So what's really happening on the job front...

The Office for National Statistics (ONS) released data this month that showed the UK unemployment level falling to 2.58 million (a reduction of 61,000 people) in the three months to May 2012. This represents a rate of 8.1% against a figure of 8.3% reported in the previous quarter.

Details reveal that the number of people now in employment rose by 181,000 to 29.35 million and, encouragingly, unemployment among 16-24 year olds fell to 1.02 million, a reduction of 10,000.

Self-employed people (both full and part time) rose by 32,000, which was an increase of 0.8% on the quarter and represented an increase of 166,000 to 4.16 million, or 4.2%, compared to the same period a year ago.

On the negative side, the number of people who have been unemployed for more than two years increased by 18,000 to a total of 441,000. This is a 15 year high. Also those claiming Jobseekers Allowance increased by 6,100 to a total of 1.6 million.

Regionally, the picture was mixed, with about 50% showing negative figures. An example of this is Wales, which saw unemployment increase from 8.8% to 9%, and Yorkshire and Humber, which saw unemployment rise from 9.3% to 9.7%.

Whilst Scotland saw their rate fall by 0.2% to 8% and the North East’s unemployment rate fell from 11.2% to 10.9%, the latter remains the region with the highest unemployment rate in the UK. The South West was the best region, reporting an unemployment rate of just 5.9%.

Commenting on these figures, Chris Grayling, the Employment Minister, said that unemployment was: “still much too high.”

He went on to say: “But, I’m at least encouraged, in what are difficult times economically, that we are seeing improvements across the board.”

Adding further encouraging prospects, the forthcoming London 2012 Olympics should further boost the short-term employment picture.

A spokesman for Commerzbank, Peter Dixon, stated that it was: “entirely possible that there will be a temporary boost due to the Olympics, possible that there will be more to come, but if this is Olympic-related temporary hiring, it is likely to be unwound again later in the year.”

Is the state going to guarantee your pension pot?

In an unexpected, but gratefully received, message from the pensions minister, Steve Webb, the Government announced an intended ground-breaking policy to protect future pensioners’ investment funds from falling equity prices saw a rise of 8.8%.

Because of the delayed bank holiday in May (to accommodate the longer Queens Jubilee weekend), that month had an extra working day, which resulted in manufacturing output increasing unexpectedly by 1.2%.

The counter to this good news was that pharmaceutical preparations and products saw a fall of 13.2% and food, drink and tobacco were down year-on-year by 3.9%.

Howard Archer, an economist at IHS Global Insight said of these figures: “A double dose of good news on the UK economy with industrial production unexpectedly rising in May and the trade deficit narrowing more than expected.”

“However, the news is not quite as good as first appears, and there will be payback in June on the industrial production front.”

At the same time the chief economist of The British Chambers of Commerce (BCC), David Kern, was quoted as saying: “Unusually, UK exports to non-EU countries were higher than exports to the EU.”

He went on to add that UK exporters have “huge untapped potential.” And that: “This shows that exporters are adjusting to global reality, as growth in the Eurozone will continue to stagnate, and the main opportunities for our exporters will remain outside Europe.”

Inflation continues to fall ...

Continuing on the good news front, the Office for National Statistics (ONS) has reported the Consumer Prices Index (CPI) and the Retail Prices Index (RPI) inflation rates fell in June to 2.4% and 2.8% respectively.

This represents the slowest rate of increase in UK prices since the latter half of 2009 and the third month in a row that the rate of increase in CPI has fallen.

Reasons behind this decrease were a drop in clothing and footwear costs - with a reduction of 4.2% seen in these sectors - probably due to retailers bringing forward their summer sale promotions.

Whilst a drop in prices here was anticipated, due to aggressive price reductions by those retailers, a fall of this scale was not forecast.

We also saw a reduction in alcohol and transport costs, which were down by 0.5% and food prices, particularly meat, down by 0.1%. The ONS cited the lack of domestic barbecues, due to the inclement ‘summer’ weather we have experienced as one reason for this decline.

Fuel costs were an important element of this overall reduction, with petrol seeing a fall of 4.3 pence per litre, to an average price of £1.33 a litre and diesel falling 4.7 pence to an average of £1.39 a litre.

Echoing this good news, Neil Saunders, retail analyst at Columino stated: “However, if inflation continues to drop back at this pace, wage settlements will outstrip inflationary growth by the fourth quarter, meaning we will see a return to growth in real disposable income.”

With regard to the reduction in fuel costs, he went on to say: “This has benefited most households although, in our view, it will take time for this to drive tangible changes in behaviour in terms of shopping and spending habits.”

Representing a welcome continuing decline in inflationary pressure and a move nearer to the Bank of England’s CPI target rate of 2%, these latest figures will reassure the Bank that its Quantitative Easing (QE) programme (totaling £375bn so far) has not stoked the inflationary fires in the UK economy as some members of the bank’s Monetary Policy Committee

A mixed forecast predicted for the UK economy...

The Ernst & Young Item Club, which is one of the most respected independent economic forecasting groups that uses the same economic model as the UK’s Office for Budget Responsibility (OBR) and The Treasury, has good news in its latest quarterly forecast for the UK economy.

They believe - although the latest GDP figures (released on July 25th) for Q2 paint a far gloomier picture and some forecasters are much less positive - that it will enjoy an “Indian summer” following its dire performance in the first half of the year.

Whilst they predict the rate of inflation to continue to decline to 1.7% by year-end and see growth for the whole of 2012 remaining flat, they go on to forecast growth in 2013 to reach 1.6% and by the end of 2014 to see a rate of 2.6%.

In addition, real disposable incomes should rise by 0.4% in 2012 and in 2013 by 1.5%.

The chief economic adviser to the Item Club, Peter Spencer, was quoted as saying: “Spiralling inflation has cut real wages by 7.5% over the last four years, but the squeeze is almost over.

“Inflation is now coming back to heel, helped by the Chancellor’s decision to postpone the increase in fuel duty, falling energy and commodity prices, plus tax changes dropping out of the calculation.”

It is widely believed that any growth in the UK economy will be export-led, as most households appear determined to pay down personal debt, rather than to consume goods.

Having said this, UK unemployment will remain high, possibly reaching 8.6% by the end of 2012 and increasing to 8.7% in 2013.

On the positive side, the report believes that business spending will increase by 3.4% in 2012, although it is unlikely to reach the levels achieved pre-recession till at least 2015.

Mr Spencer went on to conclude: “However, a resolution of uncertainty about the euro could transform the outlook, pushing company spending up much faster than forecast.”

Private Pension costs

Private pension firms have also been accused of hiding some of the costs they levy on customers' investment funds. The RSA recommended that the UK copy the example of Denmark where people taking out a personal pension are given annual statements, like a bank account, revealing the full impact each year on their investments of all charges and costs.

About six million people contribute to personal pension plans, according to recent figures from the Office for National Statistics (ONS). Ros Altmann, the director general of Saga, said: "Pension charges are too high and too complex. If your car is serviced in a garage you get an itemised bill explaining what each charge is for, which part was replaced and what the labour charges are, all in pounds and pence. No one would quote the fee as a percentage of the value of your car, which would be meaningless. But this is what happens with pensions, drawdown plans and annuities."

But the Investment Management Association criticised the report, describing it as "sensationalist headline-seeking". "It does itself no favours by quoting discredited research which exaggerates the cost of managing pension investments many times over," said Richard Saunders, chief executive of the IMA.

"For retail funds there is already a gold standard of charges disclosure, mandated under EU rules put together after extensive consultation and consumer research. "We need that standard rolled out across the whole pensions and long-term savings market," he added. Our experienced IFA’s at Enable agree.

The cost of a pension...

Since a report by the Royal Society for Arts (RSA) said 21 out of a sample of 23 firms failed to disclose the full investment costs of pensions when asked there has been much debate about pension charges. The Association of British Insurers responded that its members revealed all costs, as required by the regulator." All employees who have contract-based defined contribution pensions have their charges disclosed in their key facts information when they purchase a pension," said Otto Thoresen of the ABI. "This is required by FSA rules," he added.

When the RSA questioned the 23 pension firms, all of them said that customers' accounts had to pay an annual charge, and other normal overhead costs for administration, legal and accountancy services.  But only two firms acknowledged that there would be other one-off or variable fees, such as the costs of stamp duty on share purchases, or the stockbroking fees associated with share and bond trading.

The RSA said its report uncovered, "how those selling pensions fail to reveal what is charged for such items as audit and custodial costs, and other hidden costs including taxes, stock lending fees and broking commissions".

"Furthermore, even when costs are declared, it is not done in a way in which typical pension savers are likely to understand. "The enormous impact of fees, where an extra 2% annual charge can, over the lifetime of a pension, result in a halving of pension benefit, is not understood by individual consumers or by small employers," the RSA added. IFA’s from Enable can help you understand the cost of your pension.

Which Pension? As bond bubble hits pension savers

About four million employees are members of DC defined contribution pensions such schemes, and 86% of them are paying their money into so-called "default" funds. These tend to be partly invested in UK government bonds, in some cases heavily so if an individual is close to retirement.

In recent years the price of UK government bonds has had its very own bubble. "There has been a big inflation of government bond prices, which may not be over, and it may be some considerable time until they deflate, but at some point they will have to come back down to earth," says Laith Khalaf, pension investment manager at fund supermarket Hargreaves Lansdown.

"Gilts are seen as a very safe asset, but actually at their current prices there is a potential for capital losses."

There are three related reasons bond prices have risen. Both here and abroad, governments have cut interest rates to try to stave off recession. This has had a knock-on effect on UK government bonds, known as gilts. As the Bank of England base rate has fallen to 0.5%, the fixed rate of interest paid by the gilts has become correspondingly more valuable and their prices have risen.
Gilts have also been seen as a "safe haven" by foreign investors who have been buying them during the turmoil in the finances of the Eurozone.

If you are trying to make sense of your pension our experienced Independent Financial Advisor's at Enable would be able to talk you through your options.