The governor of the Bank of England, Mervyn King has warned families to brace themselves for a rise in interest rates as the Bank of England desperately tries to put the brakes on the rise in inflation.  Those with high mortgages have been lulled into a false sense of security with interest rates at record lows for the past two years, with many believing that these low rates would continue for a few years yet.

A 1% rise would increase monthly mortgages payments on an average variable rate mortgage by £516 a year or £43 per month.  Almost 8 million Brits will face a hike in their mortgage payments as 66% of homeowners have mortgages that are variable rate.

The financial doom doesn’t end there as in addition to the rise in interest UK residents are also going to be hit with soaring energy prices, a slow economy and high inflation.  Inflation is predicted to hit 5% before the end of the year and fuel prices are set to rise with gas bills going up by an average of £100 per household and electricity rising by £50.  Currently the average gas bill is £666 per year and electricity is £473 per year.

With Britain also facing higher taxes and reduced pay increases or pay freezes, many worry that come winter a lot of people will be faced with the choice of putting food on their tables or heating their homes.

The Bank of England has also reduced its forecast for the year’s economic growth from 2% to 1.75%, citing that Brits will be continue to financially feel the pinch for longer than anticipated.  However, senior government sources admitted that the main concern was the inflation rise, which if the utility prices increase later in the year as predicted then inflation will reach 5% before falling again during 2012 and 2013.

Savers however, will welcome the rise in interest rates as they have been losing out since rates were slashed during the recession back in March 2009, although it’s likely that they will have to wait for a few months before the new rates are applied to them whilst borrowers will probably be hit with the new rates immediately.
The Bank of England’s Monetary Policy Committee, who set the interest rates, is due to meet on the 9^th June with any rises predicted to take effect in November.

The current UK Pension Regulations change in April 2010 and the age that you can take annuity benefits will increase to age 55 from the current age 50. It is therefore very important for all those pension savers under age 55 to act quickly to unlock billions of pounds of tax-free cash from their retirement pots or wait years before they get another chance.

The amount of tax free cash that can be taken from a pension fund before an annuity has to be purchased is 25% of the fund value. This money can come in very handy to pay off a mortgage, or provide university fees for your children.

It is usually a good idea to speak with a pension annuity specialist to get independent financial advice. They will search the open market to find you the best annuity rates. Your existing pension provider does not necessarily provide the best rates and you can shop around to get better annuity quotes.

If you do not have your own adviser you can call annuity specialist Retirement Solutions on 0800 043 6701

On 6 April 2010 the minimum age at which pension scheme members will be able to access their pension benefits will jump from 50 to 55.

Mr Rogers has reached normal retirement age and is a member of his employer’s group pension scheme.

We were asked to provide quotations for an annuity bought under the Open Market Option. We quickly identified that Mr Rogers had medical conditions that might enable him to qualify for  Enhanced  Annuities (he had diabetes and bronchitis).

We initially obtained a standard rate illustration but after establishing further facts concerning his medical background, we were able to secure an uplift to his pension of 22% above the standard rates, by negotiating with several specialist annuity rate providers.

Based on standard rates, Mr Rogers pension fund (£30,800) would purchase an annual income of £2,323. Based on enhanced rates for impaired health, Mr Rogers fund eventually secured an income of £2,830, which equates to an additional £507 per annum.

Examples of some of the conditions that may qualify

• cancer
• heart conditions
• diabetes
• asthma
• obesity
• high blood pressure
• organ transplants
• stroke
• liver disease
• alzheimer’s
• chronic lung disease
• kidney disease
• multiple sclerosis
• Parkinson’s Disease
• or a disease of the central nervous system.

For advice on annuities call 0800 043 0725