Thursday, 15 December 2011

Mortgage drought to get even worse

The Council for Mortgage Lenders has switched from expecting a recovery in lending next year to forecasting a sizeable drop -- as  a result of the Eurozone crisis and the poor economic outlook.

Lending this year is expected to add up to £138bn, not including the mortgage money borrowers pay.

But while the CML's summer forecast was that the figure would jump to £150bn in 2012, now it is warning that a fall to £133bn is on the cards.

The CML is sticking to its view that repossessions will rise to 45,000 in 2012, up from an estimated 37,000 this year, though still fewer than in 2009.

House sales are expected to slip further into the doldrums, with transactions expected to fall to 825,000 from 852,000, the lowest figure for approximately 40 years.

Wednesday, 14 December 2011

Is my Lloyds branch being sold?

Who's affected by the Lloyds sale of 632 branches?

All 164 Cheltenham & Gloucester branches and all 185 Lloyds TSB Scotland branches are earmarked to be sold.

In addition, a selection of 283 Lloyds TSB branches in England and Wales would be transferred to the Co-op.

Lloyds has not published an online list of the branches affected, but customers can check directly with the branch.

This list from the Guardian has most of them:

Once Lloyds and the Co-op have agreed the deal, expected in the first 3 months of next year, the bank will write to customers who will be affected and a full list is likely to be posted on the Lloyds website.

Lloyds is selling up to 19% of its mortgage book. Mortgage customers will be told next year if they have been included.

Should a customer wish to remain within Lloyds and not transfer the bank will register their request and respond to them in due course about the options available to them, likewise if they say they really want to move.

Lloyds says customers do not need to do anything now as changes will not be seen until the sale completes in late 2013.

Thomas Cook shop closures

Thomas Cook is closing 200 shops.

It has already put 22 closures in motion, some closed and some still in consultation, losing 109 posts (though some staff to be redeployed).
They include shops in Hinckley, Birkenhead, Grimsby, Coventry, Northampton, Morley (W. Yks.), Stockton on Tees, Tunbridge Wells, Ayr,
St Helens, Bangor (N. Wales), Cleethorpes, Sheffield, Gainsborough, Melksham.

Today Thomas Cook is announcing a further 115 closures. 661 further jobs are threatened. Staff are being informed today.

There will be a further 63 closures over the next 2 years, causing further unknown job losses.

That adds up to 200 shop closures, more than 770 posts lost and more to be lost later - although some staff will be redeployed.

Car insurance rip-off

The Office of Fair Trading thinks our car insurance policies could be a rip-off, so it is to conduct a market study and might refer the whole business to the Competition Commission. Why?

Well, the main reason is that the cost of paying for injuries sustained in accidents has rocketed. But these personal injury claims are being looked at by the Ministry of Justice, so the OFT is bypassing that issue.

Almost as important, though, says the OFT, is the effective scam that appears to operate over hire cars and repairs.

This is how it works. You cause an accident, so the victim makes a claim, has to have a hire car and has to get his car repaired. Fair enough.

What the OFT is saying is that your insurer might receive a bill for a hire car which is three times the actual cost of hiring one. Specifically, between £1,200 and £1,500, rather than between £400 and £600.

The heart of this problem, we are told, is the credit hire company. It is a business which exists to serve the needs of accident victims who don't have an insurance policy which promises a hire car. The victim might have third party cover only, or a comprehensive policy which doesn't have that element.

The credit hire company pays a fee to insurers, brokers, or solicitors to refer victims on - it's known as a referral fee.

It provides a hire car to the victim, free of charge, knowing that it will be able to send the bill to the insurance company which is covering the driver who caused the accident.

It's a neat little business. The OFT is worried that insurers have no control over these escalating costs.

Worse than that, insurers are part of the problem, because they collect referral fees. Also, when they act for an accident victim who has cover for both car hire and repairs, the OFT suggests that they have little incentive to keep down the cost.

They simply pass on a whopping bill to the at-fault insurer, knowing that it will have to be paid.

It's enough to make drivers seethe, knowing that a whole industry is profiting from inflated insurance costs.

But there is some more encouraging news from the Office of Fair Trading. It says that while motor insurance premiums have risen sharply, by 12% between 2009 and 2010 and a further 9% this year, the increase is less than half that recorded by the AA and price comparison websites which analyse insurance quotes.

The reason is that drivers coming to renew their insurance are suffering smaller increases than than those asking for a new quote.

Most drivers who renew policies are older and more experienced. Many of those shopping around for new policies are younger and less experienced.

If they've just passed the test they may not find insurance they can afford at all, but the quotes are still recorded.

So, bad as the situation is with car insurance, the OFT is suggesting that it isn't quite as horrendous as it has been painted.

Tuesday, 13 December 2011

Payday clampdown

The Office of Fair Trading  is taking enforcement action against payday lenders who are flouting guidance on online advertising in the run-up to Christmas.

In a sweep of a sample of firms it found that some were not checking whether customers could afford to borrow or coming clean about charges for going into arrears.

A number were unclear about the loan terms and failed to explain the contract.

The OFT has not named the firms involved. They could be stripped of their Consumer Credit Licences or simply be forced to change their practices.

The consumer watchdog has started to check advertising on the websites of 50 further firms.

A BBC viewer, Andrew Beattie, complained today that he'd received a text from a payday lender, saying:

"Need extra cash for XMAS? Get cash in your account TODAY. No paperwork or checks."

"Many people may be tempted to follow this up, with no doubt dire consequences," he warns.

In a report sent today to MPs on the Business, Innovations and Skills Select Committee, the OFT says that complaints about the lenders to Consumer Direct rose to 1,535 in the first eleven months of this year, up from 700 in the whole of 2010.

Short-term payday loans have boomed. The market is worth about £2bn a year.

But there are serious concerns about the business practices adopted by some players.

Top of the OFT's list of worries is the misuse of continuous payment authority, which allows a lender to take funds from a borrower's bank account even if the account is overdrawn.

Next comes the rolling over of loans which can result in debts escalating out of control.

But irresponsible advertising and selling tactics have also become a major worry.

Saturday, 10 December 2011

Poop! Poop! Let's borrow again...

"You don't promise," said the Badger, "never to go into debt again?"
"Certainly not!" replied Toad emphatically. "On the contrary, I faithfully promise that the very first opportunity I have, chink-chink, I'll borrow even more!"

Christmas is a good time of year to start thinking up rules.

You can only open one present before breakfast. Spread them out: that way there will be no tears later in the day.

The turkey must be for exactly the right time: 20 minutes a pound at 180 degrees. That way no one will go down with food poisoning.

But you can't legislate against Auntie Vera and Uncle Bob having a row. Or Grandad having apoplexy and falling head-first into his plate.

It's the same with last week's Euro deal. They agreed some new rules, for the future, new restrictions on countries borrowing.

That's OK as far as it goes. The turkey will be nicely roasted.

But everyone knows they have agreed restrictions on borrowing before. And they didn't work.

The financial crisis was so horrendous, it made all that pre-tinkering irrelevant.

And, as with the unreliable Mr Toad, one has to question whether European nations will stick to what they agreed to in that room with Chancellor Merkel.

"Toad, I want you solemnly to repeat, before your friends here, what you fully admitted to me in the smoking-room just now," pronounced the gratified Badger. "First, you are sorry for what you've done, and you see the folly of it all?"

Toad looked desperately this way and that, while the other animals waited in grave silence.
"No!" he said a little sullenly, but stoutly; "I'm not sorry. And it wasn't folly at all! It was simply glorious!"

"What?" cried the Badger, greatly scandalized. "You backsliding animal, didn't you tell me just now, in there..."
"Oh, yes, yes, in there," said Toad impatiently. "I'd have said anything in there. You're so eloquent, dear Badger, and so moving, and so convincing...but I find that I'm not a bit sorry or repentant really, so it's no earthly good saying I am; now, is it?"

Of course, Toad was talking about his new obsession with fast cars - "Poop! Poop".

But I wonder when the backsliding will start in Europe?

Thursday, 8 December 2011

HSBC mis-sells to 83 year-olds...update

HSBC will look at mis-selling complaints back to 1991...

HSBC has announced that it will consider mis-selling complaints from elderly customers and their families, arising from before its takeover of the scandal-hit advice firm, NHFA, in 2005.

The move opens the way for thousands more claims for compensation.

Three days ago the Financial Services Authority fined HSBC £10.5m for mis-selling investment bonds designed to cover care homes fees.

The bank said then that it was likely to shell out an additional £29m in compensation. Now the bill looks set to grow.

NHFA had 11,000 customers while it was owned by HSBC, of whom 2,485 were possible victims of the poor advice.

Today the bank said it would accept complaints going back to 1991, during which time NHFA dealt with another 9,000 customers.

There is no indication of the extent of mis-selling during that period. Many of the victims are likely to have died, so HSBC will take complaints from surviving family members.

Customers who signed up from April 2004 will receive letters from HSBC and don't need to take any action.

Tuesday, 6 December 2011

Christmas for £182

Family Action has had a go at working out the cost of the minimum acceptable Christmas for a family of four, coming up with a figure of £182.

The shopping list includes a Monster High Lagoona's Hydration Station for £34.99 for the daughter and a 4GB Touch Media Player for the son, costing £29.99.

Add in an £18 Christmas Tree and a £15 turkey from Tesco and you can see that there's severe pressure to keep down the cost of everything else.

Decorations and stocking fillers come from Poundland, as you'd expect.

It's worth having a look at the breakdown, which is on pages 19 and 20 of the report.

The point of Family Action's campaign is to ram home how families are particularly stretched in trying to afford Christmas this time round.

Yet even in the £182 budget, there is room to make choices to try to lift everyone's spirits.

The list include gifts for the children's friends, Christmas cards and various treats.

Monday, 5 December 2011

HSBC mis-sells to 83 year-olds

It is a dark moment for a bank with HSBC's pedigree to have to own up to mis-selling investments to elderly people with only 2 or 3 years to live.

HSBC has tried to distance itself from the poor advice given by its subsidiary, NHFA, saying that the advisers involved were not its employees.

Against that many will point to the fact that NHFA was in HSBC's clutches for nearly five years before the wrongdoing was exposed.

And how painful will this record punishment really be?

One leading financial adviser, Roddy Kohn of Kohn Cougar, has pointed out that the commission earned from selling the investments could exceed the value of the £10.5m fine.

Customers typically paid a 5% up front charge for the investments, followed by 1% a year. Apply that to the £285m worth of care plans NHFA sold and you end up with a tidy sum.

Friday, 2 December 2011


What's all the fuss about six letters: CPI and RPI?

Millions of teachers, nurses and other public sector workers have been told that they'll have to get used to CPI in future and forget about RPI.

What does it all mean?

Most of us know about the Retail Prices Index or RPI. For years it was the "headline" rate of inflation and the rate used for annual upratings of pensions benefits and a host of other payments.

No longer. Now the Consumer Prices Index, CPI, is king.

It is the product of a harmonised European method of calculating the rate of inflation. But that's not why it has become the government's inflation measure of choice.

It is the chosen one, because it is usually a smaller number. Use it and you get a smaller increase and a smaller bill for the taxpayer.

Both indices use a similar basket of popular goods to measure price increases month by month. But the results are different.

When I asked the Office for National Statistics to explain why, this was the analogy they made:

Imagine you go regularly to a market stall to buy apples. One time you turn up and you find that a particular variety - say it's Cox's - has gone up in price. Do you buy them? Maybe you don't. Maybe you turn to another variety which is the same price as before, Braeburns or Pink Lady even, and buy them.

RPI thinking concentrates on the rise in the price of Cox's.

CPI thinking considers the other apples too. It allows for the fact that shoppers may not feel the full impact of a price rise because they are likely to shop around for something cheaper.

The result is that RPI is likely to be 1.4% a year higher than CPI in the long run, according the Office of Budget Responsibility.

Another difference is that RPI includes the cost of home ownership: mortgages and house prices. These are excluded from CPI, so sharp changes in interest rates or prices can make the two indices diverge for a time.

CPI does have a housing element, but it's more to do with the cost of renting.

All of this becomes hugely important over time for the uprating of pensions and benefits.

Getting around 1% less of an increase each year will cost a typical retired public sector worker tens of thousands of pounds over a whole retirement.

Tuesday, 29 November 2011

Wait until 67 for your pension

8 million people now aged between 42 and 51 will have to work up to a year longer and lose as much as one year's state pension.

That is the result of the Chancellor's decision to accelerate the move to a state pension age of 67, by introducing it in a two year transition starting in 2026.

The jump in pension age comes 8 years earlier than previously planned and will save the Exchequer £60bn over that period.

The Chancellor pledged that no one within 14 years of reaching pension age would be affected by the change, which the Treasury blames on rising life expectancy.

The decision puts in question a subsequent increase in the State Pension Age to 68, which would have occurred by 2046 according to earlier plans.

A faster move to 68 could now be on the cards. The Treasury says future increases will be based on "demographic evidence".

The charity Age UK said the change was a "bitter blow"  to many people fast approaching retirement especially those in ill-health, caring for relatives and those out of work.

The Department for Work & Pensions gave this breakdown of the age groups affected:

People born after 5 April 1960 and before 5 April 1961 (currently aged between 50 and 51) will have a State Pension age between 66 and 67.

People born between 5 April 1961 and 5 April 1969 (currently 42 to 50) will have a State Pension age of 67.

People born between 6 April 1969 and 5 April 1977 (age 34 to 42) already have a State Pension age of 67 - these proposals will not change this.

Osborne's options

Autumn statement

Personal Finance Possibilities

Restrict tax relief for higher and top rate taxpayers
Restrict or tax the tax free lump sum
Accelerate move to pension age of 67

Freeze tax credits
Child tax credit reductions are already in train for April next year

More on raising personal allowance to £10,000 eventually

Tinker with 5.2% uprating pencilled in for April
Announce a review of uprating system (uses Sept CPI rate)

Allow Child Trust Funds to be transferred into new Junior ISAs

Monday, 28 November 2011


Out of a UK workforce of 29m,

3.4m private sector employees contribute to workplace pensions, 2.4m of them looking forward to salary-linked pensions

5.3m public employees are paying into salary-linked schemes

6.4m workers are paying into personal pensions, which are NOT linked to salary

So 15m are actively contributing to pensions, or 51%.

The typical (or median) public sector pension pays £5,600 a year, compared to £5,860 from similar private sector schemes.

But only 12% of private sector employees are contributing to salary-linked schemes, compared with 87% in the public sector.

42% of the private sector workforce (including the self-employed) contribute to some form of pension scheme, including personal pensions and other schemes where there's no promise of a particular level of retirement income.

With a typical personal pension pot of £30,000 a saver could buy an inflation-proof pension annuity of £1,115 a year.

For reference:
The workforce is 29m strong.

You can split this into:
23m private sector, 6m public sector
25m employed, 4m self-employed
21m full time, 8m part-time

ONS Pension Trends, Sept 2011
ONS Labour Market Statistics, Nov 2011
NAPF Annual Survey 2010
Hutton Report
Hargreaves Lansdown

Pension reforms delayed

Small firms are to be given more breathing space to enrol millions of employees into workplace pensions, a delay which will allow them to put off the cost of making contributions.

The Department for Work and Pensions said that firms with fewer than 50 employees will get more than a year extra to comply with the new rules, which oblige them sign up staff for pensions unless they opt out.

They had been due to start from Spring 2014. The deadline has been moved until after the next election in 2015.

"Making staff in small businesses wait even longer before they get the right to an employer contribution to their pension is a grave disappointment", said TUC General Secretary Brendan Barber

The National Association of Pension Funds had warned that putting off the scheme would be highly damaging. Workers in small businesses are the least likely to be covered by existing pension arrangements.

Firms will eventually have to contribute at least 3% on top of each employee's salary and the employee at least 4%. Tax relief would take the total contribution to a minimum of 8% of pay.

The biggest companies will have to meet the auto-enrolment rules from October next year, as before.

"We recognise that small businesses are operating in tough economic times so we are softening the timetable for implementation to give them some additional breathing space," said the Pensions Minister, Steve Webb,.

He added that all businesses remain "in scope" to be covered by the new rules.

Wednesday, 23 November 2011

£280 on energy bills

The Energy Secretary Chris Huhne has revealed that the cost of policies to deal with climate change will add £280 to household energy bills by 2020.

The policies, including support for renewable energy, will add 27% to the price of electricity.

However, he said that energy efficiency measures, such as home insulation, would cut bills by more than that. So the overall effect would be a £94 reduction in bills, a drop of 7%.

The figures ignore any increase in the underlying price of gas and electricity, which will add significantly more to the cost of heat and power.

The government is introducing a Green Deal next year, enabling households to pay for insulation out of the future savings they achieve from having it installed.

Energy companies will have to provide £1.3 billion a year to ensure everyone is able to benefit from the Green Deal, no matter their income or the type of house they live in.

Monday, 21 November 2011

Store card clampdown

Retailers have agreed to a ban on inducements which tempt shoppers into signing up for expensive store cards.

As part of the government's review of consumer credit, they have pledged not to offer customers hefty discounts on the time when they agree to apply for a card.

Ministers were concerned that the inducements would result in people trapped with high cost credit.

Instead, any cut-price offers will only be available seven days after the application has gone in.

Stores will not be able to offer discounts, free gifts or similar incentives to encourage consumers to take out store cards at the point of sale, or for the seven day cooling-off period.

There will also be a ban on the payment of commission to shop staff for signing up shoppers for the cards.

Government statement:

"The package comprises three core features: a ban on direct commission to sales staff, a good practice training scheme and a seven day ban on retail incentives when a consumer takes out a store card. This ban will mean that stores will not be able to offer discounts, free gifts or similar incentives to encourage consumers to take out store cards at the point of sale, or for the first seven days. The introduction of the seven day ban on retail incentives will tackle the key concern raised by respondents, by de-coupling the decision to take out credit with an instant discount on a purchase.

"These measures will address the concerns raised by respondents and will be introduced from the second quarter of 2012, enabling consumers to benefit from the effects swiftly."

More leeway on overdrafts

Banks have promised to give customers more leeway when they slip into overdraft, in response to a government review of consumer credit.

From next April, all current account holders with leading High Street banks will have the option of a receiving an alert by text, phone or email if they get close to becoming overdrawn.

A year after that they will benefit from a buffer zone of £5 to £10 beyond their overdraft limits. They won't incur zone charges if they stray into the buffer zone for a short period.

And they will be warned at what time of day charges will be imposed, giving them time to top up their accounts to avoid having to pay a penalty.

The new commitments apply to 85% of current account customers who use the top five banks But smaller banks expected are expected to follow suit when they can.

As part of the review, ministers have ruled out imposing a cap on interest rates for credit and store cards.

But retailers have agreed to stop tempting customers into expensive credit by offering discounts on purchases at the time they take out a store card.

Taxpayer in hock to First Time Buyers

Today's promise from the government that it will guarantee the mortgages of First Time Buyers raises the question : at what point would taxpayer money be lost?

By the way, remember this Mortgage Indemnity Guarantee, masterminded by the Home Builders Federation and the Council of Mortgage Lenders, will also be open to existing owners who want to move but can't afford more than a 5% deposit.

Here are the details, but in summary the...

Homebuyer can get a 95% mortgage on a new home, because...
Housebuilder guarantees 3.5% of the price,
Taxpayer guarantees 5.5%,
Buyer puts up a 5% deposit.

For there to be a call on the taxpayer guarantee, first there has to be a default.

Plenty of people carry on servicing their mortgages, even though the value of the home has fallen and put them in negative equity. If there is negative equity, the taxpayer is in danger, but doesn't have to stump up any cash.

Next, the deposit has to be eliminated - a 5% shortfall in the price.

Then, the builder's stake of 3.5%, before there is a call on the taxpayer.

So what you'd need, in theory, would be a default and drop in value of more than 8.5%.

Of course, if the price of one home falls, others will drop as well. So if one buyer defaults it's likely that many others will be in the same dire position. The cost for the taxpayer would multiply.

Wednesday, 16 November 2011

Silver lining for savers

Today's grim news about the economy from the Bank of England has a silver lining for savers.

Cash in savings accounts has been shrinking in value, because virtually all interest rates are less than the rate of inflation.

But the Bank's Inflation Report suggests that Consumer Price Inflation (CPI), currently 5%, will drop to 2% and below in the second half of next year and to 1.3% in early 2013.

For savers, this means light at the end of a very dark tunnel.

Take two top-of-the-table accounts on Moneyfacts today, accounts which aren't distorted by bonus payments which get removed after a year.

West Brom Building Society has an internet account paying 2.8%, a money-shrinker at the moment. But potentially a money-grower if inflation does fall sharply next year.

Even with 20% tax taken off, the rate equates to 2.24%.

And you can get a similar return, tax-free, from Northern Rock's E-ISA.

For those prepared to lock their money away for 3 years, much higher rates are available: 4.3% from Yorkshire Bank, for instance, and 4.15% from the AA.

Don't expect fireworks from interest rates. Most pundits think the Bank of England's base rate will stay at 0.5% until 2013 and possibly beyond.

But at least the pain for savers could start to ease.

Tuesday, 15 November 2011

Jump in smartphone frauds

There has been a surge in frauds committed to get hold of the latest smartphones and high value mobile phone contracts, with a 93% rise since last year in fraudsters using someone else's identity to sign on with providers.

One explanation for the increase is the tough economic climate, according to the fraud prevention service, CIFAS, which works on behalf of banks, retail credit firms and telephone companies.

The 93% year-on-year jump was in cases of "impersonation of the victim", when the perpetrator sets up the account using someone else's name and current address, with 10,572 cases in the first nine months of 2011.

Fraudsters have been known to ask Royal Mail to redirect the resulting correspondence to their own homes, or to rifle through letters arriving at buildings with several flats.

There was an 85% increase in the use of completely fictitious details to get hold of phones or sign up for accounts, with 4,789 confirmed cases up to the end of September.

Often fraudulent Direct Debit details are supplied, in order to avoid paying any bills.

CIFAS says that sophisticated phones have "become so embedded in our lives that many of us seem unable to do without them".

Wednesday, 9 November 2011

Used car clampdown

A company which describes itself as the Uk's leading car supermarket has been forced to give undertakings to the Office of Fair Trading not to breach consumer law.

The OFT says customers complained that Carcraft, which has 11 car supermarkets across England and Wales, did not carry out the pre-sale inspections it advertised, resulting in significant problems after purchase.

The watchdog found that the company did not repair or replace some cars which were unsatisfactory and misled customers about the scope of its after-sales guarantee.

Last year the OFT warned used car dealers they must comply with the law or face enforcement action, after receiving high levels of complaints.

Carcraft has outlets in Rochdale, Newport, Sheffield, Merseyside, West Midlands, Leeds, North East, Lakeside, Trafford, Enfield and Chertsey.

It co-operated with the investigation and says it has changed its business practices.

Monday, 7 November 2011

House prices up 450%

The average house price in October was £163,311, according to the Halifax, up 1% on the previous month.

That is 18% down from the peak in 2007, but still 74% higher than 2001, 141% higher than 1991 and 450% higher than 1983 which is as far back as their published figures go.

Average House Price

10/2011  £163,311
08/2007  £199,612 (peak)
10/2001   £93,610
10/1991   £67,585
01/1983   £29,696

Source: Halifax

Friday, 4 November 2011

Surge in Debt relief Orders

The Insolvency Service has reported a sharp rise in the number of people seeking Debt Relief Orders, a cheap form of bankruptcy for people with few assets. They reached a record level of 7,600 in the three months to September.

Debt Relief Orders or DROs were brought in two years ago to provide a route out of debt for the poorest people in financial trouble.

The process costs just £90, much cheaper for the debtor than bankruptcy, and is only open to those with less than £300 in assets as well as a low value car.

While bankruptcies have fallen sharply as families batten down the hatches and cut spending, the numbers at the bottom of the pile seeking protection from creditors is on the rise.

Mark Sands, from insolvency experts, RSM Tenon, said, "It shows how many people are so desperately short of money that they qualify for DROs."

The total figure for individual insolvencies was down 11 per cent compared with the thrid quarter of 2010.

But with financial pressures building, the Consumer Credit Counselling Service (CCCS) fears there will be a surge in insolvencies next year.

Wednesday, 26 October 2011

Junior ISA shunned by banks

With only days to go before the launch of the tax-free Junior ISA, the Coalition's replacement for the Child Trust Fund, High Street banks seem completely underwhelmed.

RBS will have one available by the end of November. HSBC is "building" its version. Maybe it'll be ready by the end of the year.

Santander has nothing in place: it's "considering options". And Barclays has "nothing lined up".

Why? If these banks thought the product would be a big seller, you'd have thought they would have something in place for zero-hour.

So probably they don't think huge sums are likely to be invested.

Unlike Child Trust Funds, which were turbo-charged with £250 from the taxpayer, there is no free money on offer to tempt parents to open the new ISAs.

Of the big players, only Nationwide Building Society is a contender. Its Junior Cash ISA, on offer from 1st November, will pay 3% including a bonus for the first year.

UPDATE: Halifax and Bank of Scotland say they will be offering a Junior Stocks and Shares ISA in November 2011, likely to be later in the month.

Tuesday, 25 October 2011

£6m fine for bank which lost control

A private bank which manages money for wealthy investors has been fined £5.95m for failing to have effective systems in place to make sure they were given suitable advice.

Credit Suisse UK advised 623 of its customers to invest in complex Structured Capital at Risk investments, called SCARPS, putting £1bn at risk.

The investments averaged £1.8m per investor.

The Financial Services Authority found that the bank had poor records and insufficient safety checks on the advice, which had been given over a 3 year period between 2007 and 2009..

When FSA staff made a regular visit, Credit Suisse wasn't able to show that customers had been advised correctly or had an appetite for the level of risk involved.

The bank will now have to review the cases and compensate anyone who has lost out because of the failings.

The FSA said the failings were particularly serious because of Credit Suisse's leading role in private banking and the amount of money involved.

The bank agreed to settle at an early stage, otherwise the fine would have been £8.5m.

It's not the first time Credit Suisse has incurred a hefty fine from the FSA.

It was docked £5.6m in 2008 for failing to conduct business with due skill, care and diligence.

Monday, 24 October 2011

Take care with microloans...

What do you think when you hear the term "microloan"?

For me it conjures up the world of the barefoot banker and Grameen Bank, which pioneered the business of providing small loans to the rural poor in Bangladesh.

Grameen and its founder, Muhammad Yunus, were awarded the Nobel Peace Prize.

So it was surprising to see a high cost loan company, Ferratum, marketing itself in the UK as a provider of microloans.

Ferratum lends out cash at an APR of 3113%, by no means the highest rate among payday loan companies, but pretty high.

"Microloan" sounds nicer than "payday loan", doesn't it, like they're so helpful? But, clearly, you need to be on your guard.

To mark this discovery, here are three providers of microloans.

1. The Microloan Foundation.
London-based charity which provides small loans, averaging £65, in Malawi and more recently Zambia, to help people start businesses and feed their families.
If you borrowed £100 from them for 4 months, you'd pay back £120.

2. Fair Finance
A social business, offering microloans to people and small businesses in Hackney.
If you took out a £750 personal loan, you would pay back £1007 after 18 months.
They say the APR is 48%.

3. Ferratum
Payday loan firm from Finland, opened in the UK 4 months ago.
"Microloans" are repayable between 7 and 45 days. First time customers are limited to £100.
£100 costs £5 a week or £33 for a month.
But annually that works at the APR of 3113%.

I know which ones I prefer...

Friday, 21 October 2011

Social tenants to miss out on £120 solar savings

A pioneering project to provide 22,000 tenants of social housing schemes with solar panels generating free electricity is in jeopardy.

Fears that the government would cut back subsidies for solar installations have prompted backers to withdraw their support.

The project had been planned by Empower Community, a social enterprise, with support from eight local authorities and housing associations, along with charities and a major pension fund.

Empower says families would have saved an average of £120 a year off their bills, by using free solar power during daylight hours.

The project was to take advantage of a subsidy arrangement, called a feed-in tariff, designed to encourage renewable energy generation. Householders are paid a generous price for any renewable power they manage to produce.

It was well known that a reduction in the rates on offer for solar electricity was likely to be implemented in April next year.

But there has been mounting speculation that ministers will announce a cut of as much as 75% and bring it in from January, after receiving a stampede of applications for the help.

"I was gobsmacked when I heard," says Alex Grayson, managing partner of Empower Community, "The policy is being cut off at the knees."

We all pay for the subsidies, through our electricity bills. They have been criticised for costing electricity users too much and for benefiting mainly richer households and big investment funds.

But Empower argues that its project would have redressed the balance, saving money for low-income families, many of them using pre-payment meters and paying the highest prices for power.

Installations were planned for Wales, Yorkshire, East Anglia and Lincolnshire, with the work starting in January and finishing in March.

Tens of thousands of installations planned by other organisations could be affected as well.

Each home would have had between 8 and 12 solar panels fitted on a south-facing roof, providing the occupants free electricity for 25 years.

In practice, the panels were expected to save between £100 and £250 from a typical electricity bill, depending on how much electricity families could take advantage of while the sun was shining.

Any leftover power would be sold on the National Grid, with the profits and the subsidy shared between the social landlord and financial backers.

The Department of Energy and Climate Change told the BBC that all the subsidised tariffs were being considered in a Comprehensive Review.

"We've made clear that tariffs will remain unchanged until April 2012 unless the review indicates the need for greater urgency," added a DECC spokesperson.

However, once rumours started circulating that the Department was planning to pull forward a cut in rates, Empower's financial backers put £175m of support on hold.

If the right financing was in place, it is thought that a million housing association and council homes could be suitable for solar panels.

Top accountants under scrutiny

The big four accountancy firms which audit big companies' accounts are to be investigated by the Competition Commission. The move comes after widespread criticism that companies pay too much and have little choice who to use.

The Competition enquiry into the audit business has been triggered by the Office of Fair Trading which found that four accountancy firms -- PriceWaterhouse Coopers, KPMG, Ernst and Young and Deloittes -- dominated this £600m industry with little switching going on and limited opportunity for smaller players.

One firm, PriceWaterhouse Coopers or PWC has a 47% share of companies in the FTSE 100 stockmarket index. And, on average, FTSE companies, the biggest names in British business, will change their auditor only once every 43 years.

The costs involved in switching can be prohibitive, estimated to be as much as £1m a time for a large company.

Possible measures to re-ignite competition could include forcing auditors to shares contracts, limiting an individual firm's market share and designing a standard way to hand over information when an employer switches auditors.

Friday, 7 October 2011

Sun burns John Lewis


The Autumn heatwave knocked John Lewis's sales in the week to 1st October.

They were down 7.9% on last year, as shoppers stayed away to enjoy the sun.

Household budgets are under strain anyway so some will take John Lewis's "tough week" as a warning sign.

The department store chain said trade in the electrical, home and technology areas stuttered due to the impact of the weather.

Sales of autumn fashions were hit as well, though John Lewis is hoping that more people will grace its doors now that cold winds are starting to blow.

Wednesday, 5 October 2011

How people have been paying off debt

Given David Cameron's non-words about people paying off credit cards etc, here are some stats which show how consumer credit has shrunk.

The headline figure is the Bank of England's number for outstanding consumer credit, up to end of August.

It's the one which includes credit cards, personal loans and overdrafts, not mortgages.

The total was £209bn, a figure which has fallen steadily since it reached a high of £236bn in September, 2008, just before the recession struck.

Within that, outstanding credit card lending stood at £57bn, down from £62bn in January, 2010.

Other credit, including personal loans and overdrafts was at £152bn. It's been flattish this year, after peaking at £180bn in July, 2008.

From Bank of England

Tuesday, 4 October 2011

Should petrol be cheaper?

The price of Brent crude oil, which is followed as a benchmark across the world, was slipping closer to $100 today.

The cost of a barrel of crude for delivery in November (if you want it on your doorstep) reached a low of $100.34.

But what about the cost of fuel to fill up our cars?

The latest average price for unleaded petrol (from is 135.03p, while diesel is 139.72 a litre.

If you think that is high, it might stoke your anger to look back at fuel prices in February, the last time Brent actually closed a trading day below $100.

The average price reported by the AA for February was 128.88p for unleaded and 132.8p for diesel.

So today we are paying around 7p extra per litre.

Sun-fuelled cash machine scramble


Ice cream cones, beach towels and deck chairs - you need cash for them and last Friday saw a scramble for cash machines as Britons headed outside to enjoy the sun.

LINK, the UK cash machine network, says that Friday 30th September was the busiest day of the year so far for ATM withdrawals with £577million taken out.

It was the highest daily total since Christmas Eve 2010 and 14% higher than the equivalent day in 2010.

Monday, 3 October 2011

Credit easing...what?

The Chancellor has announced something called "credit easing". Er, what?

No, it's not quantitative easing, something the Bank of England does off its own bat (which is a bit like printing extra money).

Credit easing is a way of making it easier for businesses to borrow money if lending gets very difficult again, as a result of the Eurozone debt crisis.

In other words, if there's another credit crunch.

Companies raise billions of pounds by selling bonds or IOUs to investors and City firms. Bonds provide a method of borrowing money without taking out a bank loan.

But in a credit crunch few people want to lend so it's hard to raise the cash needed to keep going or expand.

That's where credit easing would come in.

The Treasury could direct the bank of England to buy company bonds, if the Eurozone crisis prompted banks over here to draw in their horns even further.

The strategy would make it easier for businesses to get credit. And there would be a small risk that the Treasury could lose money.

What about small businesses?

The suggestion is that banks would be encouraged to parcel up their small business loans into bonds, which the Bank would start buying as well.

More details likely in November.

Friday, 30 September 2011

What will the new £50 be like

The new £50 being issued on 2nd November will have the Industrial Revolution heroes Boulton and Watt on the reverse as the Bank of England explains.

But what else?

It'll be the same size as the existing £50 note.

It will have extra security features. The Bank is keeping mum on these. But each note tends to have something novel. The Adam Smith £20 of 4 years ago had a "see-through register", a series of coloured irregular shapes printed on the front and back which form the £ symbol if you look through the note.

So expect more bumpy lettering, very small lettering,  a metallic thread, watermarks and holographic images, plus something extra.

The Bank wants the new fifties to be more available and accepted in shops, hence the noise about extra security.

They had to take 300,000 counterfeit banknotes out of circulation last year.

There weren't significantly more forgeries of fifties than other notes. The problem is that fifties are worth so much more so traders are ultra-careful.

Thursday, 29 September 2011

The tricks scamsters use to find you

My report on the rip-offs perpetrated on the elderly and disabled by some doorstep traders might raise this question in some minds: how do they know who to target and which doors to knock on?

Well here are some answers...

1. They look for telltale signs outside the house, such as grab rails or walking sticks.

2. They look at the electoral roll for names from a bygone era, such as Vera, Frank or May. Then they visit or phone.

3. They trade lists of likely names - suckers lists - with co-conspirators in the pub.

4. Some leave symbols outside houses to indicate to other scamsters whether the occupant is worth a try - bit like these. It could be a mark on the gatepost or a wall indicating that there is a single female inside, or a wealthy person or a good prospect.

Scary, isn't it?

What it means is that vulnerable people need to take special care not to let anyone in whom they don't know.

Relatives and friends should take note and help.

Tuesday, 27 September 2011

Rogue debt firms lose licences

The Office of Fair Trading has revealed that 62 debt management firms have lost their licences in the last year, after a crackdown on rogue operators.

Some fee-charging firms have been criticised for misleading customers about their charges and for giving incompetent advice.

Others have been told to stop cold calling customers or pretending that they are charities or from the public sector.

They have to be licensed under the Consumer Credit Act in order to offer their services to people who have serious debt problems.

The 62 have had their licences taken away, been refused licences or surrendered them to the OFT.

The action comes after the watchdog issued warnings to 129 firms last September.

Friday, 23 September 2011

Sharp losses for savers and pensioners who depend on shares

The yo-yoing stockmarket is wreaking havoc with the savings of millions of people.

A typical pensioner retiring today on a personal pension will get 14% less than he or she would have received at the beginning of January.

A small investor who had put away money in a tax-free shares ISA has seen the value of the investment drop by 12%.

Figures complied for the BBC today show the impact of gyrating share prices on savers who have hitched their wagon to shares.

A 65 year-old who had saved £100,000 in a personal pension pot would use the money to buy a retirement annuity, a guaranteed income for life.

But the pot has dropped in value to £91,840 since the start of the year. So the prospective annuity income has fallen from £6,497 to £5,571, a cut of 14% in 9 months.

More than 400,000 buy annuities each year.

A saver who held £10,000 in a shares ISA is likely to have seen its value slip to £8,777, based on the average value of unit trusts which invest in a basket of shares.

HMRC tells me that 3.4 million investors subcribed for stocks and shares ISAs last year.

The figures come from pension experts, Hargreaves Lansdown, and the savings information group, Moneyfacts.

Wednesday, 14 September 2011

Help if the energy bill is a problem

Scottish & Southern is bringing in its prices rises from today. Eon's price hikes came in yesterday and npower's arrive on 1st October. Scottish Power and British Gas tariffs have already gone up.

The CCCS (Consumer Credit Counselling Service) says that a third of people with debt problems are also in fuel poverty - they're struggling to pay their bills.

If you're having trouble paying for gas and electricity, here are some places to go to for help:

Home Heat Helpline 0800 336699

CCCS Debt Remedy

My Money Steps

British Gas, Scottish Gas Trust

Other British Gas help
And check with your supplier for help, if it's another one.

Winter Fuel Payment

Cold Weather Payment

Clegg on gold

This is what Nick Clegg just said about City investment funds needing to give up on gold and put their money (i.e. people's pension money and savings) in big infrastructure projects instead:

"I expect Lord Green* and his team to be as active in making sure that funds in this country which have got significant resources don't just either sit on the money or invest it - for the sake of argument - in safe assets like gold and explain to them why infrastructure investment is a sensible thing for them to do for a return on their own funds.

*Trade and Investment Minister

Friday, 2 September 2011

Illiogical tax break will discourage giving

The country's leading tax body has branded government plans to encourage charitable giving in legacies as "arbitrary, complex and illogical".

The plans, announced in this year's budget, would give a tax discount to people who give 10% or more of their estates to charity.

Currently, any money and other assets above a threshold of £325,000 are taxed at 40%. Qualifying charitable givers would be charged a lower rate of 36% from April next year.

But the Chartered Institute of Taxation has protested that the proposals are complicated, capricious and counterproductive.

Its tax experts are worried that the new system would discourage would-be givers from handing money to charity via regular giving or in their wills.

Instead they recommend that any charitable gift in a legacy receives an automatic 11% tax perk for the charity.

Shoppers avoid plastic splurge


Debt racked up on credit cards fell to its lowest since 2004 in July, though the total figure still stands at an eye-watering £59.8bn or £960 for every man, woman and child in the UK.

Bankers say that shoppers are using their cards more than before to take advantage of perks on offer, but they are trying to avoid adding to their debts.

The perks include up to 56 days of interest free credit, insurance benefits and the possibility of earning cash back on purchases.

Household budgets have been drained by the jump in gas and electricity prices and families are fearful of the outlook for jobs and the economy.

In that climate, cards are being used mainly as a means of payment rather than as a borrowing option.

The British Bankers Association said the number of purchases was up 4% in July to 170m, at an average value of £65 a time.

Tuesday, 30 August 2011

Your PPI money is coming back

There's been a sharp acceleration in the payments of compensation for mis-sold Payment Protection Insurance. Payments reached £37m in May and £65m in June according to the Financial Services Authority.

The insurance, called PPI, was sold with loans to cover repayments if the borrower fell ill or lost a job. But the policies were widely sold to people didn't need them or would never have been able to claim.

The FSA says the scandal has left "an indelible stain on the financial industry's record". It is publishing compensation figures to measure firms' progress in making payouts.

They have a long way to go. Leading banks have set aside over £6bn to cover compensation for mis-selling the policies.

Payouts so far this year add up to £215m.

Wednesday, 24 August 2011

Barclays PPI complaints up 93% from last year

Barclays admitted today that complaints about sales of Payment Protection Insurance or PPI have soared.

In the first 6 months of this year the bank received over 73,000 insurance complaints, mostly about PPI. That was up from 59,000 in the second half of last year and 38,000 in the comparable period in 2010.

The bank set £1bn aside earlier this year to meet PPI compensation costs and promised to compensate all customers who complained they had been mis-sold PPI before 20 April on a "no questions asked" basis.

Overall Barclays saw a 14% drop in complaints about its services. However, it expects complaints about PPI to continue rising.

Tuesday, 23 August 2011

Loans and overdrafts at 10 year low

Households have cut back sharply on personal loans and overdrafts, leaving them at the lowest level for 10 years according to the latest snapshot of lending from Britain's banks.

They've also been trying to save more in the face of worrying economic prospects.

Family budgets have been coming under heavy strain as incomes stagnate and inflation increases - and there's the fear of job losses.

So people have been busily repaying personal loans and overdrafts, to the tune of £200m in the last month alone.

And they're attempting to save more -- total savings are up more than 8 billion pounds so far in 2011.

But that's a smaller increase than last year as the rising cost of living soaks up spare cash.

Monday, 22 August 2011

Surge in loan scam complaints

The Office of Fair Trading is warning people to steer clear of scam loan companies who take upfront fees but fail to provide loans. It says it has seen a 50 per cent increase in complaints from members of the public.

Many of the victims made applications for credit and were asked to "wire" or send upfront fees through money transfer companies. The OFT advises loan applicants to be very careful of lenders or credit brokers who cold call and ask for money before providing a loan.

Complaints about the practice surged to 3,167 in the year to June, a rise from 2,059 in the previous year.

Thursday, 18 August 2011

Millions under pressure to leave gold-plated pensions


More than 2.5m million employees in reliable but expensive final salary pension schemes are likely to be offered inducements to leave by their employers over the next few years.

750,000 are likely to accept the up-front cash on offer, leaving them at risk of  being left with second-rate pensions.

Final salary schemes promise a pension based on your pay when you finish working. Generally, the alternative on offer is a stockmarket-based scheme with no guaranteed pension amount.

The figures come from the accountancy firm, KPMG, which questioned financial advisers being used by companies to offer pensions advice to staff.

Of 91,200 employees offered payoffs to leave their schemes over the last 3 years, one in four have taken the money and moved their pensions.

They were given an average of £65,000 to transfer into another pension arrangement.

The pensions minister, Steve Webb, warned in May that employers must stop tricking people into giving up valuable pension rights.

Wednesday, 17 August 2011

Interest rates - what to expect

How are our finances going to be affected by the huge shift in interest rate expectations?

The prospect of a rise in interest rates has receded into the far distance.

Back in March, those all-seeing City economists were predicting, confidently, that the Bank of England's base rate was set to rise, with the first hike pencilled in for May.

Some even thought that the Bank's Monetary Policy committee would eschew quarter-point hikes and plump for a half-point jump to 1%.

Three of the MPC's nine members had already voted for an increase in February, they were so worried about inflation.

Come April and the predicted date for a rise was pushed back to August, then to November.

And today we hear that the MPC voted 9-0 against a rise.

More economists are suggesting that interest rates will stay where they are until 2013. That is so far ahead that it is hard to say what the situation will look like by then.

It is an intensely gloomy situation for people who rely on savings interest to prop up their incomes. Although headline savings rates are around 3% and fixed rates are higher, the average being earned from a Cash ISA is just 0.5%, uncannily close to Bank base rate.

Don't expect that to change much.

The conventional wisdom is that low rates are great news for mortgage borrowers. The large proportion of households on variable mortgage rates can breathe a sigh of relief that their payments won't be going up soon.

On the other hand, homebuyers face a tricky judgement. Should they choose a cheap variable (or tracker) rate, on the grounds that a rate rise could be a long way off?

Or should they choose the security of a fixed rate, knowing that for a period of 5 years, say, their payments will not change? Given the outlook for rates in general, new fixed rates could be forced down.

There is no easy answer. As you have seen, forecasts of future interest rates can shift wildly from month to month.

Brother can you lend a dime?


Parents, grandparents, brothers and sisters are asking each other for money more frequently, as household budgets come under pressure in the wake of the credit crunch, rising prices and job losses.

This form of lending is notoriously hard to measure. But 63% of a sample of 2,000 adults reported an increase in family members approaching relatives for money as a direct result of the credit crunch.

15% of family members are lending to each other on a regular basis, with the average loan running at £2,300 across the UK. Often the sum is more than they owe on credit cards.

The research, from insurance group Aviva, identifies parents aged between 40 and 60 years of age coming under particular pressure to lend, either to children who are short of funds or to grandparents who have retired and are hard put to find affordable borrowing.

Tuesday, 16 August 2011

How to shield savings from inflation

After today's news that the Consumer Price Index rose to 4.4% from 4.2%, ways to save and get protection from inflation - courtesy of Moneyfacts.

Minimum Investment
Cambridge BS
Inflation Linked Bond
1.00% plus RPI
Index Linked Savings Certificates
0.50% plus RPI*
5 Years
Post Office
Inflation Linked Bond Issue 2
0.50% plus RPI
Post Office
Inflation Linked Bond Issue 2
1.50% plus RPI
Inflation Linked Bond Issue 4
110% of the growth in the Retail Prices Index (RPI), or a guaranteed minimum return of 12%, plus original investment returned
Yorkshire BS
Protected Capital Account – Inflation Linked 8
100% of the growth in the Retail Prices Index (RPI), or a guaranteed minimum return of 16%, plus original investment returned
Yorkshire BS
Protected Capital Account – Inflation Linked 7
100% of any annual growth in the Retail Prices Index (RPI), or a guaranteed minimum of 1.5%, plus original investment returned on maturity
* Interest earned tax-free
Source: 15.8.11

Thursday, 7 July 2011

Action to stop scourge of silent calls

The phone regulator, Ofcom, says the energy company, Npower, and the emergency plumbing and boiler company, Homeserve, may have broken rules governing large scale phone campaigns.

It is investigating the firms, which have over 9 million customers between them, for subjecting members of the public to too many silent or abandoned marketing calls.

Ofcom says it believes they "persistently misused an electronic communications network" by making an excessive number of abandoned calls.

Call centres use automatic diallers to contact large numbers of people. But the person at home can find there's no one on the line if there aren't enough staff at the call centre.

It added that Homeserve repeatedly called people within a 24 hour period and that Npower played recorded marketing messages if no one from the call centre came on the line.

Ofcom can impose fines of up to £2m. It is considering whether to take further action.

Homeserve admitted to the BBC that it had been in breach of the regulations for a very short period, but a spokeswoman said the company was now fully compliant.