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.
 

£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.

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...

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.

Sun burns John Lewis

HEATWAVE HITS JOHN LEWIS SALES

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.

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

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 petrolprices.com) 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

CASH MACHINE BONANZA IN HOT WEATHER

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.

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.