The (free) 7-zip application was identified by the University's Standard Desktop Initiative group as an application which offers robust encryption facilities (AES-256). The software should soon be available on all managed PCs throughout the University. Individual files (or groups of files) can be encrypted using the software and the resultant files then sent as e-mail attachments with a high degree of assurance that should the e-mail go astray there would be little risk of inadvertent disclosure.
The main risk is the accidental disclosure of the password used to encrypt the data - 7-zip is an example of encryption based on a "shared secret" which needs to be conveyed to the message's recipient before they are able to decrypt the files sent.
For guidance on using 7-zip, see:
Office 2007 and Office 2010 let you easily encrypt files in Word, Excel and PowerPoint.
Warning: there seem to be problems if you try to use Word 2007 to open a password protected .docx document created in Word 2010.