British Gas has confirmed that from 18th August this year they will be increasing the price of their domestic gas and electricity.

The company, which is owned by Centrica, has indicated that on average, gas bills will increase by approximately 18% and electricity will go up by approximately 16%.

The Scottish Power company have also confirmed that their prices are going to increase in August, with gas prices going up by 19% and electricity going up by 10%. More energy companies are also expected to announce similar increases to their fuel prices.

Approximately nine million UK households will be affected by the increase to their fuel bills. The average dual fuel customer is now facing an estimated £190 increase to their annual bill.

The wholesale cost of gas on the international market has increased by over 30% since last winter. British gas have confirmed that 50% of the gas which they supply comes from the wholesale market and this is the reason why they have had to increase the price of their fuel.

The rise in the wholesale cost of Gas is a problem which faces every supplier, and Centrica had previously confirmed that they would have to increase their domestic prices. In May they had indicated that the increase to the wholesale cost of gas in the first half of the year will depress their profit margin and that prices would have to increase in order make up for the loss.

Mike O’Connor, the chief executive of Consumer Focus, has rejected this argument. He stated that whilst wholesale prices have gone up, they are still below the price levels in 2008.

However, the cost of gas to the British Gas customer is now 44% higher than it was in 2008 and furthermore, the cost of electricity has gone up by 21% in this time.

The price comparison service Uswitch has confirmed that average household bill for a dual fuel British Gas customer was at £1,096 per year last year. Customers have already had a 7% rise in their energy bills prices when British Gas announced an increase last December. The latest increase will mean that customers have sustained a 25% increase from last years energy bill to an estimated £1,288 per year.

Richard Lloyd of the consumer association Which? believes this new increase to be an unwelcome move, particularly as many people are already having to make cutbacks due to the rising cost of living. He went on to suggest that these increases could lead to a cold winter for many people this year as they will be forced to make further cutbacks.

Chris Huhne, the Energy and Climate Change Secretary, has suggested that these increases only add to the need to move away from natural gas and fossil fuels as a source of electricity and confirmed that the UK market needs to change. He added: “Alternatives like renewables and nuclear power must be allowed to become the dominant component of our energy mix.”

Strategies that pay dividends

For UK savers investing for income, it is important to strike a balance between hunting out good dividend paying shares, robust corporate bonds, well-managed funds or just the best savings account. Investing for income for most requires a mixture of investments, to balance risk with returns.

Historically low interest rates have left many UK savers searching for real returns, but the obligatory warning that past performance is no guide to how markets will perform in future always applies.

Utilising UK equity income funds that pay good dividends can have an integral part to play in a well-structured income portfolio. When looking to generate an income from UK equity funds, the objective is to select funds that invest in businesses that have the potential to provide sustainable long-term dividend growth.

The sector is divided in two, making it easier to select a suitable fund. Funds in the UK equity income sector must aim for a yield at least 10 per cent higher than the FTSE All-Share index, whereas UK equity income & growth funds must aim for a yield of at least 90 per cent of the All-Share.

If you invest in a UK equity income fund where the growth potential is not reflected in the valuation of its shares, this not only reduces the risk, it can also increase the upside opportunity.

In the short-term, UK equity income fund prices are buffeted by all sorts of influences, but over longer time periods fundamentals come to the fore. Dividend growth is the key determinant of long-term share price movements, the rest is sentiment.

Even when UK investors don’t need an immediate income from their portfolio, steady and rising dividend yields from UK equity income funds, together with the potential for capital growth, can play a central part in an investment strategy. In addition, dividend income may be particularly relevant as the UK hauls itself out of the economic doldrums we’ve experienced over the past few years.

For UK investors requiring income in retirement, it’s all about the compounding of returns over the long term. UK equity income funds look to invest in businesses that can demonstrate consistent returns on invested capital and visible earnings streams.

Companies with a high and growing free cash flow will typically attract UK investors. These are companies with money left over after paying out for capital expenditure, as this is the stream out of which rising dividends are paid. The larger the free cash flow relative to the dividend payout the better.

As with any investment strategy, diversification is the key to diminishing risk, which is particularly important for UK income-seekers who cannot afford to lose capital. Also, don’t forget to utilise tax shelters, which can deliver tax-free income, or a pension, where contributions attract initial tax relief.

The value of investments and the income from them can go down as well as up and you may not get back your original investment. Past performance is not an indication of future performance. Tax benefits may vary as a result of statutory change and their value will depend on individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.

Welcome to WordPress. This is your first post. Edit or delete it, then start blogging!