A new cap on the fees that credit card companies charge retailers is about to hit card payments in the UK. But while the jury is out on whether this will end up being a good or a bad thing for consumers, one immediate effect is that cashback credit cards are already being withdrawn in anticipation of the change- a trend that looks set to continue..
European Union regulations, first mooted back in July 2013, which will be introduced later this month, will limit the ‘interchange fees’ that credit card companies can charge retailers for accepting card payments, reducing them to a maximum 0.2% for debit cards and 0.3% at most for credit cards.
According to the European Commission, the changes will create “a more competitive system” that is more transparent and that will encourage technological innovation and investment in new payment options. However Visa Europe do not agree with the EU, claiming that the regulations will lead to less convenience, less innovation owing to reduced cost recovery and will actually cost consumers more as card issuers will start charging higher annual card fees.
Cash back credit cards are currently very popular, as they provide regular payments in the form of a percentage of your overall spending back as credit paid to your card; they are the most searched-for type of credit card according to Which!!! Money. However, in light of the new rules, Capital One has issued a statement saying it will stop offering cash back credit cards to new customers. The company will also scrap or reduce the earnings on its cash back deals for existing customers from 1 June.
The alternative for Capital One, and other card issuers contemplating the interchange fees issue, is to start charging a higher annual fee for the use of a cashback card. However, this could leave consumers looking at a card which will cost more in annual fees than it earns in cashback, particularly if cashback rates fall. Good job EU.
Of course, credit card companies are at their liberty to remove cashback incentives at any time, although most companies, including American Express, Barclays, NatWest and RBS, would need to provide 30 days’ in notice in writing before doing so.
The European Commission reckon that interchange fees currently bring in an estimated £6.5 billion a year for credit card companies, who are going to be understandably peeved at having their lucrative revenue streams cut. As a result, is it any wonder some cards are being withdrawn?
Although originally introduced as a universal benefit, child benefit became (partially) means-tested in 2012, being restricted for those families where one person earns £50,000 and scrapped completely if one partner earns £60,000 or more. However, to protect stay-at-home parents whose only income might be the child benefit payments, those ceasing to be entitled to the benefit could deal with it in two ways- disclaim it, or repay the excess amount claimed (which could be all of it) through the self-assessment system on a tax return.
However, because of the way the self-assessment system works, this meant that these high-earning parents were actually able to take advantage of an interest-free ‘loan’ from the taxman, by receiving payment of child benefit well in advance of the date of repayment. For example, child benefit paid between April 2012 and April 2013 would be due for repayment on the self-assessment deadline of 31 January 2014. In some cases, the underpayment could be collected via a change to the tax code in the following year, giving an even longer extension on the loan. In either case, the ‘loan’ from HMRC, which, for a family with two children amounts to over £1,700, could be interest free for over two years. Which is a great deal if you can get it.
But, it seems that someone at HM Revenue & Custom has realised this unforeseen benefit and they are now taking steps to address the issue. HMRC is now identifying affected parents and is making the relevant adjustments in the current year tax codes- which will take effect from this month- in order to claw back the child benefit that is not due at the same time as it is being paid out.
Normally, tax codes are used to collect underpaid or overpaid tax from a previous year, and allocates taxpayers with an personal allowance amount, less any deductions for things like overpaid child benefit. For example, a working age individual would normally have a standard tax code for 2015/16 of 1060L, which means that a payroll department will know that the first £10,600 of a person’s wages should be paid free of income tax. For those still receiving child benefit even though they are not entitled, from this year onwards this code will be changed, assuming there are no other issues or deductions, to something close to 700L, so affected taxpayers will pay slightly more tax each month, at approximately the same pace as they receive their four-weekly child benefit payments.
Unfortunately it appears HMRC has not explained why they are changing codes, which could cause even more congestion on their phone lines, already filled with pension freedom day pensioners querying potential tax implications of withdrawals, from confused high-earning parents. Besides, given HMRC’s track record with spontaneously adjusting tax codes (or not), let’s hope they manage it a little better this time around.
As many people celebrate the close of a short week and the start of a long weekend, don’t forget that Easter Sunday also sees the end of the 2015/16 tax year, meaning if you haven’t topped up your ISA for this year, you might be too late now. But what it also means is that Easter Monday, 6 April, is Pensions Freedom Day, a day when, if pensions minister Steve Webb is to be believed, millions of over-55s won’t actually blow their retirement savings on a Lamborghini- although they could. But with so many people suddenly gaining full and unfettered access to a pot of money, what are the top five things to think about if you have qualified for parole from your pension?
1. Pensions Freedom Day is actually a bank holiday
This means that, in all likelihood, you won’t actually be able to do anything anyway, even if you wanted to drive off into the sunset in your shiny new sportscar. However, on Tuesday 7th, expect lengthy queues to get through to your pension provider as folks rush to get their mitts on their cash.
In fact, if you don’t need all that money desperately, why not wait a while. Just because you can access 100% of your pension fund should you so wish on Monday (Tuesday) doesn’t mean you have to. Why not sit back and watch those first out of the gates be hit by errors and mistakes while everyone gets their systems sorted?
2. Remember there are tax consequences
While you will have theoretical access to 100% of your pension fund if you are 55 or over on Monday, don’t forget that there are tax consequences, so grabbing it all out at once might not be the most prudent move. While 25% of the value of the fund can be withdrawn tax free, any excess over this amount will suffer income tax charges, and if you take it all out at once you could end up paying higher rates of tax than if you spread your withdrawals over a number of years.
3. But watch out for charges
Industry watchdogs are already squaring up for a fight, as this new regime opens the door for pensions providers to levy whatever extortionate charges they choose, particularly for those who want to access their pension fund in the most flexible manner. Make sure you know the financial implications of each withdrawal- and particularly watch out for fixed charges- a £200 fee is only 1% of a £20,000 withdrawal, but 10% of a £2,000 one.
4. Don’t spend it all at once
While it could be very tempting to go and blow it all, try to factor in how long you are likely to live and how much you are going to need to cover that expectation. And bear in mind that, according to the Telegraph most people underestimate their ‘official’ life expectancy by around four years.
The wisest thing to do would be to just draw the income, and preserve the capital (which generates that income) but most people’s pot won’t necessarily provide enough income, resulting in an erosion of capital. Just try not to wipe out your income- earning capacity too quickly, as it becomes a vicious circle.
5. Think about an annuity…
While this might sound counter-intuitive, just because you no longer have to take an annuity doesn’t mean that it mightn’t actually be the best investment option for your pension pot. As with everything else in life, there are pros and cons of annuities, but don’t discount them out of hand before working out if that would give you financial security in your retirement.
Happy Easter Pension Freedom Day.
And now, in stating the obvious news, we have Dame Colette Bowe of the Banking Standards Review Council, who says that banks must “raise their game” to regain the public’s trust after a string of scandals.
Dame Bowe (Dame Bowe, Dame, Dry Bones) of the BS Review Council, warned everyone that the trust in the banking industry had been “badly damaged”, thanks to PPI misselling, the manipulation of Libor and… well… all the other bad things they’ve done.
Bowe unveiled a 14-member board who have been tasked with supporting and encouraging change in the UK’s lenders and said: “A healthy society and a vibrant economy like the UK needs well-run banks and building societies that understand and serve the needs of people and businesses.”
“From paying household bills to growth finance for business, millions of us rely on the banking system every day. And some 500,000 people across the UK work in this industry. But trust in the system has been badly damaged and it’s no surprise that the public expects change after everything that has happened.”
“Banks recognise the urgent need to raise their game and build the necessary momentum for change. It won’t happen overnight and it will be an uncomfortable journey but the time has come to win back trust.”
So who has been roped in, to sort everything out? A load of bankers! On the team, there’s Craig Donaldson (chief executive of Metro Bank), Alison Robb (group director of Nationwide), Antonio Simoes (UK CEO of HSBC), Clare Woodman (chief operating officer at Morgan Stanley) and James Bardrick (chief country officer for the UK at Citibank).
That’s not all! We’ve also got some trustworthy politicians as well, such as Lord McFall (used to be a member of the Parliamentary Commission on Banking Standards) and Alison Cottrell (another former Treasury director). There’s also some bishops and someone from Citizens Advice too.
The Dame added: “Through concerted, collective action, the board will support and encourage sustained change for banks operating in all areas of the market – retail, investment and commercial. That change will be equally relevant to incumbents and challengers, to banks and building societies.”
We all know that cash ISA rates have been, at best rubbish, for years. Low interest rates have hit savers hard, with an estimated £12bn languishing in cash ISAs paying a maximum of half of one percent. However, if you discover that your bank has sneakily cut your ISA rate, you may be able to claim compensation by making a complaint to the Financial Ombudsman Service- even if ‘official’ regulations state that the bank was under no obligation to personally tell the customer about the rate cut.
By law, banks must inform customers if a rate change is “material”, but what counts as a material reduction in rates, is determined by the voluntary “Banking Code”. Currently, banks can lower interest rates on individual accounts by up to 0.25% at a time, or 0.5% over the year, without explicitly informing customers. If a customer saves less than £500, the bank needn’t notify them at all.
But what this means is that, in theory, a bank must warn a saver of a rate cut which will cause them to lose £1.30 in interest, but someone who would lose £125 a year did not have to be informed. This is because a bank must tell a customer with £500 in their account if their rate is about to change by 0.26% (leading to a £1.30 loss), but not when a customer, found by the Telegraph, with £50,000 in an account had her rate cut by 0.25%. The customer in question complained to the Financial Ombusdman, and her case was upheld.
So what do you need to do if you think you have a case? If you consider you lost money by being put on a poor rate, and were not properly informed about it, you can complain to the Ombudsman, free of charge, and unlike the banks, the Financial Ombudsman looks at the overall situation rather than sticking to the arbitrary “0.25%” from the banking code.
The amount of money in the account, the length of time a customer is given to consider the rate fall and any loss from a rate change are among the factors that the ombudsman considers. And unlike the banking code, the ombudsman thinks that “deciding what is considered material [in respect of a rate change] is very much down to the individual case in point, and the individual circumstances.”
But some people think that banks might, shock horror, be doing this deliberately. James Daley, a consumer campaigner from Fairer Finance said: “As the Ombudsman complaints show, some banks are still interpreting ‘material’ in a way that is not very fair for the customer…Banks deliberately misinterpret the rules in pursuit of greater profits.”
Others think the banks are simply hiding behind out-dated rules. “The rules haven’t kept up with the way the savings market has changed,” said Anna Bowes, of rate-monitoring service Savings Champion. “Now, 0.25% is a very substantial reduction in interest, as savings rates as a whole have fallen.”
Either way, if you have suddenly found your ISA shrinking without due notification, or an introductory rate is sneakily withdrawn early, you could claim recompense for the interest you were expecting. Although given maximum rates, that’s probably not a fat lot either…
As the politicians argue over whether living standards have improved or not, it appears UK homeowners should be celebrating the lowest seasonal home insurance premium prices for new customers in four years.
MoneySuperMarket’s analysis of over 14 million home insurance quotes obtained between March 2010 and February 2015 showed that average home insurance premiums for new customers fell in 2014/15 to £115.82 – 22% lower than four years ago (2010/11), when the average winter premium was £148.85, and 27% cheaper than in spring 2010, when prices were as high as £158.93. Annually, premium prices have dropped an average of eight per cent since last winter (2013/14), when the average cost was £125.53.
The analysis also revealed regional winners and losers- for example, new customers in the HR Hereford postcode are now looking at an average cost of just £97.57, the only area coming in under 100. This is £15.85 cheaper than last year, and 35% less than winter 2010/11.
Those in NW London postcodes have experienced the biggest overall reduction (18%) in premium price for new customers year on year, although the rates in this part of the capital are still over £30 above the national average. Similarly, West London postcodes recorded an almost 14% year on year reduction in the price of home cover for new customers this winter, but average premiums are still almost £20 above average. The list of the regions with the top savings over the past year are as follows:
Kevin Pratt insurance expert at MoneySuperMarket said: “Not all of the top 10 regional winners are seeing premiums below the national average, but the rate at which prices are falling in these areas for customers who shop around is really promising.”
On the downside, however, homeowners in Northern Ireland have pulled the short straw: their BT postcode is the only one in the UK where an uplift in price has been recorded year on year. Sorry folks.
Are you feeling confident? Do you have more purpose in your stride and feel like you could shove a mountain over? Well, it isn’t surprising seeing as consumer confidence in the UK is at its highest level for nearly 13 years, according to the stat crunchers at GfK.
Look at you spending money on onions and socks like you’re Rick James!
Gfk’s Consumer Confidence Index rose three points to +4 in March, and over the last three months, there’s been an eight point rise. Good eh? There’s been a nine point increase from March 2014. That’s livin’ alright.
All five of Gfk’s index’s key indicators saw monthly and yearly increases this month, with confidence over the general economic situation over the last 12 months being the strongest climber up the charts. It is now at +1 when, last year, it was at -15!
Sounds like we’re all getting our swagger back too, as the survey showed that consumers are more confident about the economy in the coming year, as well as getting rather cocky about our collective personal financial situation for the coming 12 months. Basically, that means people are starting to look at spending money on bigger purchases like sofas or new TVs.
Nick Moon, Managing Director of Social Research at GfK, says: “Reaction to the budget has thus far been muted, but if people warm to it over the next few weeks then we may well see a further increase in the Index next month. A consistently rising Index in the run-up to the election is likely to be good news for the government.”
From now on, people selling you pensions will have to tell you if they’re ripping you off. More accurately, they’ll have to tell you if their rivals offer better deals and such, according to the Financial Conduct Authority.
Businesses will now have to advertise what their competitors are offering and how much more you could earn if you switched to a different provider. This will happen every time a customer is sent a quote for an annuity. The FCA reckon that this will “prompt customers to consider the benefits of shopping around and switching”.
FCA director Christopher Woolard said: “The retirement income market is set for the biggest change in a generation. We want to ensure it is fit for purpose.”
The idea is that pensioners will not have blindly accepted any old rubbish thrown their way, and now, people looking at their retirement will start shopping around and looking for a better deal, rather than just accepting a poor-value annuity offered by the first firm to flutter their eyelashes at them.
The FCA also said that pension documents now have to contain a lot less jargon. People can’t be bothered reading 20-odd pages of finance-babble, so companies need to do more to make it clear what they’re offering. The watchdog is also looking at the idea of people being sent a simple statement by pension companies, which outlines how much money they’ve saved and what type of pension they have.
Good news, oldsters!
In last week’s Budget, the Chancellor announced that the first £1,000 of savings income (£500 for higher rate taxpayers, nothing for additional rate (45%) taxpayers) would be subject to zero tax, with effect from 6 April 2016.While this won’t affect people looking for the best deals on where to invest anything that remains of this tax year’s ISA allowance of £15,000, that expires on 5 April 2015, those looking forward to this time next year might not have such a worry.
The point is, of course, that the main draw of cash ISAs was the fact that the interest arising was not taxable, saving investors at least 20% in income tax. While there have regularly been headline savings rates, or more recently, current account credit interest rates, that could beat cash ISA rates, once the tax advantage was taken into account ISAs often came out on top.
But if all savings interest is not taxed, why bother investing in an ISA? £1,000 of interest given the current low rates would require a sizeable capital balance, meaning that the tax-free status of cash ISAs is only of benefit to those who already have pots of cash.
But what about the rates? Could cash ISAs still offer better rates on a straight comparison? Which!!! looked at short, medium and long term savings rates and found that, comparing like with like, and assuming no tax is due on ISA or non-ISA savings accounts, there is currently no benefit to a cash ISA for most people.
On short term/instant access accounts, Which!!! figures show that the best ISA deal is 1.5% (1.65% if fixing for a year), compared with up to 5% payable by current accounts, although you would need to check the limits applicable to interest payments. For 2-3 year fixes, the best cash ISA deal comes in at 2.1%, whereas a standard savings account earns 2.2% for two years or 2.7% for three years.
Over the longer term, rates might rise and you have longer to build up a larger savings pot so a cash ISA may become more attractive, but currently the best five-year fixed-rate cash ISA only gives returns of up to 2.75%.
Of course, in a year’s time, the banks will also be aware that savers will be checking to see which rates are best for them, so the market may adjust to show better rates for ISAs at that time, but for now, the bell seems to be tolling for cash ISAs for the masses…
This means that the British taxpayer now owns less than 22% of the company after we all took a 40% stake in it, after the 2009 bailout.
“We have raised a further 500 million pounds through Lloyds share sales,” Osborne said on Twitter. “Nine billion pounds now recovered and being used to pay down our national debt.”
On top of that, RBS have sold off it’s shares in the US company Citizens, raising £2.1bn. This means that the Royal Bank of Scotland can look at selling additional shares, after the 90-day lock-up period has passed. The idea is for the bank to sell out of Citizens shares by the close of 2016.
Of course, RBS have to sell all these shares under the group’s state bail-out conditions.
“The sale of Citizens is an integral part of the RBS capital plan. It will help us to create a stronger, safer, UK focused bank that can better serve the needs of its customers,” said Ross McEwan, the chief executive of RBS.
Good news for consumers but bad news for insurance companies- the FCA has today announced plans to ban ‘opt-out selling’, which is where insurers handily pre-tick boxes offering you additional products and services, over concerns that customers were paying high prices for things they didn’t want or need. A triumph of common sense.
The FCA ran a study into the general insurance add-ons industry last year, which concluded that opt-out selling often results in “consumers purchasing products that were of poor value and not what they needed.” The FCA also found that the value of general insurance products “is not always clear,” with some consumers are not even aware they have bought an add-on.
The FCA is concerned that consumers “are not able to make an informed decision on whether they need or want” the extras being foisted on to insurance purchasers. As part of the review, the FCA also wants firms to provide consumers with “more appropriate and timely information” to help them identify if they even want an add-on at all, and if so, which is the most appropriate and most cost-effective option for them.
The FCA plans to introduce guidance encouraging insurers to raise the issue of the most common add-ons to consumers earlier in the sales process, while also making it easier to compare alternatives, specifically recommending that firms provide the annual price of add-ons rather than just giving the smaller monthly figures in a shameless attempt to make the overall cost look smaller.
Christopher Woolard, Director of Strategy and Competition said, categorically, “this is about ensuring consumers can make the right decision on what add-on insurance they do or don’t need. Forgetting to un-tick a box at the end of a purchase is not making an informed choice.”
“Our work shows that the opt-out model means too often consumers are buying a product when they have not been able to give any thought to whether or not they need it,” he continued, citing the familiar example of consumers having to double check whether or not they have accidentally agreed to buy an add-on insurance product when buying car insurance or tickets online, for example.
“These proposals will mean that consumers will be in a better position to decide what they want and consider the options available to them. Fewer consumers will end up with products they didn’t want or don’t even know they own,” he finished, with a flourish.
The proposed ban would apply to any add-on sales of regulated or unregulated products offered alongside financial primary products, which would include the almost industry-standard add ons of legal expenses sold with home or car insurance, breakdown or key cover sold alongside motor insurance, or protection cover when taking out a mortgage or credit card.
The consultation period ends on 25 June 2015.
The whole idea behind cryptocurrency , from what we can tell, is that it is border-free and not centralised. It sprung out of a dissatisfaction of trad. arr. banks and wants those pesky politicians and bankers to stay away.
We also know that cryptocurrency is referred to as ‘Bitcoin’, like most people call all vacuum cleaners, hoovers.
With all that in mind, HM Treasury has announced that they’d like to regulate and centralise digital currencies, thereby taking it from cryptocurrency to plain ol’ currency, which they already look after. Their goal, according to a very tedious 28-page document, is to prevent criminals misusing it and to support innovation.
The Bank of England are also really interested in it, saying that they wanted to release their own version of Bitcoin, which again, seems a bit odd, seeing as they already have actual money to play with, which has served them well.
Either way, the suits are circling and this document is in response to a public call for input on the development of digital currency regulations. The report itself looks at what the government can do next, what benefits there are and the risks of cryptocurrency.
Government says: “The government considers that digital currencies represent an interesting development in payments technology, with distributed, peer-to-peer networks and the use of cryptographic techniques making possible the efficient and secure transfer of digital currency funds between users. The government notes that the potential advantages are clearest for purposes such as micro-payments and cross-border transactions.”
So there you have it – Bitcoin et al is being taken seriously by the people from the halls of power.
In a little over an hour, and filled with cheap jokes and tired soundbites (“Tax doesn’t have to be taxing”), George Osborne has finally divested himself of his sixth Budget. While he promised no gimmicks or giveaways, there were a few nuggets, and a few surprises hidden away. So how will they affect your pocket?
First of all, the Chancellor announced the death of the tax return. For many people, including those with small businesses, the Chancellor reckons he’s going to scrap the return system for millions of people, replacing it with a new ‘digital account’ system that can be completed anytime. More details are awaited but this doesn’t sound at all like a technological car crash waiting to happen… Also, as widely predicted, the personal allowance will go up to £11,000, but not for a couple of years (2017/18). From April 2015, the tax-free amount will be £10,600 a year.
Other measures related to small business include changes to business rates and the news that Class 2 National Insurance contributions (currently £2.75 a week for the self employed) will be abolished during the next parliament. Assuming George is still in the chair, one supposes…
But the biggest news from the Budget is for savers. The ISA contribution limit, massively inflated last year, will go up to £15,240 in April, but under current rules, the contributions into ISAs are one-time only- so if you need to take some cash out for whatever reason, you cannot refill your ISA if you’ve used all your contribution, even where you have clearly taken the cash out of the ISA. Today, the Chancellor has announced a new ‘fully flexible’ ISA that will allow you to withdraw and reinvest in an ISA, provided the net amounts contributed do not exceed the limits.
And there’s even better news for first-time buyers. A new help-to-buy ISA will help people save up for a deposit for their first house, which will even benefit from Government contributions into the savings pot. For every £200 saved, the Government will put in £50, meaning for a £15,000 deposit, you will only need to save £12,000. The changes to pension rules previously announced will also be tweaked and added to, allowing 5 million existing pension holders to access an annuity without punitive tax charges, although they will need advice to ensure they aren’t ripped off by unscrupulous annuity buyers.
But the top news for savers is that the first £1,000 of interest earned (£500 for higher rate taxpayers) will now be totally tax free. This will take 95% of taxpayers out of tax on their savings, but this might be partly due to the fact that savers can’t earn much interest given the shockingly low rates.
Finally, duties on things you might spend your cash on- beer duty is down by 1p, and the duty on cider and spirits is down 2%. Wine duty and fuel duty is frozen.
How’s your heart? Well, your Halifax bank account might need to know as they’re toying with the idea of having a bracelet which you wear while it tracks the beat of your heart, which acts as a replacement for your password to get at your account.
No, seriously. It’s called the Nymi Band and it’ll look at the rhythm of your pulsating chest meat to keep you logged-in so you don’t have to remember tedious things like passwords, codes and PIN numbers.
All you do, is pop your finger on a plate which is housed in the band and it creates a circuit, and checks your electrocardiogram against one you’ve stored in it. As long as you’re wearing the band, you have access to your bank account and all that jive.
Bionym, who have come up with this device, reckon it is a much more secure than the usual means of identification. They also think you should use it for contactless payments.
Halifax digital development director Marc Lien muttered: “We are in the very early stages of exploring potential uses for the Nymi Band and wearable technology more widely which will help us further understand how we can serve our customers in the way that best appeals to their needs.”
Cue the Daily Mail worrying about someone hacking your heart through the bracelet.