Web week: More on inflation and pensions

(To follow on from the last blog and question about previous September inflation, I wrote this for my Mail on Sunday column Web Week...)

Inflation is at a 16-year high. This is bad news for your savings, buying power and the economy, but there could be a (wafer-thin) silver lining.

The retail prices index (RPI), a measure of inflation, sets the annual State pension rise. So the RPI figure each September is the pay increase for pensioners the following April.

In recent history, the system has benefited the payer rather than the receiver with RPI each September coming in relatively low followed by surging inflation.

It was 3.9 per cent last year and 3.6 per cent in 2006 (full history at thisismoney.co.uk/economy).

The most painful year was 2002 with a 1.7 per cent rise followed by a quick inflation leap to 3.2 per cent in 2003. But this year could be better.

Figures last week put the July RPI at five per cent and the Bank of England's quarterly report warned it would go higher before falling in 2009. So an RPI of six per cent in September would deliver a decent rise followed by lower inflation. Good stuff.

However, the vast majority of readers distrust official inflation figures. A study last week by Alliance Trust stoked that suspicion putting 'real' pensioner inflation at six per cent and rising fast. Silver linings melt away fast.

- Andrew Oxlade, Editor, This is Money

Most read stories, published in the past week

1. Rate cut out as inflation soars to 4.4%
2. The mortgage famine may go on for years
3. Bank to give gloomy outlook for the UK
4. 4x4s now worthless in part exchanges
5. Criminal gangs in new chip and PIN fraud
6. Where do your restaurant tips really go?
7. Britannia pays as mortgage arrears soar
8. Midas share tips: The FTSE Dogs
9. House sales slump 40% amid loan crunch
10. Ryanair blocks thousands of bookings
11. Bank warns inflation pain to get worse
12. Stamp duty fiasco halts housing market
13. Brits face retirement heavily in the red
14. Oil price soars on BP Georgia pipeline fears
15. Recession fears drag down pound
16. I’m beating the pinch at the car boot sale
17. Our shared ownership scheme is a scam
18. House prices may rise 30%, says forecast
19. Fixed-rate bonds offer best rates for years
20. Freeview boxes obsolete after upgrade
21. Pension or savings: What’s best for you?
22. Banks compensation licenses explained
23. Good fixed-rate savings deals persist
24. NS&I posts record year of sales
25. Car sales fall but drivers will bear fuel hike

Top stories of the month: July 2008

It's nice to be appreciated - and the boom in visits to This is Money in July certainly does that. So thanks for taking an interest and we hope we've helped in our aim of helping you make the most of your money.

The site had 1,163,271 unique users (readers) during the month, up 37% on a year earlier and 12% higher than June. They read 8,970,039 pages and spent an average 85 seconds on each one - up from 71 seconds a year earlier.

As ever - if you have any suggestions on how we can further improve the site, please tell me by emailing [email protected]

- Andrew Oxlade, Editor, This is Money

Most popular stories, guides and features in July

1. Look up your new road tax
2. HBOS rights issue: 'Don't participate'
3. Investors warned off shares for three years
4. House prices fall £11,500 in a year
5. House price tables:  Who says what?
6. Midas share tips: HBOS rights issue
7. Halifax: House prices fall £3,600 in June
8. Sharks move in as home sales hit new low
9. Where is Warren Buffett buying now?
10. House prices 'to rise 25% in five years'
11. HBOS rights issue likely to fall flat
12. B&B: What should you do now?
13. 'I'm sticking with my house price gamble'
14. Cheapest foreign currency rates
15. Can Soros push the Footsie over the edge?

>> Top stories of the past week

Web Week: Gas and oil prices down; House prices up(?)

The scatter-gun messages of gloom have left us all firmly gripping our hard hats: property market down, the oil price is up, the era of cheap food is over.

I will try to inject a little cheer. Yes, British Gas is to hike gas bills by 35%, but wholesale gas prices – the cost to utility companies – have nearly halved in the past week, undermining the case for higher bills.

Also, crude oil is down from a peak of nearly $150 a barrel a few weeks ago to less than $125. Even food price inflation could ease – sugar and wheat is trading well below year-highs.

But the good news is bad – prices are falling because the global economy is weakening and demand may fall. That will eventually undermine wealth for all.

So what about house prices? Research from the National Housing Federation, made up housing associations, suggested a lack of homes would spark a 25% surge in values within five years. Consider that the NHF,  which exists only because of property shortgages, forecast last August that prices would rise 40% by 2012. The optimism was short-lived: Nationwide building society ended the week by reporting a record 8% annual fall in prices. Keep your hard hat handy.

- Andrew Oxlade, Editor, This is Money

(This post is also published as a column in the Mail on Sunday)

Most popular 25 stories published in the past week

1. House prices to rise 25% in five years
2. Norwich Union policyholders to get £1,000
3. Record 8.1% fall in house prices
4. British Gas raises gas prices by 35%
5. Tesco takes on banks after RBS buyout
6. House prices to plunge a third by 2010
7. Norwich Union windfall payout: what happens next?
8. Isa delays: Cash Isa chaos explained
9. Foreign banks hit back on savings
10. House price optimism in short supply
11. Mortgage freeze set to last 2 more years
12. Are bank shares a good bet?
13. A&L profit wiped out in £209m assets hit
14. What is the best way to invest my inheritance?
15. Lloyds 70% profit drop bodes ill for rivals
16. My property predictions, by Foxtons man
17. Millions face £200 jump in power bills
18. Get the best digital TV football deal
19. How to survive if the storm strikes
20. Banks vs building societies: Who's best
21. Stock markets: A history of boom and bust
22. House prices fell further in July
23. Five stocks to beat tough times
24. Why millions are just 11 days from ruin
25. Was I ripped off on my Halifax Regular Saver?

Web Week: Water meters and 'toilet tax'

The Government is keen to empower water companies to install meters in all homes, it emerged last week. One incensed reader labelled it 'toilet tax'.

People can currently volunteer for a meter. Households of three or fewer should save with pay-as-you-go. My bill, for example, dropped from £330 to £220 a year after switching.

But the industry is accused of lobbying hard for meters with an eye to hiking prices once everyone is on board. The suspicion is understandable. Some of these companies have form for robbing customers to pay shareholders. Financial Mail exposed fraud at Severn Trent in 2004, which resulted in fines and reduced bills.

Meter supporters argue that global warming will make Britain drier. The industry-backed Waterwise claims London is already drier than Istanbul. Greens also highlight the effect of rising water demand on Britain's shrinking wetlands and the carbon emissions associated with water processing.

Most people in our online poll and debate supported meters. But for many the issue was fair and liberal economics rather than ecology. As Dave S of Bedford said: 'This argument has almost nothing to do with the environment. It's about personal responsibility and paying for what you actually consume. Bring it on.'

- Andrew Oxlade, Editor - This is Money

1. Can Soros push the Footsie over the edge?
2. UK heading for economic horror movie
3. Taxpayer could prop up mortgage market
4. Families 'to be forced to fit water meters'
5. Petrol price slashed 5p in supermarket war
6. Will A&L savers be happy with Abbey?
7. House prices down average of £18,000
8. Banks vs building societies: Who's best?
9. Buy-to-let: The housewife developer
10. How to save safely with UK banks and building societies
11. How safe is your building society?
12. Bank split three ways on interest rates
13. House prices could fall a further 30%
14. How to profit from the oil price
15. Gas bills will rocket 30% within weeks
16. HBOS hit as only 8% take up rights issue
17. Sunday newspaper share tips
18. Newspaper and magazine share tips
19. The week of the 'dead cat bounce'
20. Our cruise was sunk by £892 surcharge
21. Help - my girlfriend is having a baby
22. 'We're safe', says Nationwide boss
23. How to invest £300,000 for income
24. Midas share tips: Growing lifts Mattioli
25. Buy or rent: The property waiting game

Incidentally, the top blog of the week (which would have been No.4 story) was Property blame game: Kirstie or Amanda?

Web week: Landlords cling to buy-to-let optimism

Last week, Financial Mail offered a contrast to the financial gloom. Investors declared confidence that their bets on property-linked bonds would come good while landlords, undaunted by falling prices, claimed rising rents would still make their buy-to-let investments worthwhile.

The stories sparked fresh property debate on thisismoney. Gary from Peterborough spoke for the buy-to-let optimists: 'For professional landlords its great. House prices go down - rent goes up. House prices go up - fantastic.'

For the pesimists, Steve from Southampton disputed the limited land theory that suggests British house prices will always rise:  'It's amazing how many people don't "get" the housing market. It has nothing to do with supply and demand. Two things set the price of houses: availability of credit; price of credit.'

With banks still reluctant to lend and the possibility of inflation-busting interest rate rises, Steve's theory suggests further price falls. Most readers agreed in an online poll with more than 70% predicting lower prices by next summer.

Also popular last week was Financial Mail's report on theft of anything from car catalytic converters to vegetables due to the global commodities boom. Forget the swag bag - buying into this boom is easy. A range of exchange traded funds, known as ETFs, track anything from grain to gold prices while specialist funds, such as JPMF Natural Resources, continue to race ahead. See more at thisismoney.co.uk/commodities.

- Andrew Oxlade, Editor, thisismoney.co.uk
(This column as also appears in the Mail on Sunday and aims to reflect the big issues and views of our readers)

Top 25 most read stories on thisismoney
(Only includes stories published in the past week)

1. 'I'm sticking with my house price gamble'
2. Commodity prices spark new crimewave
3. Car tax change: 9m motorists to pay more
4. Should you dive in to buy-to-let investing?
5. Economy fears grow as bears grip markets
6. Can you trust price comparison websites?
7. Brown: 'Stop wasting so much food'
8. Halifax: House prices fall £3,600 in June
9. Your guide to surviving the mad market
10. B&B in forefront as banks suffer a mauling
11. The top consistent savings accounts
12. Nationwide puts block on cash Isa transfers
13. Bosses give stark warning on UK economy
14. M&S profit alert puts Rose on the rack
15. UK in denial on housing, says prophet of fear
16. Money Mail: Our solution to Isa chaos
17. Industry slump brings recession closer
18. Banks face huge losses as they bail out B&B
19. Midas share tips: Imperial, Antrim
20. Meet the self-sufficient pensioner
21. Monday view: Property slump could be good news
22. Shares in B&B dive on fears for its future
23. Newspaper and magazine share tips
24. Kaupthing rises may signal fixed-rate peak
25. Bank keeps interest rates on hold at 5%

Web week: Beware of stock market predictions

Nicola Horlick is feted as the City 'superwoman' for balancing a high profile career with bringing up a large family. This week, her warning of up to three years of falling stock markets turned heads (the story originated on trade website Citywire and was picked up by the Telegraph, Evening Standard and Radio 4 Today programme - 2 July). But is it worth listening?

Horlick built her reputation by turning around Morgan Greenfell bank. She hit the headlines in 1997 when, with her job under threat, she flew to the company's Frankfurt HQ to confront the management. She then launched SG, a UK arm of French bank SocGen. The business grew rapidly but Horlick’s funds underperformed after she made big bets in 2001 long before the bottom of the market. She now runs her own hedge fund company Bramdean (See our archive of Nicola Horlick stories).

Horlick’s corporate track record is revered; her market call credentials are less clear. So if not her, who should we listen to?

Alas even highly regarded stock-pickers have had a bad year – funds run by bearish Neil Woodford at Invesco Perpetual and bullish Bill Mott at Psigma have fallen faster than the wider market.

Even Warren Buffett, the legendary US investor, has seen his assets drop 20% against a 15% fall in US shares so far this year.

So in the absence of crystal balls and super heroes, remember advice that has helped investors keep their nerve before. Shares nearly always deliver the highest returns over 10-year spells. So keep saving steadily, in cheap funds such as trackers, oh, and ignore all predictions. (Don't miss our eight-steps to fixing all your finances).

- Andrew Oxlade, Editor, thisismoney.co.uk
(Web Week also appears in the Mail on Sunday each week. It aims to reflect the big issues and often includes the views of This is Money readers)

Most popular news stories and features published since July 1 2008

1. Horlick: 'Avoid shares for three years'
2. HBOS rights issue: 'Don't participate'
3. Savers to have first £50,000 protected
4. Midas share tips: HBOS rights issue
5. Where is Warren Buffett buying now?
6. HBOS rights issue likely to fall flat
7. House prices fall £11,500 in a year
8. Bank deputy: A year of hardship ahead
9. BoE: Mortgages for homebuyers dive 64%
10. Should I sell or rent out my flat?
11. Market report: Tuesday
12. Market report: Monday
13. Market report: Wednesday
14. Cost of retirement hits '£413,000'
15. Fears for pensions after £30bn FTSE fall
16. HSBC may repossess own head office
17. Halifax offers stunning '12%' on savings
18. What now for with-profits windfalls?
19. Sunday newspaper share tips
20. HBOS rights issue gets green light
21. The house that lost 40% in four months
22. Analysis: FTSE at 5000 - a real possibility
23. B&B bosses may pay price for 'stitch-up'
24. HSBC may repossess own head office
25. What do I do with a £70,000 lump sum?

Most popular money stories in June 2008

June is normally a quiet month for finance. Not in the credit crunch. More than 1m visitors came to This is Money during the month, up 35% on a year ago. See the most popular reports from This is Money in June, including news, features, guides and expert answers...

1. Interest rates: News and predictions
2. B&B: What does it mean to you?
3. Ten steps to reclaim unfair bank charges
4. Halifax offers stunning '12%' on savings
5. Look up your new road tax
6. Easy steps to getting the best Isa
7. Advice for Bradford & Bingley customers
8. Bank charge letter templates
9. The house that lost 40% in four months
10. Midas share tips: Halifax Bank of Scotland
11. Is it time to buy Bradford & Bingley?
12. Record 1m homes for sale as prices slide
13. 50 ways to save money...
14. Midas share tips: HBOS rights issue
15. Which banks hold your savings?
16. Property market is 'toughest for 30 years'
17. Japanese cars most reliable
18. How to get the best travel cash and cards
19. Is there going to be a house price crash?
20. Pay off the mortgage or add to a pension?
21. House prices fall £15,000 since August
22. Best paid jobs revealed
23. House price slump 'to last four years'
24. Cheapest foreign currency rates
25. Homes crunch: Revenge of the gazunderer

Web Week: A review of the top stories of the week

'Why is everyone so bloody miserable?', asked Transport Minister Tom Harris (pictured) this week. He claimed Britons should appreciate their relative wealth, saying our spending would have 'made our parents gasp'.

Readers were unimpressed by the financial lecturing a day after Chancellor Alistatir Darling pleaded with workers to accept low pay settlements depsite being squeezed by rising prices. Mr Darling wants us to grin and bear it. Mr Harris wants us to grin and compare it.

His comments were insensitive to cash-strapped and over-taxed families, but they reflect the mood. Polls on This is Money forecast a bleak year: oil will hit $200 a barrel this year while interest rates climb from 5% to 5.5% or 6%; inflation will nearly double to 6% by next summer and property prices will fall further than during the early Nineties crash.

Mr Harris calls it pessimism but readers of financial newspaper pages and websites call it caution. TiM readers, for example, typically started a pension aged 20 to 25, have more than £50,000 in savings accounts and clear their credit card balances each month. Caution has helped them focus on their finances. A little more of it would have helped us all avoid the crunch.

Other top stories this week included news that inflation rose from 3% to 3.3% in June, that some Brits are coping with the credit crunch and how a care-free Michael Winner is coping with £6m debts. That helped lift the gloom.

- Andrew Oxlade, Editor, This is Money.co.uk

(This post also appears as a column in Financial Mail on Sunday)

1. No rate cut for a year as inflation hits 3.3%
2. How to survive the credit crunch, by Michael Winner
3. Brits shaking off credit crunch worries
4. Minister tells boom generation to cheer up
4. House price slump to last four years
5. Fixed mortgage rates hit ten-year high
6. Kings grim warning on pay and bills
7. 'My husband moved our money in secret'
8. Halifax offers stunning '12%' on savings
9. Cautious savers inherit the wealth
10. Card limits frozen - even for the wealthy
11. NS&I: The sure-fire way to beat inflation
12. Hundreds added to the cost of a holiday
13. Sunday newspaper share tips
14. Pay rises have fallen behind inflation
15. 10 accounts to keep your money safe
16. Housebuilders hit by gazundering
17. Ten essential tips for buying homes abroad
18. Airline surcharges: are they just a rip-off?
19. How's this for a £75 council flat
20. Newspaper and magazine share tips
21. Gieve sacrificed by Whitehall spinners to bury bad news
22. Savers in limbo over Isa transfer delays
23. Inflation and petrol fears as oil price soars
24. Spreading risk in fund-of-funds pays off
25. Driving holidays: Spain is Europe's bargain

Web week: Pensions vs mortgages

If you have the luxury of a little extra money, should you pay off your mortgage or invest in a pension? This is Money pensions correspondent Philip Scott posed the question. The view of readers was virtually united. Of 20 comments only one reader dare to admit he had confidence in regular pension saving.

So why the cynicism? Reasons vary but most centre around trust, or lack of it – in Government tax rules, in independent financial advisers, in the stock market (or the managers who invest in it on our behalf).

But the common theme is that people want control of their finances, and they get that by paying down their mortgage rather than entrusting money to professionals who may have let them down before. Instead, many are squirreling money away in high-rate bonds and assiduously watching for the next best-buy account to exploit.

And it’s understandable amid the current economic uncertainty. As 'Ashwin from London' says: 'If I were to lose my job and have cashflow problems, the bank is more likely to grant me a payment holiday on my mortgage. The pension won't pay my mortgage.'

Also this week, readers were worried by a dramatic about-turn in interest rate forecasts. Economists had been expecting further cuts this year but heightened inflation fears spurred the markets to predict a rise from  5% to 5.5%, or even 5.75%. Paying down mortgage debt and investing in top-rate accounts is about to become even more attractive.

- Andrew Oxlade, Editor, This is Money

Top 20 most popular stories, published in the past week

1. Halifax offers stunning 12% on savings
2. Property market is toughest for 30 years
3. Homes crunch: Revenge of the gazunderer
4. Pay off the mortgage or add to a pension
5. City bets on imminent interest rate rise
6. Production costs to tip UK into stagflation
7. Thousands face negative equity crisis
8. Higher fuel cost drives cars off the roads
9. Banks get safer as investing risks tumble
10. B&B: What does it mean for you?
11. CBI boss: oil crisis to spell economic chaos
12. Sunday newspaper share tips
13. How secure is your savings safety net?
14. Will my tenants bad debts affect me?
15. Market report: Wednesday latest
16. HBOS rights issue could fall £800m short
17. 10 accounts to keep your money safe
18. Newspaper and magazine share tips
19. 15 months of gloom ahead, says RBS chief
20. Merger windfall for Catholic BS members

The Gods That Failed: How Blind Faith in Markets Has Cost Us Our Future

One year ago this month, I penned a few words for thisismoney under the highly misleading heading How to get your book published.

Anyone expecting a handy guide to the ins and outs of publishing houses, literary agents, copyright law and the sort of book-jacket designer likely to give your offering that extra oomph on the shelf at Waterstone's would have been disappointed.

My 'advice' ran to four one-syllable words: get a move on.

But I did at least know what I was talking about, in terms of foot-dragging. Back in May 1998, I wrote, I, along with Larry Elliott - then, as now, economics editor of The Guardian, had written a critique of the market economy entitled The Age of Insecurity.
It had sold reasonably well, and we had great fun promoting it. There was even, improbably, a Chinese edition.

A couple of years rolled by and we decided to favour what we assumed would be a hungry public and a grateful publishing industry with a new book. Nothing much happened for a while, other than 'planning' lunches and drinks, but keeping your fans short of 'product' had worked pretty well for operators as diverse as Philip Larkin and Led Zeppelin in terms of stoking up demand. There was just one problem. It did not work for us.

Happily, in 2006, we hit on the idea of a book about the economic legacy of Tony Blair, who had sportingly announced his departure in advance. We called it Fantasy Island and it was published by Constable in May 2007.

I signed off the above mentioned misleadingly-entitled piece of last year as follows:
'Will there be a book three?
'Certainly.
'Will we get our skates on this time?
'Absolutely.
'Well, put it this way, we are having lunch in a few days' time.'

Actually, it was a dinner, in Washington, at our favourite restaurant in that city. We had two ideas for a follow up to Fantasy Island. The first was a sort of Fantasy World book, covering the huge bubble of credit that had been puffed up by central bankers. Given these were pretty well pre-credit crunch days, the idea seemed less obvious then that it does now.

The second was a book provisionally entitled The New Olympians, all about how the elites of the City and Wall Street, in cahoots with central bankers and policymakers, had been given free rein to run the world economy and, we argued, bring it to the brink of disaster.

A publisher was interested in signing us up for a new book and had quite liked both ideas. To which Larry replied that if we put both ideas together, the publisher may really like it.
Usually, this sort of 'two aspirin good, four aspirin better' thinking can get you into trouble. The sum is less than its parts.

But this time round, it worked a treat. Our new book, The Gods that Failed, was published by Bodley Head on June 5, and argues that the New Olympians are responsible for the global money bubble that is now deflating with the consequences everyone can see.

So...will there be a book four? Not for a while. This winter we are taking off - as are our wives and children, who would quite rightly not put with another six months of going for long walks at the weekends 'to let daddy get on with his work'.

But the point is this. Last year's piece may have had a misleading title, but we did take our own advice. We did get on with it. No slacking for us.

That said, the best bit about Larry's brainwave was that we were still at the aperitif stage. That meant we could enjoy our dinner without having to worry about our book.

- Dan Atkinson, Economics Editor, Mail on Sunday

TiM special offer: Buy The Gods that Failed at a 35% discount for £8.44 (RRP: £12.99)