Thursday, 31 May 2012

Pound sags again

The pound has looked a bit spongey against the dollar over the past few days, we are being told. It's held most of its gains against the euro, holidaymakers will be glad to hear. Though sterling has lost a bit of ground there as well.

But looking at the the trade-weighted index - that's sterling against a basket of currencies* - you can set the recent movements in a bit of context.

The pound peaked at 106.8 on 23rd January, 2007. (The index is set at 100 from the start of 2005.)

Then the credit crunch and financial crisis saw it drop to 73.7 at the end of 2008.

That's what a devaluation looks like: a 31% drop.

Since then sterling has been clawing back a little ground, up and down, bit bit.

It sagged to 77.6 in April last year, then rose to 84.5 on 14th May this year.

Now it has slipped a bit, down to 83.6.

Where are we? 13% above the low in 2008.

But still 22% down from the pre-crisis peak. Still devalued.
*Bank of England definition: "The sterling effective exchange rate index is a measure of the overall change in the trade-weighted exchange value of sterling, calculated by weighting together bilateral exchange rates. It is designed to measure changes in the price competitiveness of traded goods and services and so the weights reflect trade flows in manufactured goods and services."

Friday, 25 May 2012

Spotting fake £1 coins

Police have found a stash of 4 million fake one pound coins, highlighting the fact that there are huge numbers of dodgy coins out there.

How can you tell if you have one?

1 in 30 pound coins (roughly) is a fake. So I gathered together 30 of them from friends and, sure enough, a couple looked suspicious - and one was definitely a fake.

I can say that because I checked with the Queen's Assay Master!

Look at the lettering on the side in the first picture. The E and T of DECUS ET TUTAMEN* are right out of line and waywardly stamped. Plus the milled edge (those bumpy lines) is poorly defined. It's sub-standard.

The Queen's head should be vertically in line with the design on the back. The top and the bottom should line up on each side. Turning this coin around, I can see that they don't.

And here, in the second picture, you can see that the Celtic Cross with a Pimpernel Flower (representing Northern Ireland) is badly stamped. It's too shallow and some of the design is missing.

The lesson is that if the coin looks like it's made by an amateur, it probably is. You shouldn't accept it. It is worthless and you're unlikely to get your money back.

The Royal Mint warns that the counterfeiters seem to have favoured coins dated from 2004 to 2007 recently, so you should check those particularly carefully.

Here's a link to the Mint's briefing on the issue.

*Means "An ornament and a safeguard" (from Virgil's Aeneid).

Wednesday, 23 May 2012

BAE jobs threatened

How many jobs are in jeopardy at BAE Systems in Brough in East Yorkshire, after today's deal to sell 22 Hawk trainers to the Saudis?

1300 people work at Brough, including manufacturing and testing.

Brough was under threat as a manufacturing site, with work likely to stop in 2013.

Last year 865 jobs were pencilled to go.

Today 218 manufacturing jobs are saved for an extra 2 years, until mid-2015

118 job losses have already been "mitigated" through transfers and early retirement.

73 further people could be helped by offers of transfers to Warton and Samlesbury

The bulk of the work on the 22 Hawks announced today will be done at Warton and Samlesbury, but some will go to Brough

Perils of catalogue debt

Pressure on household finances is causing thousands more people to fall into unaffordable debt with mail order catalogues, according to the debt charity, the Money Advice Trust.

National Debtline, which is run by the charity, received a record 25,000 calls about catalogue debt last year, up 10 per cent on the year and nearly double the number received in 2007 before the credit crunch.

It's had a further 7,000 calls so far this year.

Families on tight budgets have been turning to catalogues to take advantage of keen prices and offers to buy now and pay later with no interest.

Then they find they can't settle the bill.

Catalogue debt is prompting more calls for help than payday loans, mortgages or rent.

The Trust says many people don't realise they are signing a consumer credit agreement, which means the debt is enforceable in the courts.

Nor do they understand that missing a payment on a catalogue debt will usually invalidate any special zero per cent interest deal.

Tuesday, 22 May 2012

Zero % Interest Rates?

Would the Bank of England cut its base interest rate below 0.5%?

If it did, what would the effect be - or is the idea a red herring?

The notion has resurfaced because the IMF has called on the Bank of England to consider cutting its rate even further.

Here's the possible impact:


People with tracker mortgages are the winners - their monthly payments would be cut. Some borrowers on Standard Variable Rate mortgages would benefit too, if they have a guarantee that the rate won't vary too much from base rate.

New mortgage offers - unlikely to be affected much.

Credit cards, overdrafts, personal loans. All these tend to move independently from base rate.


Sounds like terrible news for people depending on savings interest.

But the best savings rates, around 3% variable, are governed more by competition between banks and building societies - as they try get hold of our cash to give them something to lend out.

So the rates on offer might be affected very little, if at all.

Stretching banks

In fact, the effect of cutting Bank base rate might be to put our beleaguered banks under even more pressure.

They'd have to cut some customers' mortgage payments, but would still have to pay top dollar - or top pound - for savings.

"Their balance sheets would be even more stretched," warns Ray Boulger, mortgage expert at John Charcol. herring?

The IMF message is bound to prompt discussion at the Bank of England. But that doesn't mean action.

If its Monetary Policy Committee can't see a useful result, they're unlikely to push base rate further down into uncharted depths.

Wonga gets told off

The Office of Fair Trading has told Wonga off for pressurising people who owed them money by:

*sending letters suggesting they were fraudsters

*telling others over the phone that they shouldn't be borrowing, according to their terms of employment.

In response, Wonga says it will appeal because:

*the letters were sent to a limited number of customers, 18 months ago

*the suspect calls followed a script which hasn't been used since January, 2010.

So they did it, then?

Black box App

Black box technology could be the future for many drivers, especially young drivers, who find car insurance is unaffordable.

The gadgets monitor your driving skills and when you take the car out (insurers think it's much riskier at night). If you're good, the cover should be cheaper.

So why not try out the technology on your smartphone?

One provider, Young Marmalade, has come up with an App to keep tabs on your driving - and show how the system operates.

Worth a try! See if it works.

Some firms offering motor insurance with a black box:

Young Marmalade

Co-operative Insurance Services

AA Insurance

Friday, 18 May 2012

Bank scare stories

One newspaper told us this morning that the Spanish banking crisis had hit the UK High Street.

They were referring to a credit rating agency, Moody's, downgrading Santander UK from A1 to A2, with a negative outlook.

To most people this means nothing, but it does make you ask: "Should I panic? Should I pull out my money?" etc etc

1. What is a credit rating agency?

It tells investors how risky it is to invest in companies, including banks. A lower rating means it's slightly riskier.

It is not telling customers whether or not their bank is about to fail.

2. What are they saying about Santander UK?

That it's slightly riskier than before, though not as risky as its big Spanish parent, Santander.

The A2 rating is still firmly "investment grade", as are all the big High Street banks in the UK.

3. How does Santander UK compare?

The highest rated UK banks are HSBC and Barclays.

But another big bank, RBS (which includes NatWest), has a lower rating than Santander UK.

So it's in the middle of the pack.

4. What does Santander UK say?

That 90% per cent of its assets are safely in the UK.

And even Moody's says that it's highly unlikely that the UK banking watchdog, the FSA, would allow this money to be used to prop up Santander in Spain.

What does all this mean? Don't panic - just calm down.

NB The FSCS protects deposits up to £85,000

Thursday, 17 May 2012

Trouble keeping warm

Last autumn's sharp gas and electricity price rises pushed an extra 400,000 English households into fuel poverty, according to the Energy Department, DECC.

It says that "price rises in the latter part of 2011 lead to an increase of around 0.4m households", taking the total to 3.9m.

Since then we've seen a modest cut in prices earlier this year, but British Gas has indicated that prices will rise significantly again before the coming winter.

So the fuel poverty total is likely to rise once more.

Fuel poverty is defined as households which spend more than 10 per cent of their income keeping warm.

Tuesday, 15 May 2012

Euro scare story

The European Central Bank (ECB) has dismissed a warning from a UK travel company that holidaymakers should be careful of Greek and Spanish banknotes.

The Association of British Travel Agents (ABTA) distanced itself from the warning as well.

Dial A Flight, which organises travel for 450,000 people a year, told its customers in a blog that "anyone holding Greek Euros may find themselves out of pocket" if Greece were to leave the eurozone and stamp, or endorse, its euro notes to identify them as a new currency.

The company suggests there is a risk that other eurozone members might not accept the notes -- whether or not they had been stamped -- and that Spain might be the next to suffer.

Notes printed in different countries are identifiable from a letter at the front of the serial number: Y in the case of Greece and V for Spain.

But a spokesman for the ECB said "euro banknotes are legal tender in all euro nations" and that they remained legal tender "wherever they are printed".

ABTA said that while no one knows what would happen if Greece left the euro, "A euro is a euro - it doesn't matter where it is printed".

After I started making enquiries, Dial A Flight removed the blog from its website.

There will be lots of scare stories as Greece's problems persist, but if anyone wants to know what the symbols on euro banknotes mean, the ECB provides a handy guide.

UPDATE - and here's what the British Bankers Association says...

"There is no difference between Euros from different countries. They are worth the same from one end of the Eurozone to the other, regardless of where they are issued. The Euro is a single currency and worth the same whether French, German, Greek or Spanish."

Child Benefit freeze

Remember: Child Benefit is being cut in two different ways. Everyone who receives it is losing out.

Today plans to take it from high earning families have been condemned by chartered accountants as "seriously flawed in principle and in practice".

This change, due to be implemented from January could end up being a "disaster".

The Chancellor will remove the benefit in part from households with someone earning over £50,000 and entirely if someone brings in over £60,000.

It's a controversial policy. Some say Child Benefit should be simple and universal, others that the rich shouldn't have it, while these accountants say Osborne's plan is too complicated as well as being unfair.

I think people shouldn't forget that there are actually two cuts being imposed: the value of the benefit has been frozen as well. 

The Treasury saves £1.5bn next year from taking Child Benefit from high earners.

And it saves £1.25bn in the same year by freezing the rates for everyone. The freeze has already started.

Anyway, here's an extract from the Institute of Chartered Accountant's (ICAEW's) findings:

As currently set out, the legislation is seriously flawed in principle and in practice. Unless the government withdraws this clause and schedule with a view to tabling a more workable alternative in time for the Bill’s third reading, we believe the new tax charge could be an operational and reputational disaster for the government and HMRC.

  • HMRC will be using the tax system to claw back from one individual a benefit paid to another. The tax system is based on individuals, while the benefits system is based on households. This undermines the principle of individual taxation.
  • Families in similar financial situations could be treated quite differently, undermining the policy’s ‘fairness’ objective, and creating very high marginal rates of tax for some.
  • Changed family circumstances could make it difficult or impossible to calculate the claw-back, or who should pay it. In the period between the benefit being paid and then clawed back, the couple could be separated, involved in an acrimonious divorce, or completely out of touch with each other.
  • Taxpayers could be penalised for failing to submit information they have no access to, particularly if the relationship breaks down.
  • Taxpayers could find their confidentiality breached, as HMRC may need to share information about one partner’s (or former partner’s) income and tax affairs with the other.
  • It could create 500,000 more self-assessed taxpayers, because taxpayers will have to assess their own liability for the new charge – very expensive for HMRC to administer.

Saturday, 12 May 2012

Stay-at-home parents can get their pension

It's a silly mistake from the Telegraph in its lead story today, and misleading, to say:

"At the moment, people who do not work for 30 years do not qualify for the full basic state pension."

In fact, you get national insurance credits if you are looking after a child under 12 -- or if you can't do paid work for various other reasons.

And under the old system of Home Responsibilities Protection, you could qualify for up to 22 years of contributions towards the state pension  -- for parenting.

It's not to say that the new flat-rate pension won't help.

Under the old system and the current one, there's a serious risk that parents, especially mothers, don't qualify for the full pension.

But it's wrong to say that they couldn't qualify for it up until now. 

National Insurance Credits

Qualifying for state pension

Friday, 11 May 2012

Surprise tax bills for 1.6m

The tax office, Revenue and Customs, is writing to 1.6 million taxpayers to tell them that they underpaid hundreds of pounds in tax last year.

The average shortfall of £537 will be taken out of pay packets over the financial year starting next April.

Underpayments happen every year, because the tax system isn't able to reflect job changes at once. And inaccuracies can arise if the taxpayer has more than one job or pension.

Even more people will gain from the recalculations. From next week HMRC will start paying refunds to 3.5 million taxpayers, with an average credit of £379.

Where paying a unexpected tax bill will cause hardship, tax officials have promised that they will allow those affected to spread the payments over a longer period.

Wednesday, 9 May 2012

8 million face state pension cut

The Queen's Speech mentions the forthcoming Pensions Bill which will set a much earlier date for the planned rise in state pension age to 67.

So it's worth recapping what the effect of the change will be.

*Pension age would go up from 66 to 67 between 2026 and 2028, rather than 2034 to 2036.

*8 million people would be affected, those born between 6th April, 1960 and 5th April 1969.

*They'd lose up to 4% of the pension income they might expect over their lifetimes.

*The Department for Work and Pension would save £58.9bn and there'd be a gain of £9.7bn from tax and National Insurance as people had to work a year longer.

All this is from the DWP's own analysis.

Tuesday, 8 May 2012

Jump in euro rate for tourists

Leading bureaux de change are selling euros at a rate of 1.20 to the pound for the first time in three and a half years.

The jump reflects worries about the eurozone in the wake of the Greek and French elections. But the result is that British travellers are getting 10 per cent more for their money than a year ago.

Travelex is offering 1 euro 20.8 cents -- it was last above 1.20 on 4th November, 2008. The Post Office is paying 1euro 20.7 cents.

High Street banks are still offering lower rates, but some specialist money-changing services will pay even more.

The rate at certain Sainsbury's stores has risen to 1 euro 21.19 cents.

Wednesday, 2 May 2012

Death-knell for interest-only mortgages

The Cooperative Bank has become the first major lender to pull out completely from offering interest-only mortgages.

The move comes in the wake of a clampdown from the City watchdog, the FSA, which wants all mortgage applications to be assessed on a capital repayment basis.

With an interest-only mortgage, the borrower only has to pay the monthly interest bill, without making regular payments to reduce the size of the loan.

Santander, Lloyds and Barclays have already made it much harder to qualify for an interest-only loan.

Now the Coop, the UK's 10th largest mortgage lender, says it has decided to pull out of the market. The decision also applies to the Britannia, which was taken over by the Cooperative Bank in 2009.

The group's 60,000 customers who already have the loans will be able to apply for new Coop-branded interest-only loans - but they'll find it very difficult to shop around for a better deal.

Doorstep sales pushing £5bn

Doorstep selling of double-glazing, gas and electricity and other goods has reached a value of £4.7bn a year, according to a new study from the Office of Fair Trading.

The volume of sales has been rising at a rate of 2.9% annually, led by double-glazing, conservatories and cleaning products, as firms bypass the High Street and take advantage of the opportunity to sell direct - sometimes at high prices.

The OFT says that tighter rules governing cooling-off periods and written quotes have saved consumers millions of pounds over the past few years.

But the study, compiled by a research firm GHK, highlights concerns about high pressure sales techniques in some areas, including home repairs and mobility devices for the disabled.

It adds that some prices are nearly double the best quotes and that too many buyers fail to compare prices when buying on the doorstep.

£ buying you more travel money

The pound is rising again in the international currency market, amid continuing worries about the financial state of the eurozone.

Sterling has touched 1.2330 to the euro in the wholesale market today, its highest since June 2010.

What that means is that bureau de change rates are approaching 1.20, having dropped close to 1:1 parity last summer.

Tavelex is offering 1.1950 online.

The Post Office Rate is 1.1940

M&S Money has 1.1788