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Tax tips for returns

Mon, 22 Jan 2007 15:01:03 GMT

As the deadline for tax returns approaches, taxpayers have been given tips on how to save on their finances, as well as avoid the £100 fee for late submissions.

Returns can be filled in manually on paper or calculated automatically online - which some customers may find easier, according to the Sun.

Self-employed workers, the newspaper claims, can benefit if they reclaim expenses made while working.

For example, heating or lighting bills accrued during the hours of work, as well as any other work-related costs, could be reclaimed, the company says.

Also, employees whose bosses will not refund them for expenses should keep hold of receipts until it's time to fill in the return.

Leonie Kerswill, a tax partner at PricewaterhouseCoopers, says "preparation is key".

"Get your information together before you start and if you need help ask HM Revenue & Customs or a qualified tax adviser in good time," she adds.

Earlier this year, consumer charity Credit Action estimated personal debt to be at a total of £1.25 trillion in the UK.

FSA fines loans company over PPI

Fri, 27 Oct 2006 16:00:21 GMT

The Financial Services Authority (FSA) has cracked down on an insurance firm for not treating its customers fairly when selling them Payment Protection Insurance (PPI).

Loans.co.uk was fined £455,000 by the regulatory watchdog for failing to gather and record adequate information to show that its policy recommendations were accurate.

The FSA found that around 14,000 customers were not being told the full story when they were offered PPI and so could have been short-changed by being pushed into an inappropriate deal.

Margaret Cole, the FSA director of enforcement, said: "Loans.co.uk failed to make sure adequate processes were in place to ensure the suitability of its PPI recommendations and treat its customers fairly.

She added: "We encourage consumers to ask straightforward questions of sales staff when PPI is mentioned to help them to identify whether the product is right for them."

Stephen Hayes, chief executive of the prosecuted firm, affirmed that the company would have relevant safeguards to prevent the same situation arising in the future.

"We co-operated fully with the FSA and undertook an internal audit review to ensure effective and timely resolution of the issues identified," he said.

"New practices have been in place for the past six months."

Parents failing kids on CTFs

Thu, 26 Oct 2006 16:18:20 GMT

Too many parents are failing their children by not getting the best returns out of their Child Trust Funds (CTFs), claims new research.

Although there has been a good uptake of CTFs, for which any child born after September 1st 2002 is eligible, 22 per cent are still opting for low-yield cash accounts, reports Family Investments.

Family's stakeholder funds over the past year amount to 10.4 per cent, a sum which is twice the average cash fund.

Although the research is based over a year, which is a short period of time in terms of returns on stocks and shares, it does suggest the potential benefits available to investment savvy parents.

The company's research shows that 36 per cent of parents underestimate the benefits of investing in stocks and shares and half are unaware that inflation gnaws away the value of cash savings.

John Reeve, chief executive of Family Investments, commented: "The natural instinct for some parents is to fear loss more than anticipate gain and as a result opt for cash.

"The fact is that when you lock money away in cash over 18 years, it is twice as likely that the buying power of your money will be lower than if you had invested the equivalent amount at outset."

The government is encouraging families to start saving for their children's future by giving them a £250 voucher when they open their fund.

No handouts for children of the future

Wed, 25 Oct 2006 17:07:39 GMT

In two generations' time, children will be expected to be financially autonomous from an early age, according to new research.

In a climate of rising house prices, interest rates and energy bills, parents are becoming more expectant of their offspring to provide for themselves when they reach their teenage years, reports Bradford & Bingley.

Over half of adults (55 per cent) in the survey said that children should start saving for the future before the age of ten and a third believe that their offspring should have amassed £2,000 by the time they are 18.

But there was found to be a stark difference between older and younger parents. Only 29 per cent of those aged 45 to 54 expect their kids to save for higher education or the deposit for their first house while this figure nearly doubles for those aged between 25 and 34.

Steve Potter, head of saving for Bradford & Bingley, said: "If this trend of parents expecting their children to save rather than parents bailing them out continues then the bank of Mum and Dad will be hanging up the 'closed' sign in two generations time.

"This makes it all the more important for parents to encourage their children to save from birth," he added.

Mr Potter believes that the discrepancy between the two groups of parents comes down to the elder providers feeling more secure due to the advent of final salary pension schemes and house price inflation and those in their younger years feeling the pinch from rising living costs.

But there is one thing they both agree on if a child wants their own car, they are going to have to fund it themselves.

Financial woes become 'last taboo'

Tue, 24 Oct 2006 17:03:21 GMT

Less than a quarter of Brits are willing to speak to their closest confidants about debt problems, as a new survey suggests that money worries have become the last taboo.

Although more than half of the nation is willing to chat about issues relating to their love lives or family problems and 40 per cent would discuss health or career concerns with friends, research from First Direct shows that we are a nation highly strung about the subject of money.

However, talking about our financial woes means that we are admitting we have a problem and this is the first stage to overcoming the burden, advises Mo Shapiro, one of the UK's leading relationship psychologists.

"Some people feel that they are defined by their financial situation it decides their social status. Admitting to money problems can feel like an admission of failure to run your life properly and not being in control," she said.

"But it also takes a lot of energy to hide problems and often just discussing them can makes them seem less frightening."

The survey also revealed stark regional variation; 87 per cent of respondents in East Anglia were happy discussing their financial worries with their partner but in Wales this figure drops to just 50 per cent.

Overall, men were found to be guiltier than women of bottling up, less than a fifth would be content to discuss their cash-flow problems with close friends.

Delaying pension payment 'cuts retirement fund by 50%'

Mon, 23 Oct 2006 16:47:55 GMT

Graduates disillusioned with pension funds could be risking halving their retirement fund if they delay making contributions until they hit 30, according to new research.

Nine out of ten 16 to 24-year-olds and 44 per cent of 25 to 34-year-olds are not paying into a pension fund and it is only when workers put their 20s behind them that they appear to start making plans for the future, reports HSBC.

The proportion of those making contributions jumps to 69 per cent in the 35 to 44 year-old age bracket, by which time savers could have irrevocably damaged their potential returns.

HSBC calculates that a 21-year-old paying £75 a month into a stakeholder pension would receive £12,700 a year once they reach retirement age but an employee who delays this contribution until they are 30 risks settling on just £6,470.

Ian Martin, head of pensions and retirement income at HSBC, said: "There has been a great deal of talk about pensions recently, and it appears that older workers are starting to hear the message about the importance of planning for their retirement."

The basic state pension is now £84.25 a week, or £4,381 a year.

Savers favour buy-to-let

Fri, 20 Oct 2006 17:18:22 GMT

Bricks and mortar is still Britons' favoured investment vehicle as new research shows that people are choosing to put their money into the rapidly growing property market for the best returns.

As expected, the survey by Standard Life said that the most popular savings medium is consumers' own homes but it also revealed that buy-to-let properties had crept up into second place.

Buy-to-let property has jumped in popularity by some 23 per cent in the last three months and as houses are increasing in value by around eight per cent a year, savers are making increasingly profitable returns on property.

But the research also reveals that people are becoming more inclined to take their financial affairs into their own hands.

Trevor Matthews, chief executive of Standard Life Assurance, said: "The index confirms that consumers are increasingly disillusioned with financial advisers with only 24 per cent of respondents stating they have an ongoing relationship with a professional financial adviser a decrease of four per cent and the lowest score to date.

"It is therefore not surprising that only 28 per cent of those questioned were satisfied with the amount they were saving for retirement."

Research from CML says that in 1998, there were only 28,000 buy-to-let loans taken out, whereas by 2004 this figure had swelled 24-fold to 701,900 and it appears that investor confidence is set to continue in the same vein.

PPI sellers 'failing consumers'

Thu, 19 Oct 2006 16:15:53 GMT

Firms selling payment protection insurance (PPI) are failing to treat their customers fairly, concludes a review by the Financial Services Authority (FSA).

Key findings of the review revealed that many firms are still not giving customers clear information during the sales conversation and it is not being made clear that PPI cover is optional.

Sales people were found to be advising customers to purchase single premium policies even though they may not have the best interests of the customer in mind.

"The bottom line is that customers should come away from the sale having been given the best possible chance of understanding that PPI is optional, what the policy will and will not cover and how much it costs," said Clive Briault, FSA managing director of retail markets.

"On the strength of our findings, the industry has further to go to demonstrate that customers really are being treated fairly in this market," he continued.

Nick White, head of personal finance at uSwitch.com, affirmed that his company's findings backed up those of the FSA.

"Our own investigations into PPI have highlighted that consumers could be paying an additional £4,736 in interest on a £10,000 loan over five years by opting to take PPI with a loan. This is a staggering 694 per cent more with a high street bank rather than with an independent broker," he said.

FSA to teach personal finance

Wed, 18 Oct 2006 17:09:02 GMT

The Financial Services Authority (FSA) has pledged 15 to 20 million pounds a year for the next four years in a bid to help ten million people organise their finances and plan for the future.

In March this year a Baseline survey identified what it believed to be real challenges ahead for those in the 18 to 40 year age group.

It flagged up a general weakness in planning ahead and in choosing the right financial products and as a result, the FSA has decided to help educate people in the ways of personal finance so as to address this skills deficit.

John Tiner, chief executive of the FSA, speaking at today's financial capability conference, said: "Despite being in the early days of delivery, we're helping thousands of people across the UK approach their finances with a new sense of confidence."

He added: "The broader challenge is to widen the availability of basic level money advice and we are forging alliances with trusted existing organisations."

The programmes will range from school participation to workplace seminars and will be delivered through a range of partnerships with private firms.

To date, 278 schools have signed up to the Learning Money Matters programme and 19 universities are helping to develop a Money Doctor tool kit. In workplaces, 43,000 information packs have been distributed and nearly 2,000 people have attended seminars.

Credit union services 'to be available in Post Offices'

Tue, 17 Oct 2006 17:06:50 GMT

Availability of credit union services should be increased by making them accessible through Post Offices, a Labour MP has claimed.

David Drew, MP for Stoud, argued for credit union opportunities to be linked to the savings network so that customers could access them whenever they take money out of their saver accounts.

"After people had drawn their cash by means of whatever follows the Post Office card account a similar arrangement, I hope they could save through credit unions."

He continued: "That would provide all the advantages that the socially excluded do not currently have and we ignore it at our peril."

The chief executive of the Association of British Credit Union said that it was "happy to explore potential ways of working together, especially if this would mean a dramatic increase in the accessibility of credit union services".

Concluding the debate, Jim Fitzpatrick, parliamentary under-secretary at the Department of Trade and Industry noted that the government is investing £36 million through the growth fund to help the development of credit unions.

Identity fraud hits new high

Mon, 16 Oct 2006 16:35:40 GMT

By the end of 2006 it is estimated that over 68,000 people will have fallen victim to identity fraud, according to CIFAS, the UK's fraud prevention service.

Identity fraud has reached record levels this year up from 22,520 just six years ago, an increase of over 200 per cent, having now claimed 282,297 victims since the millennium.

However, some headway is being made. During the first nine months of 2005, almost half of all identity frauds went undetected at the application stage, defined as when the criminal applies for a credit card for example, but this year, this figure has dropped to a third.

Peter Hurst, chief executive of CIFAS, emphasised the importance of catching the fraudsters at this early stage. If the deception is not spotted, the "financial and other institutions would bear any loss incurred as a result of the identity fraud".

He added that while the authorities attempt to be as vigilant as possible, it is "just as important that individuals do everything possible to protect themselves by taking various preventative measures".

Smile.co.uk today offered advice for those concerned by identity fraud. The list included checking for unauthorised activity on your credit file and being wary of telephone canvassers.

Pension funds warned over bonds

Fri, 13 Oct 2006 15:22:50 GMT

Pension funds' focus on buying bonds in order to secure strong yields for their customers could prove to diminish the value of the asset in the long-term, warns a report by the Organisation of Economic Cooperation and Development (OECD).

As demand is inversely proportional to the bond's yield, the more that pension funds by into this method of investment, the lower the returns will be, leading to greater pension liabilities.

The OECD has said that this will create a risky "vicious circle" if not properly addressed.

Derek McLean, head of asset liability management and insurance at F&C Asset Management, said that this is "certainly a consideration" for pension firms at present.

"The current inversion of the yield curve in the UK is a feature that arises from the demand for long dated bonds," he said.

"The risk for schemes is that with a demand-driven spiral down in yields, the first movers into liability driven investment (LDI) strategies will benefit, having effectively locked in any existing benefits, but those schemes that adopt LDI hedging strategies at a later stage will be worse off because falling yields will cause their solvency to plummet."

But Mr McLean added that F&C do not regard this unwelcome outcome as a likely eventuality so long as pension funds consider LDI approaches.

The European commission recently warned that six EU states, Cyprus, the Czech Republic, Greece, Hungary, Portugal and Slovenia, are in high risk of suffering from a pension time bomb unless they readdress their public finances.

The UK was put in a medium risk group.

£20 for single parents looking for work

Thu, 12 Oct 2006 16:53:07 GMT

Single parents will receive a £20 bonus to their benefits if they prove that they have been taking steps towards taking on work, in a pilot scheme due to be introduced by the department for work and pensions next April.

The incentive will be available to single parents with parents aged 11 and over and is part of the Welfare to Work programme.

The Work Related Activity Premium (Wrap) is the latest effort by the government to try to help lone parents take the step from relying on handouts to the world of work.

Speaking at the Inclusion and Child Poverty Action Group conference, Jim Murphy, minister for employment and welfare reform, said: "Nine out of ten lone parents say they want to work, either now or in the future and work-focused interviews ensure they all know about the range of opportunities available to them."

He continued: "The introduction of the Wrap pilot will enable us to test if the extra financial assistance will encourage lone parents with older children to actively take steps to make the transition back into the work place."

The New Deal for Loan Parents has helped more than 458,000 participants make the leap into the workplace meaning that the total number of single parents in work now totals over a million.

70% of debtors owe over £10,000

Wed, 11 Oct 2006 16:42:04 GMT

Some 70 per cent of people with serious debt problems owe more than £10,000 and two thirds are struggling to pay back between £10,001 and £50,000, according to new research.

The survey found that the UK's population collectively owes £1.25 trillion and that the sum is growing by £1 million every four minutes.

The UK has a long history of personal debt going back to the 1980s when credit was freely available and the plethora of credit cards offering attractive short-term rates has done nothing to curb this problem.

John Porter of The Debt Councillors said: "We are seeing many cases where a large amount of money is owed."

It was also found that more than a tenth of those with debt troubles need to pay back loans of over £50,000 but Mr Porter affirmed that the lesser cases also had the potential of spiralling out of control.

"Even the smaller debts are a cause for concern because a change in personal circumstances, such as redundancy, illness or bereavement, an economic downturn or a rise in interest rates could make the problem much worse," he said.

He added that help was at hand: "The first, most important step for someone worried about their level of borrowing is to seek professional debt advice."

Consumers warned 'save wisely'

Tue, 10 Oct 2006 17:13:14 GMT

Savings account providers are increasingly attaching withdrawal terms and conditions to instant access savings accounts, warns a leading consumer welfare website.

As customers often make the decision to deposit their savings in the account that offers the highest rate of return, many are losing out through small print which limits when withdrawals can be made and at what cost, according to MoneyFacts.

Rachel Thrussel, head of savings at the MoneyFacts website, said that although consumers have little time to continually research the best finance products, they "should avoid choosing an account just based on its headline interest rate".

She continued: "It is much better to set out their needs first, whether it be the notice term, where the interest is payable or how the money can be accessed, then choose the best interest paying account from these."

But Ms Thrussel also warned that consumers should keep some cash readily available for unforeseen circumstances, saying that "a mix of accounts can often work well, offering varying liquidity and rates of interest."

Providers such as Alliance & Leicester, first direct and HSBC offer savings accounts that will not pay interest for a month during which a withdrawal has been made.

Banks' customers warned of current account cost

Mon, 9 Oct 2006 17:18:55 GMT

Customers signing up to packaged bank accounts are being charged almost £140 a year, according to new research.

Almost half of current account providers now offer packaged accounts which included extra features such as travel insurance, discount deals with leisure firms and breakdown insurance.

But the returns on these accounts are not as lucrative as many are led to believe, claims MoneyExpert, with the average interest paid being just 1.5 per cent and two-thirds of customers only gaining returns of less than a per cent.

Sean Gardner, chief executive of the MoneyExpert website, said: "Packaged accounts are proving popular with customers and banks and are likely to remain so. However, the average credit interest paid on accounts is not particularly impressive at 1.5 per cent so customers must really value the added extras."

Mr Gardner continued to explain that monthly fees can rise to up to £25 a month, equating to £300 a year and so advised: "Anyone considering taking out a packaged account needs to think carefully about what the special deals are, how much they would cost to buy on their own, how often you would use them and whether that is worth the monthly fee."

Such is the popularity of these accounts that they could spell the end of free banking, meaning that current accounts would require consumers to pay a monthly fee for even the most basic of services.

Benefits of cash back loan disputed

Fri, 6 Oct 2006 17:14:00 GMT

Financial experts have questioned the benefits to consumers of a novel cash back personal loan scheme.

Last week Nationwide joined Moneyback Bank as the only two loan providers to offer the money back option on their loans but there are concerns that it may not be beneficial in the longer term.

Michelle Slade, personal finance analyst at Moneyfacts' website, described the two companies' products as "similar" but she noted: "To qualify you must take the lender's payment protection insurance, not claim on the policy, miss any loan repayments and allow the loan to run its full term."

But she maintained that "the cash back calculations differ enormously".

This is shown by Nationwide's offer of 20 per cent of the customer's premium back compared with Moneyback, which offers a fixed yearly payment dependent on the size of the loan.

Ms Slade concluded: "While the prospect of a cash payment from your loan provider may sound attractive, over the term of the loan, better deals can be found."

House price growth but slowdown to come

Thu, 5 Oct 2006 08:05:21 GMT

UK house prices reported strong one per cent growth in September but are expected to ease by the end of the year, according to the Halifax house price index.

The UK's longest running monthly survey's results tally up with Hometrack's research published yesterday both with its evidence of strong and sustained growth and predictions of a slowdown to come in the near future.

The latest Royal Institute of Chartered Surveyors (Rics) report showed that in August, property sales marginally eased off after having stabilised for three month previous, suggesting that a dampening of the market is imminent.

In addtion, the Halifax survey says that the annual rate of house price inflation has slowed for the third successive month to eight per cent, the lowest since April 2006.

Martin Ellis, Halifax's chief economist, said: "We expect increased utility bills and higher interest rates to curb housing demand over the coming months, causing annual house price inflation to ease between now and the end of the year."

However the UK should avoid a housing market collapse, as is currently being seen in the US, due to it being underpinned by a strong economy of high employment.

Milan Khatri, Rics' chief economist, believes that the "buoyant picture" of the property market suggests that "the slowdown will be gradual" as we move into 2007.

Interest rates held

Thu, 5 Oct 2006 15:57:56 GMT

The Bank of England's monetary policy committee (MPC) has voted to keep interest rates at 4.75 per cent for October.

The City has been expecting rates to rise to five per cent this November for some time but a handful of commentators had warned that the hike could have been pushed forward to today (October 5th).

Borrowers were hit with a quarter of a per cent rise on August 3rd, after not having been raised for two years, but will have at least a month's respite before the MPC meets again.

Mehrdad Yousefi, head of intermediary mortgages at Alliance & Leicester, said: "It comes as no surprise that rates remain on hold this month.

"However, given a buoyant economy and above target inflation, a rise in the base rate before the end of the year is anticipated and rates are likely to hit five per cent before the year is out."

But the recent stability of energy prices has assuaged inflationary pressures, a factor which could keep rates low in the longer term.

Steve Radley, chief economist at the manufacturers' organisation EEF, commented: "Whilst we are not out of the woods yet, there are some signs that the biggest drivers of the recent increase inflation are set to ease over the next year."

Phone bills 'to rise covertly'

Mon, 2 Oct 2006 17:43:35 GMT

Millions of Britons could be paying more for their phone bills, despite an advertising campaign claiming the opposite, according to new research.

BT has returned to per minute billing, a move which could increase the value of ten million customers' bills claims independent comparison and switching website uSwitch.

The main problem with per minute billing is that costs will be rounded up to the nearest minute rather than to the nearest second.

Furthermore, both BT and TalkTalk plan to introduce a 3p charge just to connect the call.

Chris Williams, telecommunications expert at uSwitch, said: "BTs recent high profile promotion of their cost reduction exercise is now a seemingly redundant and hollow gesture for their millions of customers.

He continued: "TalkTalk has stuck by its promise 'to be cheaper than BT' but it is disappointing that they have mirrored these increases."

uSwitch claims that while both companies say that the changes help to make it easier for customers to understand their call rates the reason for the change in billing is simply to increase revenue.

Package accounts 'not what they seem'

Thu, 28 Sep 2006 16:57:22 GMT

Customers are getting a poor deal from many packaged current accounts, according to new research.

Some 1.3 million customers believe that their current account has been automatically upgraded to a paid-for package account and a third bought into it purely on their bank's advice.

The new research from price comparison website uSwitch shows that eight million people in the UK are paying an average of £120 per annum for package current accounts that they are not actually benefiting from.

Nick White, head of personal finance at uSwitch, said: "In effect, packaged accounts are allowing banks to charge customers for the privilege of being sold additional financial products. Just because banks claim to offer customers a discount if they take out additional financial products it doesn't mean it's a best buy deal or the best option for the individual."

As a result of having a package account, over a third of customers say that they have opened a savings account and 28 per cent bought travel insurance. In addition, just over a fifth bought card protection and credit cards.

Mr White continued to warn that consumers must be aware of exactly what banks mean when they appear to be offering certain new deals: "Persuading customers to take out a packaged account is one thing, but if banks really are automatically upgrading people to a fee paying account it could be described as unethical."

Parents warned of non-stakeholder CTFs by experts

Wed, 27 Sep 2006 16:46:17 GMT

Experts have warned that parents buying into a non-stakeholder child trust fund may be charged high fees and find the process very complex.

It was revealed last week that during the first year of the Child Trust Fund (CTF) a quarter of parents and guardians receiving £250 vouchers from the government failed to invest them before the 12 month expiry date.

HM Revenue and Customs has revealed that parents forfeited at least £87 million of public money, funds which could have been generating tax free returns for children's future use.

Justin Modray, a financial advisor at Bestinvest, speaking on BBC Two's Working Lunch programme, said: "There's really two down sides. One is it can be a little bewildering. So when you've got the whole market to choose from, it's not necessarily an easy choice. The second is that the charges often can be quite high."

He continued to say that trading fees can even be up to five per cent not including the fund charges themselves.

The stakeholder option, although higher risk, offers higher returns as it is invested in stocks and shares.

All children born since September 1st 2002 are entitled to a £250 voucher towards a CTF.

Students still rely on parents

Tue, 26 Sep 2006 17:23:30 GMT

As the new academic year begins, new research reveals that despite bursaries, loans and employment, students all over the country are still relying on their parents for financial support.

With the implementation of top-up fees, students can be paying up to £3,000 a year for courses at the top universities and a new survey by the Royal Bank of Scotland (RBS) shows that there is a marked variation of the amount of help given to youngsters by their parents.

Students at Birmingham University were found to have the most generous parents, receiving £152 a week on average, while their peers at Liverpool only receive £43. Other lucky recipients go to London, Bristol and Leicester.

Paul Jeffrey, head of student banking at RBS, gave the following advice: "The key to managing your finances effectively is careful budgeting. We are encouraging more students to include financial planning in their university preparation."

He also recommended taking advantage of "really usable benefits such as discounts off books, CDs, DVDs and personal contents insurance".

The survey showed that students received these often considerable sums despite the fact that 45 per cent take on term-time jobs to offset their expenses.

Mortgage repayments 'will continue through to retirement'

Mon, 25 Sep 2006 17:38:53 GMT

Millions of homeowners could be forced to work into their retirement in order to pay off their mortgage, according to new research.

Over a third of people with mortgages looming over them predict that they will be at least 60 years of age before they own their home, reports a survey by mortgage provider the One Account.

Furthermore, 43 per cent of homeowners believe that their mortgage prevents them from saving for their later years and 17 per cent of 25 to 29-year-olds admitted that their mortgage repayments are preventing from starting a family.

Both of these factors exacerbate the already problematic pension 'time-bomb' that is threatening the major western European economies.

Debbie Milsom, spokesperson for the One Account, commented: "It is worrying that homeowners perceive that it will take them until they are in their 60s before they pay it off when they should be spending this time preparing financially for their futures.

"A mortgage is perceived by many to be a huge burden but there are ways that people can manage these payments in a flexible way - giving them the opportunity to pay off their mortgage early."

Prospective homeowners, concerned by the amount of debt they are to incur if they choose the wrong mortgage, should look online for the best deals.

Child Trust Fund confusion

Thu, 21 Sep 2006 16:50:25 GMT

During the first year of the Child Trust Fund (CTF) a quarter of parents and guardians receiving vouchers from the government failed to invest them before the 12 month expiry date.

HM Revenue and Customs has revealed that parents forfeited at least £87 million of public money, funds which could have been generating tax free returns for children's future use.

The sum will now be invested across stakeholder funds from 14 providers but it is feared that parents were not well enough informed about the proposal, with many investing in the lower returning cash option or choosing a provider that has excess charges.

Jason Holland, head of communications at F&C Asset Management said: "The most popular option, stakeholder, does have the merit of ensuring money is initially invested in stocks and shares but the downside is that most providers have chosen to take the maximum charges allowable."

He added: "Parents may assume that Stakeholder is the lower cost option because the charges are capped but in reality lower costs and more choice can be found elsewhere."

Many providers offering index tracker funds have been charging the maximum 1.5 per cent an annual fee under the stakeholder rules, a value which can be reduced by shopping around online.

Mortgage lending at record high

Wed, 20 Sep 2006 16:58:38 GMT

August's value of mortgage lending has broken the all-time record once again, as analysts praise the state of the housing market.

The Council of Mortgage Lenders (CML) reports that gross mortgage lending reached £32.7 billion, 7.2 per cent higher than July and 21 per cent above the amount leant in the same month in 2005.

It also became the tenth monthly record of the last year.

Michael Coogan, the CML director general, said: "With financial markets still expecting an increase in interest rates sometime between now and the middle of next year, we forecast that house price growth and strength of demand will moderate, as consumers anticipate higher rates."

However, he added: "This level of lending is sustainable and illustrates the market is in fundamentally robust shape."

The Royal Institute of Chartered Surveyors (Rics) re-enforced this positive outlook, saying that the surge in mortgage lending is "of little surprise coming on the back of a strong upturn in buyer enquiries" recorded by their own survey last month.

Value of pensions halve in a decade

Tue, 19 Sep 2006 16:39:26 GMT

Personal pension returns have plummeted over the last ten years leaving those coming to the end of their working life with concern for the future.

Figures from Moneyfacts.com show that an individual with a personal pension retiring today could be 50 per cent worse off than someone who made the same contributions but reached their retirement a decade ago.

A man retiring at 65 in 1996 having contributed £500 a year for 15 years would have built up a profits pension fund worth £25,840 whereas the same individual today would have a fund worth just £11,696.

Richard Eagling, editor of investment, life & pensions at Moneyfacts said: "Many pension savers may have enjoyed better returns over the last three years but it is vital that they do not become complacent."

He added: "These latest figures should serve as a powerful reminder that securing a comfortable retirement will only be possible for those individuals who actively monitor and manage their own pension provision."

The additional factor that pensioners today are fit to enjoy a longer retirement accentuates the squeeze on their finances, already strained by rising fuel costs this winter.

Britons' grand familial financial outlay

Mon, 18 Sep 2006 17:14:07 GMT

The best things in life may be free, but children are certainly not as new research reveals that Britons spend almost £10,000 a year supporting their families.

Engage Mutual Assurance claims that the average breadwinning earner is spending £9,648 a year on supporting their loved ones, meaning that children are reducing their parents' personal spending by over a third.

Hard-working parents on average spend £804 a month, nine times more on their family than they do on themselves, reported the 3GB survey.

Despite moves to make gender discrimination a thing of the past, it is still evident that men are living up to their traditional role as provider, shelling out £907 on their dependents while women spend £709 of their earnings.

Parents aged 45 to 54 with children at university age spend the most on their offspring, just over a thousand pounds a month.

Karl Elliot, 3GB spokesperson for engage Mutual Assurance, said: "The changing needs of modern families means making major financial sacrifices which affect lifestyle expectations and often leave the breadwinner with just half of their monthly income."

He continued: "We can't stress enough the importance of planning well in advance for the future by saving little and often as early as possible - particularly when the costs associated with dependents of all ages are considered."

Debt: An old problem

Fri, 15 Sep 2006 16:11:19 GMT

Thousands of pensioners are racking up huge debts with no intention of paying them back, claims a new survey.

Financial experts Sesame found that just over a quarter of respondents to their debt survey were not even considering getting themselves back into the black.

It is thought that the newer retirees were the first generation of UK adults to experience the consumer credit card revolution of the 1960s and 1970s meaning that they are more comfortable with carrying debt.

Alastair Conway, head of customer propositions at Sesame, advised: "People have to take control of their finances in the lead up to retirement and beyond, if we are to avoid adding to the UKs mounting debt crisis."

He warned that the mounting problem "may force the government to consider moving towards a system more akin to that of Japan, where debt is passed to children on the death of the parent".

This phenomenon has been raised recently with the issue of the 'deathbed mortgage', where mortgage repayments would be passed onto the homeowners' offspring in the event of their death.

However, in the UK, such a mortgage can only be purchased with the consent of the children.

Energy customers face tough winter

Thu, 14 Sep 2006 17:26:54 GMT

Homeowners will be paying more for their energy this winter if they stick with the incumbent suppliers, according to experts.

With energy rises from British Gas, Powergen and npower it is becoming increasingly important for consumers to make sure that they do not become locked to an unsuitable deal.

Among the recent price hikes, British Gas raised remains 16 per cent more expensive on average than their competitors.

Customers who stay with the company without shopping around, could then be much worse off as the winter months approach.

Ann Robinson, director of consumer policy at uSwitch.com said: "It is time for action before the hefty bills start rolling in and it is in everybody's interest to review their energy costs on an annual basis, just as you would your home or motor insurance to make sure you are not paying too much."

Some ten million in the UK have never switched their electricity supplier and nearly eight million have always stuck with their gas supplier.

Hoards of Britons default on mortgages

Wed, 13 Sep 2006 16:00:12 GMT

Hundreds of thousands of British homeowners have missed their mortgage repayments in the last year, according to new research.

Citizens Advice says that some 770,000 households did not pay one or more of their mortgage payments as borrowers, especially the young, risk getting into serious debt by over-committing on mortgages and other loans.

The charity is urging people to think carefully about the amount of debt they can manage and is advising them to prioritise essential payments.

David Harker, chief executive of Citizens Advice, said: "These figures do not surprise us. Local Citizens Advice Bureaux helped people to deal with 1.25 million debt problems last year and see many people with mortgage and rent arrears."

Drew Wotherspoon of John Charcol mortgage adviser gave the following recommendation to those struggling with their finances: "Always let your lender know of any change straight away and do not try and borrow more money to pay off existing debts. More importantly, whatever you are faced with, do not just stop paying the mortgage as many lenders will be prepared to listen to your situation if you contact them early."

The startling figures come at a time when first-time buyers are putting themselves under increased pressure to get on the first rung of the housing ladder.

Clampdown on door-to-door sales

Mon, 11 Sep 2006 17:06:35 GMT

Consumers pressured into buying goods on their doorsteps will have a cooling off period during which they can return their items under new government proposals launched today.

Currently customers have the right to cancel their purchases within a week if a sales visit is uninvited, but a study by the Office of Fair Trading found that 94 per cent of consumers were ignorant of this rule.

Under the new proposals this legislation applies irrespective of whether sales people have been invited, making the law much clearer for consumers.

Jonathan May, director at the OFT said: "Extending protection in this way means that consumers shopping from home can be confident that they are protected from unscrupulous doorstep sellers."

The changes to the law complement the forthcoming Unfair Commercial Practices legislation which protects consumers from sales people who pressurise them into buying a product or service, outstay their welcome once inside people's homes or falsely claim that they need to sign up immediately to get a better deal.

Consumers looking to make purchases from the comfort of their own home without pressure from sales people should look online for the top bargains.

Britons unaware of IHT costs

Wed, 6 Sep 2006 16:10:10 GMT

Britons are not preparing themselves adequately for when they pass away, possibly leaving their loved ones with a huge inheritance tax bill, it has been claimed.

New research suggests that up to 3.6 million people's estates will be liable for inheritance tax (IHT) by 2009 yet only 27 per cent of people have a will and just one in four are aware that IHT is charged at 40 per cent.

IHT is a massive earner for the government, bringing in £3.6 billion a year and as more houses creep into the bracket at which the tax is charged, this figure is due to increase in the future.

Richard Wiseman, professor of psychology at the University of Hertfordshire, sought to expain the apathy:

"People are clearly not planning ahead and I suspect that there are several psychological factors at work. We become very anxious when we think about our own deaths, and so tend to avoid the topic. Also, most of us are natural optimists who like to think that somehow things will work out for the best."

The research, conducted online by 72 point, found that three out of four believed IHT to be unfair while only eight per cent thought it justified.

Christine Foyster, head of wealth management at Friends Provident, said: "This is no longer a tax on the rich. Ordinary people are being caught unawares by the IHT trap, mainly because property price gains have so completely outstripped any increases in the inheritance tax threshold."

Teenage dreams so hard to beat into reality

Mon, 4 Sep 2006 17:30:43 GMT

The vast majority of British teenagers believe that they will become homeowners in the future but the reality facing them is that millions of adults cannot afford to buy their own accommodation.

Some 83 per cent of teenagers are sure that they will own a property one day with over half hoping to make their first purchase between the ages of 23 and 27, according to new research by IFA Promotion.

However, contrary to this optimism, 5.8 million adults in the UK cannot even find their feet on the first rung of the property ladder.

Remarkably, only 21 per cent of young people think that owning a house will be a financial burden in spite of the recent press that has been documenting the troubles of first-time buyers.

Karen Barrett of IFA Promotion said: "The British obsession with owning your own home clearly starts young but the unrealistic expectations are coupled with a shocking lack of knowledge about the home buying process. 80 per cent know nothing, or little, about buying a property or mortgages. The need for advice is palpable and arguably it is the first time buyer who would benefit from independent financial advice the most."

The research shows that the average age of the first-time-buyer is 34, meaning that our teenagers will have to wait for longer than they expect to become kings of their own castles.

'Perpetual' interest mortgage launched to help first time buyers

Thu, 24 Aug 2006 17:24:02 GMT

Kent Reliance yesterday (August 23rd) announced that it would be launching a new low-cost interest-only mortgage that would allow repayments to be passed on to the next generation, but borrowers have been warned to consult relatives before committing to the loan.

The Royal Institute of Chartered Surveyors (RICS) published its August 2006 housing forecast, which claimed that accessibility for first-time buyers was now at its lowest level since the 1980s, predicting that first-time buyers today would need to save for seven and a half years to afford the deposit for their first home.

Ray Boulger, spokesman for John Charcoal, said that mortgage lenders were adapting to the needs of first-time buyers, who could now afford a house without issuing much capital up front.

Praising the Kent Reliance's bold move, he said, "People look at the situation today and ignore the changes that have taken place. There are more people buying together and more people buying on two incomes you need to build all those demographic changes into the figures".

However, Mr Boulger warned that interest only mortgages were generally only suitable for those who were expecting their income to increase over time, so that they could eventually switch to a repayment loan:

"If a parent, while they're working, can only afford an interest-only mortgage, they are not going to be able to afford the interest payments at retirement," he said.

Meanwhile, Alexander Hall, Tony Cardiff sales director said: "It can only be aimed at people in the market who are approaching retirement and haven't yet bought a house."

Interest only loans could reduce first-time buyers' mortgage payments by £150 to £170 a month.

Millionaire aren't what they used to be

Thu, 17 Aug 2006 17:34:44 GMT

Although having millions of pounds stashed away in your bank has its benefits, it comes at a price, according to Abbey Premium Banking.

Over one third of people fear that as a millionaire, they would be hassled by gold-diggers and a quarter say that they would not know who to trust. Such attitudes would have catastrophic effects on a person's social life, with 12 per cent believing that their friends and family would be green with jealousy at their success.

Although the benefits of being a millionaire are obvious, only a surprising 11 per cent would give up their jobs for £1 million and a third of people would consider themselves 'wealthy' as opposed to 'very wealthy'.

Perhaps this is because being a millionaire is not what it used to be says Ewen Fleming, Abbey's Managing Director of Premium Banking: "there are now around 376,000 millionaires in Britain today compared to just 36 in 1953 A million pounds in todays money would have only have been worth around £60,000 in 1953. A million pounds in 1953 would be the equivalent of £16.6 million today."

With the news that if they became a millionaire, one in four would appoint their own bank manager, it is clear that people do not enjoy managing their own finances, not realizing that they can do so much more easily if they look online.

Cardiff the UK's most expensive city

Wed, 16 Aug 2006 17:32:44 GMT

London has been overtaken as the country's most expensive city by Cardiff and Edinburgh among others, reports Combined Insurance.

The average Londoner shells out 75 per cent of their monthly pay-packet on essential everyday living costs compared with people from Cardiff and Edinburgh forced to pay 97 and 93 per cent respectively of their earnings to meet their basic needs.

The survey asked a representative sample of 2,000 people how much of their monthly pay cheque they spent on living costs, classed as; mortgage or rent, utility bills, and debt repayments.

Although London's monetary cost of living is the highest, at £1,338, residents' gross monthly earnings are more than sufficient of matching the bill at £1,809. Dwellers in the Welsh capital by contrast are only left with three per cent of their earnings, or £29, for savings.

Nigel Brittle of Combined Insurance said: "These findings call into question the long-held belief that London is the UK's cost capital with an exorbitant cost of living. When monthly income is taken into account, and all monthly commitments are totted up - not just mortgages - it's clear there are residents in other parts of the UK that are living closer to the financial edge."

The major financial pressures facing UK residents at present are rising utility prices, especially gas bills, and ever increasing levels of personal debt.

Homeowners looking for cheaper house insurance to ease pressure on their utility costs are likely to find a better deal online.

Experian busts credit rating myths

Thu, 15 Jun 2006 17:04:35 GMT

Credit blacklists, popularly believed to dictate your chance of securing loans and credit, are actually a myth claims a new report from credit rating agency Experian.

Lenders do use credit rating information to decide whether an individual is liable to be a safe investment, however.

Experian also sought to puncture claims that the previous occupant of your home can affect your credit rating – lenders in fact rely on names and never addresses.

"There are a number of myths about the credit reference processes that have been perpetuated over the years, leaving many consumers baffled," said Jill Stevens, director of consumer affairs at Experian.

"Many of these myths have no basis in fact. It is important that everyone understands how credit works so they can have confidence that the system really does work for them."

Credit refusals will also never turn up on your credit rating, despite what some agencies claim, said Experian.

Giantkiller takes on UK banks

Mon, 6 Mar 2006 14:08:38 GMT

Once in a generation comes a hero. A man prepared to stand up against the forces of oppression, no matter what the cost to himself. A man capable of the greatest compassion for the little guy and terrible wrath for the forces of darkness.

That man, in our case, has appeared in the rather unlikely form of Stephen Hone, an unassuming law student and father of three from Plymouth.

He has launched a lawsuit against some of the biggest and most powerful banks in the UK over what he argues are the illegal and punitive fees charged for minor infractions.

He has picked the penalty fees charged by banks for going into an unauthorised overdraft, having insufficient funds to cover a direct debit or writing a cheque that bounces as grounds for a test case.

Having filed writs in Plymouth Crown Court against Barclays, the Co-op Bank, Halifax, Lloyds TSB, Alliance and Leicester, Nationwide, Natwest and HSBC he is seeking a ruling that the penalties they impose, and the legal principles they use to justify the charges are unlawful.

The banks now have until March 8th to decide whether or not they will fight the case.

''Bank charges are pushing people into financial hardship," Mr Hone told the Independent. "Someone has to stand up and fight.''

Penalty fees are a massive source of income for UK finance providers. Which? has estimated that charges for breaching authorised overdraft limits alone earn banks and other finance companies £3 billion every year.

Other reports have calculated that the fees charged on bounced cheques have increased by almost a third in just the past two years, to £32.22.

A few weeks ago Barclays announced that it is to increase the fees charged on bounced cheques from £5 to £35 - which brings it broadly into line with its competitors, but also suggests that the fee bears no relation to the bank's admin costs, as they claim.

Mr Hone found his calling after he decided to challenge Abbey over the fees it charged him when he did not have sufficient funds to cover the costs of a direct debit.

Using a 1999 law known as the Unfair Terms in Consumer Contracts Regulations, he argued that Abbey could only hold him liable to the true cost of processing the failed direct debit and of informing him that it was unpaid.

Being an automated system, this should cost almost nothing. Abbey did the corporate equivalent of failing to show up in court, failing to file a defence, and then offered Mr Hone a £5,000 out-of-court settlement.

''I can't put the real cost at more than £5,'' Mr Hone said of the case. "The costs being levied were disproportionate and would not be enforceable in court.

''In my case - and other cases like it - the banks don't want to risk going to court and losing, so they are backing down.''

While individuals have won similar amounts through out-of-court payments when they have challenged fees in the past, no one has ever brought a legal challenge against the legal principles used by the banks to justify them.

Mr Hone is not alone however. A growing movement is building against charges, especially when they are coupled with record profits being posted by the UK's largest banks.

The previous preferred method of settling out of court has led many to believe that the banks themselves believe that they do not have a legally sustainable argument. ''After all, they can afford to get the best solicitors on their side,'' said anti-charges campaigner Bob Egerton.

Borrowers warned on 367% interest equity release

Wed, 1 Feb 2006 13:13:16 GMT

Financial advisors have issued a major warning over an equity release scheme that could end up costing homeowners much of the value of their homes. Shared Appreciation Mortgages - Sams - marketed by the Bank of Scotland (now HBoS) and Barclays have been taken up by at least 15,000 elderly homeowners since they were launched in the late 1990s.

Sams were sold as promising financial freedom through retirement but only a few short years down the line, their method of calculating interest payments has amounted to 367 per cent APR for some and effectively meant many are unable to afford to sell their homes. Tied to a ballooning debt, there is little Sam owners can do to escape as the value of their biggest personal asset slips away from them.

Consumer group Which? has labelled equity release products across the market as "high risk" and only to be used as a last resort, but Sams have proved to be more hazardous than most. The schemes allow elderly homeowners to borrow a large sum against the value of their property interest free, in return for a sizeable chunk of any increase in the value of their homes, usually over 70 per cent.

Peter and Vivien Gudgin, owners of a four bedroom house in Leamington Spa, agreed to take out a Sam on their property in 1998 when it was valued at £180,000. Their bank lent them £45,000, guaranteed against 75 per cent of any increase in the future value of their home.

Since then, rampant house price inflation that has more than doubled the value of their home to £400,000 has ensured that the final interest payable on their Sam far outweighs the amount that they originally borrowed. If the Gudgins were to pay off their borrowing today they would have to hand over £210,000: £165,000 to cover three quarters of the £220,000 increase in the value of their home, plus the original £45,000 debt.

The Gudgins experience is typical and works out to an equivalent of 367 per cent interest. Mortgage broker Patrick Bunton says that there is no doubt that Sam customers have received a raw deal but that there is little recourse for them to take.

"With hindsight, Sams have offered poor value to those like the Gudgins," Mr Bunton told This is Money.

"They should have been taken out only by borrowers needing to unlock capital with no consequent monthly payments - and where they were sure they would not need to sell the property or move. In other words, the mortgage was viewed as a one-off release of equity." But the Financial Ombudsman Service has already rejected complaints of mis-selling, saying that the banks did enough to satisfy legal requirements.

"Barclays and Bank of Scotland issued brochures describing how the products worked and that they would take a big share of any future increase in a property's value," he said. "They also required borrowers to take independent legal advice. On this basis, the phrase 'caveat emptor' (let the buyer beware) springs to mind."

For these reasons the banks have rejected complaints made to them personally, saying "prospective customers were encouraged to seek independent financial and legal advice and confirm that they understood all aspects of the product's terms and conditions". Peter Gudgin freely describes himself and his wife as "financial idiots" for taking the deal.

Despite this, Mr Gudgin says that the bank failed to properly spell out the risks of the product they were supplying. "I'd never have gone down this route if someone had told me the debt could more than triple in just eight years," he said.

Mr Bunton said that the couple would have been better advised to choose a fixed rate loan, with interest rolled up rather than paid monthly, which would have left them with a current loan balance of £93,000, or less than half what they now owe under their Sam. Another option would have been an interest-only loan with variable monthly payments - which could have cost them as little as £25,000 on a £45,000 loan since 1998.

Find your way out of debt

Tue, 29 Nov 2005 15:30:26 GMT

Thousands of people in the UK have started waking up from a long credit binge over the last few months – and as with so many forms of excess, it can leave a nasty hangover.

The latest figures show that more than 12,000 people in England and Wales were declared bankrupt through the three months up to the end of October – that works out to 200 every working day.

A record 43,606 people have declared themselves bankrupt over the past year, and the number of people opting for the lesser option of an Individual Voluntary Arrangement (IVA) nearly doubled to 5,500.

All in all, the number of people applying for personal insolvency schemes was 46 per cent higher than in 2004, and analysts say that there will be worse to come as some of the slopes of the country's £1 trillion personal debt mountain start to slip.

So, the good news is that at least you're not alone if you are beginning to come to terms with debt. First, don't let the scale of the problem overwhelm you. Secondly, bear in mind that it is as much in your creditors interest to sort a way out of it as it in yours.

First, work out how much you owe. If debt repayments take up more than 20 per cent of your net monthly income the Consumer Credit Counselling Service (CCCS) warns that you should take steps to address your debt and not to borrow any further.

Secondly, budget. Be realistic, work out how much you can afford to repay and still be within budget and include a timetable of how long it will take to clear your debt. If things start to seem daunting at this stage then now is the time to seek further help.

Experts recommend the Citizens Advice Bureaux, the National Debtline and the CCCS as reputable, professional non-profit making organisations – beware some of the private services around who may seek to profit from your situation.

Typically, these debt management services will negotiate a budget between you and your creditors, drawing up a debt repayment program and often arranging measures such as interest freezes.

A third of people who apply for help to the CCCS are given debt management training and pay a single sum to the charity every month for distribution among creditors. The average unsecured debt held by people in contact with the company is £29,000.

If the situation still seems insurmountable, then people with regular income can apply for an IVA. These are only suitable for those who have a regular wage, owe £10,000 or more to three or mare creditors and normally negotiate a legally binding repayment of 35p – 40p for every pound owed.

IVAs will not cover mortgage arrangements other than arrears, or student debts. They will protect your home from repossession, and are less drastic than bankruptcy – you will still be able to run a business and your employer will not be informed. The costs of an IVA in fees are around £80 a month, deducted from your repayment.

Lastly, there is bankruptcy. This should only be considered as a very last resort if there is absolutely no way to cover payments, for instance if you have no regular income, have no long term prospects of becoming employed and insurmountable debts to multiple creditors.

Although the rules have been changed to make the process easier in recent years, it will still leave problems gaining credit in future, and any assets, including your home, may have to be sold to cover the debt.

Certain professions, such as lawyers, may be debarred in future and applicants will be credit blacklisted for up to 15 years. Other than a small living allowance, all income you receive will be passed to receivers for distribution among creditors. Other than a few household basics and books or tools necessary for employment, creditors may repossess all your belongings.

While utility companies may not apply for any money owed before the bankruptcy application they may ask for a deposit before resuming supply or seek to put the bill in the name of a spouse or partner.

Consult with one of the organisations listed above before considering bankruptcy.

BT home phone slammed in satisfaction survey

Wed, 16 Nov 2005 18:46:00 GMT

Two of the biggest home phone line providers in the country are failing to live up to the expectations of most of their customers, says a new satisfaction survey.

Less than a quarter of BT home phone customers (23 per cent) and less than a third (30 per cent) of NTL home phone customers would recommend their services to a friend.

TalkTalk, the new home phone service provided by the car phone warehouse came out on top of the poll, with 92 per cent of its customers saying that they would recommend them to a friend.

TalkTalk also came top of the 'value for money' poll with 90 per cent, Tiscali home phone came second on 89 per cent, followed by Sky Talk on 88 per cent, Onetel at 87 per cent, Telewest on 84 per cent and Homecall at 83 per cent.

"Our results show that some home phone providers are falling short on delivering the service levels that consumers expect," service comparison expert Jon Miller told This is Money.

"It is interesting to see that the companies with the most customers have been exposed as being the worst offenders when it comes to customer satisfaction," he added. The poll has been released as the latest figures show BT losing around 90,000 customers a month.