Ubuntu suxs when you get to know it well! Its a nightmare

Make sure you do this

sudo dpkg-reconfigure adduser

Give "no" for an answer

Also don't forget to add this line to ~/.profile

umask 077

Then you may also want to do this

cp ~/.profile /etc/skel

this will change the default (pathetic) rights on files created by a user form 755 to 700. Note: this change will only be for users that are added after you made this change.

Or instead of changing and copying the ~./profile into etc/skel you may just simply change /etc/profile. At the end of this file you would find umask 022 change it to 077. Enjoy :)
Reference:
http://ubuntuforums.org/showpost.php?p=4461165&postcount=4