which, at its simplest, involves two human beings trying to sort something out. Who pays for this farce? We do, of course.

A good few years ago an old pal of mine, recovering from a heart attack, went out to Hong Kong for the Sevens. He had an awful flight back with Virgin, and wrote to complain. He got a ‘phone call the day after he posted the letter. The caller was Richard Branson, with an apology and an offer of a flight to New York. You can’t legislate for that.

On an entirely different note it appears that the deputy governor of the Bank of England thinks that those of us who have savings should draw them out and spend the money to keep the economy going (I’ve been away so missed the exact quote). His name is Mr Bean. Quite. When we savers want his opinion we’ll give it to him.

Read this article at http://www.candidmoney.com/articles/article156.aspx

Good time to buy index-linked gilts?

Question
How do I work out whether now is a good time to buy Index linked gilts, either direct or via an ETF? Are they expensively rated at the moment? If inflation moves higher, how will this affect the price? And vice versa.Answer
Whether or not index-linked gilts are worth buying depends almost entirely on where you think future inflation is headed.

When you buy an index-linked gilt both income and the redemption price are linked to inflation (measured by the Retail Price Index - RPI), so it has a potentially significant impact on investment returns.

I find the best way to gauge the attractiveness of index-linked gilts is to look at the break-even inflation rate - that is the rate of inflation where returns from the index-linked gilt held to redemption equal those of a comparable conventional gilt.

If you think the average inflation rate will be higher than the break-even rate between now and maturity then index-linked gilts would look worthwhile, otherwise conventional gilts would appear better value.

You can find break-even inflation rates in the FT - let's look at a couple of examples:

The 2.5% index-linked gilt redeeming in July 2016 has a break even inflation rate of 2.30% (based on its 5 October price) while the same figure for a 2% index-linked gilt redeeming in January 2035 is 3.25%.

Annual RPI is currently 4.7%, well above these break-even rates. But will it remain high? Over the next year or two I'm not convinced, I think the combination of higher taxes and spending cuts will drag down inflation, possibly even into negative territory (called 'deflation'), which is an index-linked gilt's worst nightmare (because both income and the redemption price will fall).

If you buy an index-linked gilt now and inflation is lower than expected you could lose money (the gilt's price will fall to reflect the downward affect on income and the redemption price) and, of course, vice-versa.

The outlook for inflation is currently very uncertain and even if inflation falls shorter term it could rise longer term, so the decision on whether to buy index-linked gilts now is a difficult one. Unless you're convinced inflation will remain high, I'd be tempted to hold-fire for the time being.

Read this Q and A at http://www.candidmoney.com/questions/question294.aspx

Child benefit changes

The Government has announced that child benefit is to be axed for higher rate taxpayers from 2013..

Will I be affected?

If you’re currently claiming child benefit and either you or your spouse is a higher rate taxpayer then as things stand you’ll no longer receive this from April 2013.

When does higher rate tax kick-in?

If you’re under 65 then higher rate tax is currently charged on income above £43,875. This is calculated by adding your basic rate tax allowance of £37,400 to your personal income tax allowance of £6,475.

How much is child benefit?

It’s currently £20.30 per week (£1,055 p.a.) for the first child and £13.40 per week (£697 p.a.) for subsequent children. These rates were frozen until April 2014 in June’s emergency Budget.

Are child tax credits affected?

No, but they are due to be reduced from April 2011 for families with a combined income of around £30,000 or more. See this article for more details.

Is this fair?

Given the Government has to slash spending (see this article for more details on why) then axing child benefit for higher rate taxpayers is probably one of the less contentious cuts. It does seem unfair that it’s based on just one parent being a higher rate taxpayer rather than combined family income – i.e. if one parent earns £50,000 and the other £0 child benefit won’t be paid, whereas a family where both parents earn £40,000 will continue to receive it despite having a higher overall combined income – but wielding the axe in this way does at least keep things simple.

Can we expect further cuts?

Yes. The extent of the Government’s financial predicament cannot be underestimated, especially as it’s banking on growth in the private sector to compensate for a shrinking public sector. If the private sector struggles to create new jobs (and there’s a fair chance it will) then soaring unemployment will make balancing the Government’s books even more difficult than it already is. The next few years could be bleak, very bleak indeed.

Read this article at http://www.candidmoney.com/articles/article155.aspx