Fewer going bust

Fewer people are going bust and the least nasty form of insolvency, the Individual Voluntary Arrangement or IVA, is now falling along with bankruptcies and Debt Relief Orders.

There were 10,405 IVAs in England and Wales in the first three months of the year, down 24% from the same time last year. This is the route where you make a formal agreement with creditors to pay back an amount you can afford.

Mark Sands from the insolvency firm, Baker Tilly, tells me this is basically as a good as it sounds, a sign that those in the most acute financial trouble after the credit crunch and the recession are working through the system.

Through this period, they avoided "giving up on their debts" through a bankruptcy or DRO -- if they could -- by opting instead for the optimistic route of an IVA and pledging to try to pay money back.

But now fewer are needing to walk down the IVA road either, helped by the recovery and continued forbearance from some lenders.

What next? There are still many more people who go bust than in the dim, distant past before the credit boom of the early years of this century.

And that probably won't change, because we have grown addicted to being able to borrow money when we feel like it.

In fact we could now be close to a low point.

Mark points out that unsecured lending - where you don't have to pledge your home or other assets - is on the rise once again.

Plus interest rates will rise at some stage, even if some forecasters now suggest that stage may not be reached until next year.

So now may be the time to start looking at how we can prevent the number of personal insolvencies starting to bounce back again.

Blow your pension and lose benefits

Here's the Department for Work and Pensions warning about squandering your pension savings and then expecting to be able to fall back on state benefits:

“Means-tested benefits take into account how much income and capital a household has. 

“And if people are found to have deliberately spent their pension in order to get means-tested benefits, then their benefit is reduced accordingly.”

It's understood that if money is released from a pension pot and then spent, these "deprivation rules" may apply regardless of age.

·         Benefits affected include:

·         Pension Credit

·         Housing Benefit

·         Jobseeker’s Allowance (income based)

·         Employment and Support Allowance (income related)

·         Income Support

·         Universal Credit 

Pension help phone number

The Chancellor has announced that the telephone number for free guidance on the new pension freedoms is operational from today.

The freedoms, which start on the 6th April, enable savers to dip into their pension pots as they wish from 55 rather than having to use the money to buy a pension annuity.

They can ring the number, 030 0330 1001, between 8am and 10pm to book a guidance session.

Phone sessions will happen from tomorrow, with face-to-face help starting on the Tuesday after Easter, once the reforms have been launched.

45 minutes is being allocated for each guidance session over the phone.

10,000 savers have already pre-registered requests to get help with the freedoms.

Here's the Pension Wise page.

Tax free savings

From Budget document...

In a radical reform to the savings tax system, a new Personal Savings Allowance will be created from April 2016, exempting the first £1,000 of savings income from any tax for basic rate taxpayers and the first £500 for higher rate taxpayers, saving up to £200 off an annual tax bill. This will not apply to additional rate taxpayers.

From Treasury:

Banks will stop deducting 20% tax on people’s savings income. 95% of taxpayers (28m people) will benefit. 17m people will be completely removed from tax on their savings income from April 2016.

It's from April 2016

Beware of tax if you free up your pension

How much tax will you pay on your pension?

Tax is a crucial consideration with the pension freedoms being launched in April and the latest idea -- cashing in your annuity -- which might arrive in 2016.

The tax penalty of 55% on taking out your money is being removed, but there will still be tax: 25% will be tax free, then you pay income tax at 20%, 40% or 45%, depending on which threshold you smash through.

It's a point which may have been overlooked in the excitement over the cash-in-your-annuity idea.

A typical pension pot of £20,000 to £30,000 buys a very small annuity, perhaps around £25 a week.

However, for many pensioners, that money could be free of tax, because their incomes will be less than the personal allowance, the amount of income you are allowed to have before income tax kicks in.

On the other hand, taking the money as a cash lump sum would push many of them into 20% tax and there's no tax-free element.

People on slightly higher incomes will need to worry about the 40% tax threshold.

So it will be very important to calculate what might happen to your tax bill, even though you might be very unhappy about the size of your annuity.

No prosecution for Wonga

The payday lender, Wonga, will not be prosecuted over the fake letters affair, when it emerged that customers owing money were sent demands which appeared to be from legal firms but were actually from Wonga itself.

The financial watchdog, the FCA, fined Wonga £2.6m last summer after finding that 45,000 such letters had been sent out. It then referred the matter to the police.

Today the City of London Police issued a statement saying: "The central allegations were that Wonga had deceived its customers by sending letters falsely purporting to be from lawyers with the aim of recovering outstanding debts from customers.

"After a thorough review of all the material gathered the City of London Police has concluded there is not sufficient evidence to progress a criminal investigation. ​"

Switching Commissions

Here's the list of what the price comparison websites make out of you when you switch gas and/or electricity.

The commissions are per fuel, so double if you go for a dual fuel deal.

£29 Moneysupermarket
£30 U-switch
£22 Compare the Market
£23 Confused.com
£22 Go Compare

They revealed these charges to MPs on the Energy and Climate Committee.