Millennials Reject Workplace Pension Opt Out

Millennials have embraced the new automatic enrolment in a workplace pension, according to research by Royal London. A survey found that 71% of Millennials decided not to opt out of the plan. A further 8% initially opted out but then returned to their workplace plan.

The news may ease fears that younger people do not see pension saving as important. Three quarters of Millennials said they would increase their pension payments automatically in line with a pay rise, while 40% plan to increase pension payments next year.

However, almost one third (28%) of Millennials do not know how much is being paid into their pension pot. More than half (57%) say they know they should be saving more towards retirement.

The ratio of contributions made by employees and employers also impacted on Millennials’ willingness to save. Around three quarters (74%) said they would continue to contribute 2% if their employer gave 3%; but if contributions rose to 8% with employees paying 5% and employers paying 3%, that figure dropped to two thirds (62%).

However, if employees and employers both gave 4% then 76% of Millennials would be willing to save on those terms.

Jamie Clark, Pensions Business Development Manager at Royal London said: “Providers, employers and financial advisers all have a duty to ensure employees are engaged in their future pension planning as soon as possible and fully understand the consequences of opting out of their workplace pension.”

The government is in the process of reviewing the automatic enrolment programme, in a bid to increase the number of people saving into a workplace pension. Royal London has recommended that contributions should be more than 8% of salary.

January snow hits UK retail sales

UK retail sales declined from December to January, surprising economists who had forecast sales to grow at the start of the year.

Figures released today by the Office for National Statistics (ONS) show that the quantity of goods bought in the retail sector dropped by 0.6% from December 2012. Sales volumes also fell by 0.6% from a year ago.

Most downward pressure came from a significant drop in food sales: the quantity bought in the food sector last month was estimated to have fallen by 2.6% year-on-year, to the lowest level since April 2004.

Commenting on the figures, John Longworth, director general of the British Chambers of Commerce, said that although they only represent a single month, the drop in retail sales is a “serious warning” to the government, indicating that more needs to be done to get the economy growing again.

There were contrasting fortunes for smaller and larger retail outlets last month, with large stores seeing sales increase. There was an overall fall in the quantity bought in small stores and the contrast was particularly marked in the food sector.

Smaller retailers told the statistics agency that the heavy snow in the second half of January had affected their sales, while large store retailers reported that some of the increase they had seen in the quantity bought by consumers had come from a rise in online shopping.

Overall, online sales represented 10.1% of all retail spending (excluding automotive fuel) last month and the average weekly spend online was estimated at GBP546.5m, an increase of 8.7% compared with January 2012.

In the food sector the proportion of sales made online rose by 27.1% year-on-year and equated to 3.7% of all food sector sales, the highest on record.

The total amount spent in the retail sector in January 2013 was GBP24bn, unchanged from January 2012, with an average weekly spend of GBP6.1bn. Over the course of the year, the prices of goods sold in the retail sector increased by 0.8%.

Barclays announces job cuts and transformation plan

Barclays said today that it is aiming to transform its business after a series of scandals rocked the bank and the wider industry.

New chief executive Antony Jenkins, who took over from Bob Diamond in August, said that Barclays is aiming to become the ‘go-to’ bank for all of its stakeholders – customers and clients, colleagues, investors and wider society.

The transformation plan comes as the bank attempts to rebuild its reputation in the wake of last year’s fine for attempting to rig the Libor interest rate, and industry-wide mis-selling scandals in the UK involving payment protection insurance and interest rate hedging products.

Barclays announced today a drop in pre-tax profit to GBP246m in 2012, from GBP5.9bn in 2011, after the bank recorded a GBP4.6bn charge against the value of its own debt and set aside GBP2.45bn for the cost of mis-selling compensation.

Reflecting on a difficult year for Barclays and the entire banking sector, Antony Jenkins said: “The behaviours which made headlines during the year stemmed from a period of 20 years in banking in which the sector became too aggressive, too focused on the short-term, and too disconnected from the needs of customers and clients, and wider society. Barclays was not immune from the impact of these trends, and we suffered reputational damage in 2012 as a consequence.”

Change is needed both at Barclays and in the industry as a whole, the chief executive added.

Following a strategic review, Barclays said today that it is aiming to reduce costs by GBP1.7bn and will be cutting 3,700 jobs across the business. The job reductions will result in a restructuring charge of close to GBP500m in the first quarter of 2013.

Primarily the job cuts will be made in the bank’s investment banking activities in Asia and its retail banking business in Europe. Very few of the job losses are expected to be in the UK.

In the future, Barclays intends to focus on activities that support customers and clients in geographic markets and businesses where the bank has scale and competitive advantage. Specifically, it will focus investment in the UK, the US and Africa, while maintaining a presence across Europe and Asia to support its global investment banking franchise.

Barclays’ European retail operations will be restructured to focus on the mass affluent customer segment and it will close its Structured Capital Markets business unit.

Investors responded positively to Barclays’ announcements, with shares in the bank rising to a 23-month high earlier today, Bloomberg reported.

Bank of England reports continued rise in mortgage approvals

Further signs are emerging of a recovery in the UK housing market, as the Bank of England said today that mortgage approvals rose again in December 2012.

The number of loan approvals for house purchases climbed to an 11-month high of 55,785, increasing for the fifth month in a row.

Analysts believe that the revival in the market is an indicator that the government’s Funding for Lending Scheme (FLS) has been successful in boosting lending. The scheme was launched at the start of August 2012 and was designed to encourage lending to households and growing businesses by allowing financial institutions to borrow at low interest rates.

Since the launch of FLS the number of mortgages on the market has increased and lenders have been reducing their mortgage rates, according to personal finance website This is Money.

Separate figures released today by the Building Societies Association show that, over the whole of 2012, mortgage lending by building societies and other mutual lenders grew to a total of GBP30.7bn. This is a 30% increase compared to the prior year.

Mutuals also represented a larger share of the overall lending market, taking a 22% market share of total new lending in the year, up from 17% in 2011. In December, total lending by mutuals increased to GBP2.4bn from GBP2.1bn a year earlier.

Adrian Coles, director-general of the Building Societies Association, said that mutual lenders such as building societies are likely to continue to play a prominent role in the mortgage market in 2013 and he pointed out that more than half of the 35 firms that were signed up to the Funding for Lending Scheme in December are mutuals.

Last week the Council of Mortgage Lenders (CML) reported that gross mortgage lending in December reached an estimated GBP11.7bn, taking the estimated total for the year to GBP143bn, up from GBP141bn in 2011. In the coming year the organisation forecasts that gross lending will reach GBP156bn.

The CML represents banks, building societies and other lenders who provide a combined 95% of all residential mortgage lending in the UK.

UK prime minister pledges referendum on EU membership

The UK faces years of uncertainty over its place in the European Union, critics claim, after Prime Minister David Cameron promised to hold a referendum on membership of the EU.

In a long-awaited speech today on Europe, Cameron said that he wanted to renegotiate the UK’s relationship with the EU and then ask people to vote on whether they think the country should remain part of the alliance. He also called for a more “flexible, adaptable and open” relationship between all EU members, seeking a more flexible cooperation between the partner nations instead of “compulsion from the centre.”

The prime minister said that a commitment on the renegotiation and referendum would be included in the Conservative Party’s manifesto for the next general election.

Nick Clegg, leader of Cameron’s coalition partners, the Liberal Democrats, spoke out against the plans, saying that the extended period of uncertainty caused by the proposals would hit jobs and economic growth and “was not in the national interest”.

Former Lib Dem leader Charles Kennedy, together with Labour and Liberal Democrat colleagues in the House of Commons, the House of Lords and the European Parliament, wrote a letter to the Guardian, advising against putting in question Britain’s membership of the EU.

A number of business groups took a more positive view of the speech, with the CBI’s director general, John Cridland, claiming that there are benefits to be gained from retaining membership of a reformed EU. He said that the CBI will work closely with government to get the best deal for Britain.

John Longworth of the British Chambers of Commerce (BCC) also said that Cameron is right to renegotiate Britain’s place in Europe, pointing out that the country starts with a strong negotiating position as the UK runs a trade deficit with the EU. However, the BCC director general feels that a shorter timescale for negotiation and referendum would be better, with the aim of securing a cross-party consensus and the outline of a deal during the current parliament.

Support for renegotiation also came from the Institute of Directors, whose director general, Simon Walker, said that the prime minster’s approach is “realistic and pragmatic.”

Addressing the matter of the uncertainty brought about by the plans, Walker said that the issues need to be dealt with and British business is resilient and flexible and can cope with change or uncertainty. “The eurozone crisis is the source of far more uncertainty than a referendum,” he added.

Philip Green considers selling a stake in retailer Topshop — report

UK businessman Philip Green is reportedly negotiating the sale of a non-controlling stake in local clothing retailers Topshop and Topman with a US buyout firm, Reuters reported, citing a source in the know.

On Tuesday, Sky News reported that US private equity firm Leonard Green & Partners LP was holding discussions with a view to buying into the high street chains in a transaction valuing the two businesses at nearly GBP1bn (USD1.6bn/EUR1.23bn). Leonard Green is already in the retail business through US clothing chain J Crew, which it owns jointly with larger peer TPG Capital LP.

The targeted 25% stake would be ring-fenced from the businessman’s Arcadia Group Limited, which also owns high street clothing retailers Burton, Dorothy Perkins, Evans, Miss Selfridge, Wallis and BHS.

The parties are expected to unveil discussions about the deal tomorrow, according to the insider.

When contacted by Reuters, Philip Green did not wish to comment, while Leonard Green was not available for comment.

Arcadia recorded GBP2.68bn in sales from its 2,500 domestic stores and 615 franchised units in 39 countries in its fiscal year to 25 August.

Topshop Ltd operates stores that sell clothing and fashion products for women. Topman is the stand-alone fashion business counterpart of Topshop that caters exclusively to men’s clothing.

HSBC agrees to sell stake in Chinese insurer Ping An to Thailand’s Charoen in $9.4bn deal

British banking and financial services group HSBC Holdings Plc (LON:HSBA) on Wednesday announced a HKD72.74bn (USD9.4bn/EUR7.2bn) agreement for the sale of its 15.57% in Chinese insurer Ping An Insurance (Group) Company of China Ltd (HKG:2318).

The buyer is Thai diversified group Charoen Pokphand Group Company Limited (CP Group) which is carrying out the deal through indirectly fully-owned units All Gain Trading Limited, Bloom Fortune Group Limited, Business Fortune Holdings Limited and Easy Boom Developments Limited.

Under the terms of the transaction, HSBC will transfer a first tranche of 256.7m Ping An shares, or 20.8% of the shares, to the buyers on 7 December for HKD59.00 apiece in cash, while the rest of the stock will be delivered at the same price per share after securing the approval of China Insurance Regulatory Commission (CIRC) in January 2013, the vendor said.

HSBC said the sale is part of its strategy of delivering long-term value to shareholders. It expects the disposal to boost its core Tire 1 capital ratio by some 0.5% and the total capital ratio by around 1% based on ratios on 30 September 2012. The vendor plans to use the funds from the divestment to support the group’s overall strategy, HSBC said.

The buyer will finance the deal with cash and a debt facility from the China Development Bank Corporation (CDB).

DealMarket and CapitalOnStage Announce Project to Help Start-ups Find Venture Capital More Efficiently

A Swiss firm offering third party private equity services has stuck a partnership with a top European venture capital scheme in an attempt to foster entrepreneurship and assist start-up companies in getting access to venture capital in a quick and efficient manner.

DealMarket, who among other things provide a platform for start-up businesses to search for financial backing and help private equity firms to track down promising new investment opportunities, have announced a deal with CapitalOnStage, who organise unconventional conferences where leading investors pitch their services to some of the brightest start-up entrepreneurs in Europe.

The deal will see CapitalOnStage use DealMarket’s online deal management tools to increase the visibility of promising new businesses by linking them to their wide network of respected investors. Potential investors will receive unfiltered access to DealMarket’s database of start-up companies allowing them to quickly find exciting clients with which to bolster their portfolio. If an agreement is reached, a start-up can then also post details of the deal for all of the website’s 35,000 global users to see.

CEO of CapitalOnStage, Arjen Strijker thinks the new partnership offers fantastic opportunities for both start-up companies and firms in the private equity and venture capital sectors, “I was looking for a partner who could really deliver on its promise to run an online marketplace for venture capital and private equity deals professionally. With our long-term partnership we are able to offer our combined clients the opportunity to source and manage deals in one place. I strongly believe that the virtual fosters the physical – now and in the future”

DealMarket CEO Urs Haeusler is equally satisfied with the agreement and believes it offers those in the sector a more transparent marketplace in which to do business, “DealMarket steps from the virtual world into the real world.” said Mr Haeusler, “With this cooperation we are consistently pursuing our vision to build an ecosystem for investors and capital seekers to provide better, simpler and more transparent access to capital and investment opportunities around the world.”

The two firms will begin work in 2013 on a series of conferences around Europe, with dates already confirmed in Berlin and London for early next summer.

More information here: DealMarket in the press.

Home repossessions in the UK continue to fall

The rate of home repossession in the UK continued to fall in the third quarter of 2012, the Council of Mortgage Lenders (CML) reported today.

In its latest quarterly report, the CML said that 8,200 properties were taken into possession by mortgage providers between July and September, down from 8,500 in the previous three-month period and from 9,600 in the third quarter last year.

The total for this year’s third quarter represents the lowest number of properties taken into possession in a single quarter since 2007. Over the first nine months of the year repossessions were down 8% compared to a year earlier.

Lenders want to keep people in their homes and repossession is a last resort, according to CML director general Paul Smee. He added that good communication and effective arrears management by borrowers, lenders and money advisers are helping the vast majority of those with mortgage repayment problems.

Mortgage arrears remained stable in the third quarter. As of the end of September, the total number of mortgages with arrears of 2.5% or more of the outstanding balance rose slightly to 159,100, up from 158,700 in the previous quarter, but remained below the 165,300 in arrears in the same period last year.

According to the CML, borrowers in the UK have 11.2 million mortgages, with loans worth over GBP1.2 trillion.

The Council of Mortgage Lenders represent banks, building societies and other lenders who together account for around 95% of all residential mortgage lending in the UK.

Separate statistics released today by the Ministry of Justice give an indication that the number of homes being repossessed will fall further over the coming months. There were 14,168 court actions for repossession issued from July to September 2012, which continues the downward trend seen since 2008.

The Ministry of Justice said that this fall in the number of claims coincides with lower interest rates and a more proactive approach from lenders in managing consumers in financial difficulties, as well as various interventions, such as the introduction of the Mortgage Pre-Action Protocol.

The Bank of England confirmed today that its Monetary Policy Committee (MPC) has decided to keep interest rates at the record low of 0.5%.

UK employees see wage growth of 62% over 25 years

Full-time employees in the UK are earning 62% more than they were 25 years ago, the Office for National Statistics (ONS) said today.

As of April 2011 the average full-time wage had risen to around GBP12.62 per hour excluding overtime. This represents a cash increase of 226% compared with 1986, when the average wage was GBP3.87 per hour. After adjusting for price increases over the 25-year period, full-time employees were on average 62% better off in 2011 than in 1986.

Importantly, the increase in pay was not evenly spread and earnings grew most for those at the top end of the scale. The top 1% of earners enjoyed the biggest increase between 1986 and 2011, at 117%, and the top 10% saw an increase of 81%.

The bottom 10% saw wage growth of 47%, although the very lowest earners did better – especially after the introduction of the National Minimum Wage in 1998. Across the 25 years the bottom earners had a 70% increase in pay. Since 1998 those at the very bottom end of the earnings distribution have seen a real increase of 51%, compared with an increase of 30% for the top 1%, the ONS reported.

The UK’s national trade union centre, the TUC, noted that the minimum wage has provided an important pay boost to the very poorest workers, but that inequality has risen throughout the UK over the last quarter of a century.

TUC General Secretary Brendan Barber said that the cost of the economic crisis has been passed on to workers on average incomes, with those near the bottom suffering the greatest loss, and he called for the minimum wage to continue rising in order to help the very poorest workers. More employers should pay a living wage to help the low-paid, he added.

Looking specifically at the effects of the economic downturn of the last five years, the ONS report reveals that people at all income levels experienced drops in real earnings in the period 2007-2011, with wage growth failing to keep pace with price rises. This stands in contrast to the four-year period covering the recession of the early 1990s, in which real wage growth was positive across the scale.

A separate report released yesterday by Incomes Data Services, part of Thomson Reuters, showed that total earnings for FTSE-100 directors have increased by around 10% over the last year. Although salary growth was in line with inflation and bonuses were down on the previous year, there was a big rise in the value of vested long term incentive plan awards.

Simon Walker from the Institute of Directors commented that the level of FTSE directors’ pay in some cases remains excessive, and incentives are often not properly linked to the long-term fortunes of the company. He said that shareholders have a role to play in working with boards to make sure that directors are judged on a range of criteria that reward genuine long-term performance, not just on fluctuations in the stock market.