Half don't know they've been paying for advice

Oh dear! You thought you were getting something for free and now you discover you were paying through the nose all along.

Paying as much as 8% of the money you put in.

We so want to believe that we are getting a bargain, that we don't ask questions and don't read the small print.

A third of people think that financial advice is free, even though a chunk of  the money tucked away by investors and pension savers gets slipped back to adviser by the investment company as commission.

That's according to market research from the Financial Services Authority, based on questions to over 2,000 members of the public.

Even worse than that, half of those who were actually getting financial advice thought it was free.

From today, commission on selling investments and pensions is banned. (Although see this comment from one pension expert who says there's a loophole.)

In theory, the new system forces advisers to be open about their charges, negotiating a fee with the customer before the transaction.

So you'll know where you stand stand - and there's less chance of being sold the wrong investment or pension, just because a provider pays more commission.

But investors will still need to watch out. The new fees can be paid in a variety of ways, by instalments for instance, and they could still be large.

It'll be vital to research what a reasonable fee might be and to try out different advisers, or financial planners.

High cost of tax calls

We lost £33m last year waiting on the phone to tax call centres operated by HMRC.

The calls can cost over a pound a time if you're held for more than 10 minutes - as 6.5m callers were in the first six months of this financial year.

Often it's via an 0845 number, though HMRC says tax credit calls are now dealt with on an 0345 number.

So what's the difference?

0845

Calls are typically charged at between 1p and 10.5p per minute depending on the time of day for landline customers, and often include a call set-up fee.
Calls from mobile phones generally cost between 12p and 41p per minute.

0345

Calls cost no more than calls to geographic numbers (01 or 02) and must be included in inclusive minutes and discount schemes in the same way.
Calls from landlines are typically charged between 2p and 10p per minute; calls from mobiles typically cost between 10p and 40p per minute.
Calls from landlines and mobiles are included in free call packages.



Full call charges guide from Ofcom

£millions for sole traders

Thousands of sole traders could benefit from a new initiative to allow savers to offer them loans directly via an internet website.

The business secretary, Vince Cable, is expected to announce today that he will invest £10 million in the online savings and loans firm, zopa.com, to help it launch a service builders, decorators, and other small businesses which aren't limited companies.

"There are 3 million sole traders and they find it really difficult to borrow money," says Giles Andrews, one of Zopa’s founders, "No one specialises in them."

Traders will be able to raise thousands of pounds to pay for vehicles and equipment, at a time when bank funding is hard to come by.

Zopa is a new peer-to-peer lender, which enables savers to offer their money directly to borrowers over the internet.

They earn more than they would expect to get from a bank or building society, though without the absolute guarantee that their money will be returned.

The firm has concentrated on consumer borrowers so far but will launch the sole trader service in the New Year.

Vince Cable is also likely to put £20 million of taxpayers’ money into another peer-to-peer lender, Funding Circle, which specialises in limited companies. Other providers of alternative finance will benefit as well.

Giles Andrews expects to offer loans of between £1,000 and £15,000 at slightly higher rates than his best borrowers enjoy, because of the higher level of risk.

He will match the government money pound for pound with cash from savers. All the state funding will be paid back after two years.

The growth of peer-to-peer lending has been impressive. Zopa is on course to lend £90 million this year and hopes to get close to £200 million of loans in 2013.

On the face of it the model is risky for savers, but their money is spread between hundreds of borrowers to reduce the chance of making significant losses.

Jacob Rothschild, from the well known banking dynasty, revealed in the last few days that he had bought a stake in Zopa, saying "alternative forms of credit will be developed on a significant scale".

Lord Rothschild wouldn't reveal the size of the investment.

£270m for Northern Rock customers

The taxpayer will have to pay £270m to customers who have personal loans with Northern Rock Asset Management, which has been in public ownership since the financial crisis.

152,000 Northern Rock customers will receive an average of £1,770 each because bank staff failed to include key details on annual statements, including the original amount which had been borrowed.

The problem arose with personal loans of less than £25,000, many of which were provided on top of Northern Rock's Together mortgage which was popular before the credit crunch and allowed homebuyers to borrow more than their homes were worth.

The failing arose as a result of an investigation by UK Asset Resolution, which looks after rescued banks for the government.

The Treasury said that it had commissioned an investigation from the consultancy firm, Deloittes, which would report early in the New Year.

It adds that UK Asset Resolution has the financial resources to cover the payments to customers.

How the £270m will impact on the public finances will be decided by the ONS, but it is likely to increase Public Sector Net Borrowing in 2012/13.

Thousands get mortgage compensation

Thousands of mortgage borrowers who fell into arrears are to be compensated after the City watchdog, the FSA, decided that they were treated unfairly.

They were customers of Cheshire Mortgage Corporation Limited, which is being fined £1.2 million for failing to treat customers fairly in the sale of mortgages and arrears handling from October 2004 to the end of 2009.

2,000 borrowers will receive an average of £1,000 each.

The FSA says the company didn't check properly whether some borrowers could afford their loans.

If they fell into financial difficulty, they faced unfair charges for handling their arrears and for the use of debt collection agencies.

Staff at Cheshire Mortgage Corporation, which is based in Cheadle, were paid bonuses to motivate them to collect arrears.

We're buying more cars

If you want to measure the state of family finances, don't lose sight of what people are buying.

The biggest expense for most people, after buying a home, is buying a car. In fact, getting wheels ranks right up there as a major decision along with getting married, getting a mortgage and having children.

Unsurprisingly, car sales took a serious knock during the financial crisis. But now they are going up.

In fact they have risen every month since March.

UK buyers bought 15,000 more cars in November than a year ago and, so far this year, they've bought nearly 100,000 more cars.

Car traders expect they'll post their biggest sales total since 2008 this year at over 2 million cars, with private buyers showing the most significant increase.

Ironically, the acceleration in car-buying has skewed our trade figures, which look pretty bad today. Part of the reason is that we are buying more cars from the continent, while hard-pressed citizens of other EU countries are buying fewer cars from us.

Average earners hit by pension limit?

How could someone on an average wage be hit by a reduction from £50,000 to £30,000 in the amount that can be saved each year into a pension scheme?

Well, it could happen but most would escape.

Take, for example, an employee on an average wage of £25,900 with 15 years in a nice final salary pension scheme.

That means the pension is a proportion of final salary, possibly building at 1/60 of salary for each year worked. The tax office multiplies each year's gain by 16 to see if it exceeds the annual allowance - the one which could drop to £30,000.

Our example would have to gain more than £1,875 in a year to breach the limit.

Unlikely? Yes, but say the person was promoted to a management job on £35,000. In that case there would be a sudden gain in pension entitlement achieved in just one year.

By my calculation it would be £2,858.

Our employee would have to pay a tax charge the part of the gain which exceeded the annual limit. In this case it would be a charge of £196.

BUT - and this is a big BUT - everyone is able to deploy unused annual allowance from the previous three years.

Those on medium and even many on higher wages are likely to have plenty of allowance to spare. In which case they could escape the tax charge.

Nowadays, more people on being signed up to pensions which aren't guaranteed by their employers. All that happens is that the employee and the company put in some money in a pension fund each month - and the pension you get at the end just depends on how well the fund does.

The situation is a lot simpler for these employees. Their contributions, including company contributions, would have to exceed £30,000 a year, which isn't likely to worry most of them.