Friday, 25 November 2016

Bereavement rights for unmarried parents

Earlier this year Claire Harris told me about the terrible loss of her partner, Gary, and the shock of finding that, because they hadn't been married, she and her kids were not entitled to bereavement benefits.

This was even though they had lived together for 16 years and had 3 children together before he died suddenly of cancer at the age of 36.

Now she is starting a campaign to raise money for a legal case. If she wins, she is hoping it will pave the wave for better rights for unmarried parents.

Tuesday, 22 November 2016

Bank which manages your life...

Here's a sneak preview of what our future banks might do for us:

*start a savings pot for friends' birthdays or a holiday, after checking your Facebook or what air tickets you're looking at.

*tell you what energy or insurance deals will save you money and switch you over

*alert you that an account you're sending money to might be fraudulent and block the payment temporarily

*tell you you're paying for two music services which overlap and offer to cancel one of them

*warn you to stop spending if you've used cards, cash or loans too much, even if they're with other banks

These are some of the features -- useful to some, a bit creepy to others -- to be offered by the new app-only bank, Tandem, one of its founders, Ricky Knox, has been telling me.

Tandem is in development-mode, operating credit cards and loans for friends, family and early backers before launching to the public some time next year.

The plan is to offer a current account but, interestingly, Tandem envisages including your existing current account from another bank within its own app.

That might sound awkward and you wouldn't be able to operate the account normally as things stand.

But new standards on open banking will allow banks and internet start-ups to combine a variety of accounts one platform.

This makes complete sense if you are a new bank challenging the High Street players, because people are still very sticky when it comes to switching current account providers.

If you can't persuade them to switch, why not move their old account lock, stock and barrel onto your app?

The new app banks or would-be banks, like Tandem, Atom, Monzo and Starling, have slightly different approaches but the key for all of them is the smartphone, which Knox argues provides greater security. 

After the recent security breakdown at another challenger bank, Tesco, that's an important assertion to make.

Knox says at the customer's end safety is enhanced because they have to use a fingerprint to log in on a mobile, while - behind the scenes - the service is so automated there is less risk of human failure at head office.

Let's hope he is right!

Friday, 11 November 2016

Pound helped by Trump effect

The pound is 6 per cent up against the euro in the past few weeks, at €1.16 and it's up against the dollar as well at $1.26.

It's still sharply down since the Brexit vote, but first the court decision that the government must get parliament to trigger Brexit and now the Trump victory have caused a little bounce.

Here's some comment from Rupert Lee-Browne, Chief Executive of currency firm Caxton FX.

"For holidaymakers it's a little bit of good news.
This is definitely a rebound after some very positive comments from President-elect Trump.
He's indicated he wants America the UK to continue with the special relationship and that has lifted spirits in the currency market.
There's also an uplift from talk about higher inflation in the UK which might lead to higher interest rates and there may be room for the pound to move higher.
But there is always the worry about Brexit and that could bring sterling down going forward."

Pound helped by Trump effect

The pound is 6 per cent up against the euro in the past few weeks, at €1.16 and it's up against the dollar as well at $1.26.

It's still sharply down since the Brexit vote, but first the court decision that the government must get parliament to trigger Brexit and now the Trump victory has caused a little bounce.

Here's some comment from Rupert Lee-Browne, Chief Executive of currency firm Caxton FX.

"For holidaymakers it's a little bit of good news.
This is definitely a rebound after some very positive comments from President-elect Trump.
He's indicated he wants America the UK to continue with the special relationship and that has lifted spirits in the currency market.
There's also an uplift from talk about higher inflation in the UK which might lead to higher interest rates and there may be room for the pound to move higher.
But there is always the worry about Brexit and that could bring sterling down going forward."

Friday, 21 October 2016

When will interest rates go up?

Plenty of people are wondering what might happen to interest rates - and hence the cost of borrowing and returns for long-suffering savers - if inflation really does pick up to the extent that some economists fear.

There are forecasts of 3% or even 3.5% inflation by the end of next year, up from 1% now. Higher inflation usually means higher interest rates.

However, the normal rules may not apply this time. The Bank of England, which controls interest rates in the UK, may keep them ultra-low.

Why the connection between inflation and interest rates? In the past rising inflation has been seen as a danger sign, of a country which can't pay its way or an overheating economy. Central banks have used higher interest rates as a tool to cool things down.

Here, the Bank of England has been using very low rates to make borrowing cheap and try to warm the economy up.

And across the world interest rates have been used as a sort of shield to defend a currency against a battering in the financial markets. The thinking is that investors might be more willing to buy your currency if you offer a better return in the form of a higher interest rate.

The story so far is that the pound has fallen by 18%, with a likely knock-on effect on prices for the goods we import, including food, clothing and electronic gadgets. So how will this play out?

Here are two scenarios: the "sterling crisis" and "low rates, whatever".

Plenty of newspapers have described what we have seen in the past few weeks as a sterling crisis. But it isn't really. Because, although the pound has fallen sharply, there has been no feeling of desperation about how to rescue it or prop it up.

Some welcome the drop as a way of helping exporters. It makes their goods cheaper for foreign buyers. The Bank of England has let it happen, partly for the same reason, partly because inflation is still well below the national target of 2%. The Bank governor, Mark Carney, has even said he would be willing to see inflation rise higher and still keep Bank rate low. It's currently 0.25%.

That doesn't mean that a sterling crisis might not occur at some point, in which worries about Brexit cause a much steeper fall, threatening much higher inflation. Or in which the public finances deteriorate, or the shortfall on our trade with the rest of the world gets dramatically worse.

Currency experts don't buy this crisis scenario at the moment, though many do see the pound drifting lower.

For what it's worth, anyone who has lived through a foreign exchange storm in a South American country will recognise what happens. Economic problem - currency falls - central banks pretend it's not happening - currency disappears through cracks in floor - central bank raises interest rates sharply - recession - country forced to live within its means.

The low rates whatever scenario features inflation rising but the Bank of England sitting on its hands, possibly after shaving a tiny bit off Bank Rate again early next year.

The thinking behind this is that the Bank can tolerate above target inflation, keeping rates low to support the economy and jobs through the Brexit uncertainty.

If there is anything that the last few years have taught us about the Bank's thinking, it is that its Monetary Policy Committee, the MPC, watches wage increases very closely as a long-term indicator of the inflationary trend.

Wages are increasing, but not very fast and it is hard to see them taking off while employers shift nervously from foot to foot, watching the course of Brexit.

Another factor is today's news that public borrowing is coming down slower than hoped. So it would be harder for the new chancellor, Philip Hammond, to ease off on taxes in some way to give the economy a boost. So reliance on the Bank keeping interest rates low will continue. 

If interest rates are going to stay low, how will that affect your finances?

If you are starting a mortgage or re-mortgaging, you want to be on the lowest rate, obviously. But you might think carefully before paying a big arrangement fee for a short term fix.

Savers need to hunker down for a longer period of low returns. Tempting interest rates on current accounts, like Santander's, are being cut already.

Gas bills. We're at the mercy of the markets here: the pound and wholesale energy prices, which are in dollars.

Spending. Prices of imported items like cookers and dishwashers are already rising by 5-10%. If the pound doesn't recover, expect more increases.

Holidays. Cheaper at home.

Friday, 24 June 2016

Thomas Cook suspends currency sales

Thomas Cook has suspended its online currency sales after unprecedented demand overnight, as the referendum results came in.
Throughout the night the travel company had been offering euros to click and collect at yesterday's favourable rate of €1.27 to the pound, despite the plunge in the value of the pound in the wholesale foreign exchange market.
Their rate has been cut to €1.21 today.
A rush of demand from holidaymakers trying to protect themselves against the fall led to queues snaking outside the doors at some Thomas Cook outlets this morning.
So the company suspended the online service to make sure that its counters did not run out of cash.
A Thomas Cook spokesperson said:
"We have temporarily suspended our travel money website following unprecedented customer demand for foreign currency overnight and this morning. We apologise to all customers affected. Our immediate priority is to ensure that we have enough currency in store to fulfil outstanding orders. We hope to be back up and running as soon as possible."

Wednesday, 22 June 2016

Pension warning

The government is to write to more than 100,000 people who are set to receive no state retirement pension because they haven't made enough National Insurance contributions.

A new rule imposed in April laid down that people needed at least 10 years of contributions in order to start qualifying.

MPs on the Work and Pensions Select Committee had complained that many would have been unaware of the change.

The Department for Work and Pensions has decided to write to those most at risk "as a one-off exercise" before the end of the year.

It will target individuals within 9 years of state pension age whose records suggest they will have fewer than 10 qualifying years of contributions by the time they retire.

The 10 year rule was introduced alongside the New Station Pension, paid at a flat rate of £155.65 to those with a full 35 years of contributions.

Friday, 15 April 2016

1,100 tax dodger prosecutions

Here is the counterblast from HM Revenue & Customs, in the face of today's attack from MPs on the Public Accounts Select Committee, accusing officials of not doing enough to tackle tax fraud...

HMRC says it has 1,100 prosecutions of tax dodgers in the pipeline.

Last year it secured 1,200 prosecutions, resulting in prison sentences of 407 years.

Those prosecuted included barristers, accountants, lawyers, bankers, medical consultants, people hiding money offshore, money launderers and smugglers.

Two out of five of those convicted had dodged more than £50,000 of tax.

So what about the criticism that HMRC only has 35 wealthy people either in court or waiting to be prosecuted for tax evasion, despite having 26,000 staff working on enforcement and compliance?

Well, the figure is correct, but the explanation from the tax office is that all of the 35 have wealth of at least £1m.

In other words, the number isn't as small as it looks because the people involved are from a tiny proportion of the population.

Critics will, no doubt, say that this is exactly the well-off part of the population which tax officials need to concentrate on, to make it clear that no one gets an easy ride.

Monday, 11 April 2016

How many avoid Inheritance Tax?

If giving money or other assets to family or friends to avoid inheritance tax is standard practice among the better off, as experts say, why do we have no idea how much of it goes on?

Not one of these bodies has any clue: HM Revenue and Customs, the Institute of Chartered Accountants in England and Wales, the Chartered Institute of Taxation and the Institute for Fiscal Studies.

Just by way of a reminder, you can give away the assets and avoid 40% Inheritance Tax, as long as you live for another 7 years.

Between 7 and 3 years before you pass away there is a tapered rate, so less than 40% is paid.

The only figure that HMRC can provide is the amount of tapered relief which is granted, which adds up to £35m a year.

One suspects that is a tiny proportion of the quantity of tax avoided, legally, by making what are called PETs or Potentially Exempt Transfers.

But the total isn't tracked, because PETs don't have to be registered with the tax office.

The Prime Minster says the exemption allows parents to pass on money to their children, while Labour says it wants the wealthy to pay their tax.

Meanwhile, some accountants warn that imposing Inheritance Tax on gifts made more than 7 years before death could lead to double taxation.

If you give property or shares, they argue, Capital Gains Tax is triggered, while gifts from earnings would have incurred Income Tax.

But can someone tell us how much the Exchequer is losing from allowing PETs?

It would be nice to know.

Tuesday, 22 March 2016

Travel insurance after Brussels attacks

In general travel insurance policies do not cover the transport disruption caused by terrorist acts. Here is what the Association of British Insurers says today:

"Travel insurance policies are designed and priced to cover non-refundable cancellation costs in specific circumstances.

Typically these will include cancellation due to medical reasons, being made redundant, called up for jury service. Speak to your travel provider, tour operator or travel agent for advice.

While cancellation due to terrorist acts is not usually covered:

- Some policies may cover you if you cancel due to Government advice against travel
- If you make alternative travel arrangements away from the affected region, then you can usually transfer your travel insurance to cover your new destination.

While some travel policies may exclude terrorist acts, this would not usually apply to any claims for emergency medical treatment or personal injury claims that would be covered in the normal way."

The insurance brokers' trade body, BIBA, points out that some policies do not exclude terrorist acts, including its own version, designed for brokers to sell.

In those cases, baggage, personal accident, delay and cancellation would be included in the cover.

However, no insurer will compensate holidaymakers who decide against going on a trip because of a worrying event, when their means of travel hasn't been affected.

Friday, 18 March 2016

£2,000 of digital tax allowances and how you can use them

In his Budget, the Chancellor trumpeted the benefits of special tax-free allowances for people making money from the internet.

From next year you will be able to earn £1,000 from selling stuff via ebay and other auction and selling websites.

And you'll be able to make another £1,000, tax free, by renting out your property in different ways. That's what many people are doing by using sites including airbnb and ownersdirect.

So who is likely to do well out of these allowances? And have we been dodging tax up until now, simply by making money from online sales?

Flogging on the net
If you make money from the internet, flogging goods stacked up in your garage, for instance, or renting out the garage itself, then that money can be taxable. That's if you are working as a trader.

George Osborne calls you a micro-entrepreneur, selling services online or renting out all or part of your home.

The first £1,000 of income from your online sales will be tax free, although you won't be able to take off your running expenses before calculating the total.

Micro-entrepreneurs only have to declare income above the £1,000 threshold for tax purposes.

When it comes to renting out furnished accommodation, there is already a Rent a Room scheme giving you £4,250 tax free, rising to £7,500 from next month.

You will be able to use the new property allowance at the same time, though not for the same part of the home.

So, for instance, you could rent out the spare room using the Rent a Room scheme and use the new £1,000 allowance to save tax on renting out a parking space on the drive.

Are you a trader?
The big question is whether you are a trader in the first place.

If you are simply selling junk from the attic, books and CDs, a spare bike or even your used car, it is unlikely that the proceeds would be taxable anyway.

These are one-offs. What the tax people are interested in are repeat sales, when the intention is to make a profit.

On the other hand, renting out parts of your home on a regular basis would normally be taxable.

That's if you have already used up your personal allowance, the amount - currently £10,600 - that you can earn before income tax kicks in.

How to work out if you are a trader or not, from the tax people at HMRC...

What we consider to be trading
It can sometimes be difficult to tell the difference between trading and not trading.
You are most probably trading if:
• you want to make a profit
• you have bought goods to sell them on
• you sell things often or regularly
• you register as a business seller on an internet auction site
• you sell from a market stall
• you buy things wholesale or through trade suppliers
• you change or improve things before selling them on
• you sell things that you have just bought
• you sell things that are related to another business that you run
• you have borrowed money to pay for the things that you are selling and you need
to repay that loan.

You are probably not regarded as trading if:
• you only sell things to cover your costs
• you sell a personal possession or something that you have been given or
have inherited
• you only make sales occasionally
• you are not registered as an online shop or trader on an internet auction site
• you make no changes or improvements to the items that you sell
• you occasionally sell a personal possession that you have acquired or bought

some time ago.

Wednesday, 16 March 2016

Showdown: Lifetime ISA v. Pension

There is going to be a showdown between Pensions (red corner) and the New Lifetime ISA (blue corner).

People will have decide -- when they have some cash to save -- which is the best to use. They might not be able to afford both.

So here are the pluses and minuses...


Up front tax relief
Employer contribution
Tax free lump sum when you retire
Can use for pension from age 55

Can't dip in to the money while saving
You pay income tax on your pension when you take it

Lifetime ISA

25% top up bonus when you pay in
Can use to help buy home (or if have terminal illness)
Can dip into your contribution
The money is tax free to use when you retire

No tax relief on contributions
Have to wait till 60, not 55, to use for retirement
5% charge if dip in
Have to be under 40 to open

Monday, 14 March 2016

Help to Save criticised

The debt charity, Stepchange, has criticised the government's new Help to Save scheme for low paid workers, saying they will have to wait too long for the benefits.

The proposals, which will be fleshed out by the Chancellor in this week's Budget, would provide a 50% bonus to those who manage to save up to £50 a month.

As many as 3.5m people in low paid work and receiving working tax credit or universal credit would qualify, with the maximum level of help set at £1,200.

However, they will have to save for two years before getting any bonus.

Stepchange says such a wait may see families overtaken by events as they dip into funds for emergencies.

The charity warns that the thought of losing the bonus could act as a disincentive to save in the first place.

Monday, 8 February 2016

£2bn seized from tax avoidance

Tax officials say they have received £250m in the last few days from people who were involved in tax avoidance schemes.

The biggest of these recent payments was for £5m.

HM Revenue and Customs has new powers to demand that users of tax avoidance schemes pay disputed tax up-front while their tax affairs are investigated, instead of waiting for a decision.

It does not name particular avoidance schemes behind the rush but sports figures, celebrities and other wealthy investors have been reported as facing demands for tax.

By sending out Accelerated Payments Notices, officials say they have "seized" £2bn since 2014, with half of that pouring in since September.

3,000 Notices a month are being issued, with a view to bringing forward over £5 billion tax revenue by March 2020.

Npower cuts 5%

The energy supplier, Npower, is to cut its standard gas price by an average of 5.2 per cent.

The typical annual bill for 1.2 million customers will drop by £32.

It is the fourth major provider to reduce prices in the wake of the falling cost of oil, following moves by Eon, SSE and Scottish Power.

While Eon's price cut was effective from 1st February, Npower's customers will have to wait until 28th March for the saving.

Wednesday, 3 February 2016

Fewer women getting pension

Only 90,000 women reach State Pension Age this year, compared to 320,000 men.

A similar thing is happening over the next 4 years.

It's because women are having to wait for their pensions, as male and female pension ages are equalised at 66.

Here is the table from the Department for Work and Pensions:

Friday, 15 January 2016

Jump in buy-to-let demand

Demand for buy-to-let lending increased significantly in the three months to Christmas, according to the Bank of England.

Lenders expect more jostling for buy-to-let mortgages in the first quarter of 2016.

Housing experts predict that prospective landlords will move as quickly as possible to complete purchases before stamp duty on second homes goes up in April.

George Osborne is imposing a 3% surcharge on the duty to target buy-to-let investors.

The Bank of England said 22 per cent more lenders reported increases rather than decreases in the demand for loans.

Looking ahead, 30 per cent more lenders expect demand to grow even further over the next few months.

Yesterday the Council of Mortgage Lenders said the number of buy-to-let loans leapt by 35% in the month of November, compared to the same month a year before.

Thursday, 14 January 2016

Young lose out on state pension

The government has published figures showing that most people retiring over the next 15 years will be gainers from the new flat rate state pension which is being launched in April.

But the calculations also demonstrate how millions of young people could lose out significantly from the reform.

The Department for Work and Pensions says that 73 per cent of those reaching pension age between April and the year 2030 will be better off than if the existing system had carried on, typically by £10 a week.

By 2040, though, most new retirees will be receiving around £11 less.

The new State Pension will pay a higher rate, £155.65 a week rather than the current £119.30,

Although under transitional arrangements very few people will qualify for the exact new amount in the early years - some will be paid more and some less.

The increase is paid for by throwing in all the extra payments available at the moment, such as means-tested Pension Credit and the earnings-related State Second Pension.

By the time people just starting out in the world of work, in their twenties, come to retire, virtually all will qualify for the full flat rate payment.

But what is most interesting about these figures is that this younger group will do much worse than if the current rules were left alone.

69% of those retiring in 2050, now in their thirties, will lose out compared to staying in the current system, typically by £14 a week.

And 76% of those in the 20s will get less, typically £15 less.

In most cases this is because they would never have had the opportunity to contribute to the State Second Pension, the most generous current top-up.

Monday, 11 January 2016

Tax boss Homer resigned

HM Revenue & Customs tells me:

Lin Homer told the Cabinet Secretary, Sir Jeremy Heywood, in the summer of 2015 that she wanted to leave at the end of the 2015-16 financial year, after completing the 2015 Spending Review.

Like any other employee who hands in their notice, Lin is leaving without any compensation payments.

Friday, 8 January 2016

Savings rates cut to the bone

Savings rates offered to new customers have reached a fresh low, after banks implemented further cuts.

The Bank of England said that the average new instant access savings account was paying just 0.48% in December, while rates being offered for new tax-free cash ISAs had fallen to 0.85%.

It's not long ago that ISA's were paying more than two and a half per cent.

National Savings cut its Direct ISA rate in November and High Street banks have followed its lead.

Financial experts say banks aren't competing to attract savings in. Instead they are concentrating on winning current account customers by paying them better interest instead.

Halifax, Lloyds, and Nationwide were among those cutting ISA rates last month.

Santander and HSBC have given notice that they'll be reducing them too.

Savers have suffered ever since the Bank's base interest rate was cut to a record low of one half of one per cent in 2009, but in recent months returns have been cut to the bone.