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.
Of course, we’re being sarcastic and whiplash claims have, according to a report from one insurer, hit record levels.
The result of all this is that on average, motorists are getting £93 added to their motor insurance premium. So, thanks to people with no neck ache, everyone else is paying for it. Nothing new, but galling all the same.
So what’s brought these new levels about? Well, once again, we can thank the no-win no-fee law firms who have been drumming up business on daytime TV and doing very well for themselves.
Aviva reckons that, despite the best efforts of the government to sort out compensation culture and lower motor insurance costs, more needs to be done if there’s going to be any reduction in whiplash claims. According to their figures, whiplash is costing drivers as a whole, £2.5bn a year. Their research also showed that the UK is on course to bring in advance of 840,000 motor injury claims to the Claims Portal, which allows insurers to submit claims, for the year ending April 2015.
Last year, 80% of motor injury claims included whiplash. Compare that to France where it only makes up 3% of injury claims, and you can see that something’s awry.
We all have to eat. And while it is heating costs, rather than culinary charges that make the headlines when energy bills soar, the appliances you use in your kitchen also contribute to your energy use, and, for example, selecting an AAA rated appliance over a G rated appliance for energy consumption could make a dent in your annual bill. But what about the appliances you already have? Could you just use them more effectively? It seems that, for the best energy report, microwaves and slow cookers are the way to eat hot food, for less.
Jennipher Marshall-Jenkinson, president of the Microwave Association, recently spoke on BBC Radio 4 about her love of the device that is totally unrelated to her current job, but instead of just banging on about speed and efficiency, she claimed that using a microwave can actually be cheaper than cooking on a hob to the tune of £5 a month. For the 83% of us who own a microwave, that adds up to a tidy saving.
She calculated that having four saucepans on a stove cooking broccoli, cabbage, carrots and any other vegetable will cost 28p. The vegetables will take 15-20 minutes to cook and will “lose 85% of their nutrients while cooking”, she said. By comparison, cooking the same vegetables in one dish in the microwave will cost 7p, and the food will retain its nutrients because the vegetables cook in their own steam.
But can her claims be substantiated? The Telegraph asked some experts what they thought of the numbers. According to the Energy Saving Trust, it’s not easy to directly compare the cost of using a microwave or a hob for cooking, but five minutes usage of a typical microwave (800W, category E) will use about 0.09kWh of electricity, which costs around 1.3p, compared with the typical gas consumption each time a gas hob is used of 0.9kWh, costing around 3.8p.
“These figures aren’t directly comparable, since the ‘typical use’ of a gas hob isn’t necessarily equivalent to five minutes’ microwave use, but it does provide a basic comparison,” a spokesman said. “Obviously, energy usage varies depending on different factors, such as whether you have the lids on each pan, an individual’s cooking style, and so on.”
Comparison site uSwitch said that a microwave is the most energy-efficient way to cook food, followed by a hob and then an oven. “To keep your energy bills down, it’s a good idea to buy a microwave oven if you don’t already have one, and to use it for as much cooking as possible,” a spokesman said. “But remember to switch off your microwave at the wall when you’re not using it, so it isn’t left using electricity to power its clock.
However, uSwitch threw another contender into the ring- slow cookers. “Slow cookers can also be an energy-efficient option – they use just a little more energy than a traditional light bulb, and you can leave your food to cook slowly while you get on with other things.”
Sales of slow cookers have boomed over the past two years, and are very practical for busy workers, but is it worth the average £20 outlay in savings on oven use?
The answer is most likely, yes. Most sources agree that electric ovens are the least energy efficient way to cook. The Centre for Sustainable Energy estimates the average electricity usage of an electric oven between 2-2.2kWh, while a microwave uses between 0.6-1.5kWh. A slow cooker uses approximately 0.7kWh over the eight hours. Money-saving website goodtoknow.co.uk calculated that using an electric oven for an hour each day will cost £2.46 a week, or £127.92 over a year.
So there you have it. You don’t need a cooker, just a microwave and slow cooker. With spare cash saved on your energy bills left over for takeaways…
So, if you’re a business-owner who was missold an interest rate hedging product, you might be hearing from your bank again, as the report said that the “redress must be fair and reasonable”, and that “redress should aim to put customers back in the position they would have been in had the breach of regulatory requirements not occurred.”
However, there’s a problem – this advice is open to interpretation by the banks, and seeing as they’ve got form for really not giving two hoots about their customers, this means as they review each case, they’re inevitably going to do someone over.
Chairman of the Treasury Committee, Andrew Tyrie MP, said: “Many small businesses have been badly hit by the complex terms of the IRHPs offered by their bank. A significant number of those firms who were missold these hedging products feel that, having been ripped off in the first place, they have now been treated unfairly again by the FCA’s IRHP redress scheme.”
“It is far from clear that the FCA’s scheme has delivered fair and reasonable redress to all the businesses affected. The FCA needs to do much more to demonstrate that this process is credible and has not unduly favoured the banks. As part of this work, the FCA should collect the information necessary to establish whether there are systemic failures in the review.”
“This would benefit from independent oversight. It should publish its findings. “Greater transparency is crucial in order to ensure that those SMEs mis-sold these products receive – and are seen to receive – appropriate redress. The Financial Services Act provides for the Treasury to require for this type of work to be done. But hopefully this won’t be necessary.”
With any luck, an independent body will oversee these cases in a bid to work in the favour of the customers, but don’t hold your breath.
The Financial Conduct Authority (FCA) has said that customers with payday loans who are in arrears are still being failed by companies, even though new rules are supposed to fix how they’re being treated. The regulator said that they’ve found “serious non-compliance and unfair practices” in all firms that they reviewed since they took over the regulation of the sector.
The report noted that outcomes for too many customers weren’t good enough and that, in some cases, there was “serious detriment and financial loss”.
The FCA said that three firms in particular, which they’re not naming yet, had a large backlog of letters and documentation, including some from vulnerable customers who were behind on their repayments. This included medical evidence and letters from debt advisers which showed why some of these customers were struggling or failing to pay.
Some of these vulnerable customers were being chased by bailiffs or collection agents.
The watchdog said that firms are legally required to give customers “breathing space” from collections if they have provided evidence that they are working with a debt adviser in a bid to manage debts. Of course, the payday loan companies won’t be doing that if they’ve got a load of unopened correspondence.
With that, the FCA found examples of companies exacerbating situations that were already stressful, including repayment plans that were quite obviously unsustainable, leaving customers having to explain their situation multiple times, thanks to loan companies keeping poor records. Where the businesses were non-compliant with new rules, the FCA intervened to get the loan companies to take measures to make sure that these failings weren’t repeated.
The regulator said that they’ve restricted the way some payday loan companies do business until the mess gets sorted out.
Tracey McDermott, director of supervision at the FCA, said: “Our rules are designed to ensure loans are affordable; that customers who get into difficulty are treated fairly and that they are not pressurised into unaffordable and unsustainable repayment plans. The real test for these lenders will be FCA authorisation where they will have to demonstrate exactly how much progress they have made if they want to remain in the market”.
The Government confirmed a couple of months ago, that the fee for issuing a money claim for anything worth more than £10,000 would be increased to 5% of the sum claimed, which has left one lobbying group outraged at the ”astonishing” fee increases of up to 600%.
Under these new rules, for example, fees on a claim worth £300,000 have been raised to £8,080, where it would have once been £1,920. That’s a rise of 421%.
Director of policy at the British Chambers of Commerce, Adam Marshall, said: “We remain concerned that a lot of companies in supply chains could be dissuaded from using the courts to resolve long running late payment disputes.”
“At a time when the situation seems to be getting worse not better, restricting access to one potential remedy is not encouraging.”
The Government won’t be raising the cost of getting a divorce and other fee reforms, mercifully. Justice Minister Shailesh Vara said: “Access to justice is a fundamental principle of our legal system and this is not threatened. 90% of the claims will be unaffected by these changes and waivers will also be available for those who cannot afford to pay. Our courts play a critical role and it is important that they are properly funded.”
“It is only fair that businesses and individuals who can afford to pay and are fighting legal battles should contribute more in fees to ease the burden on hardworking taxpayers.”
“Court fees are a small fraction of the overall cost of litigation and Britain’s reputation for having the best justice system in the world remains intact.”
If you’ve been living in a cave, Lloyds got £20bn of support during the financial crisis and the taxpayer ended up with a 40% stake in the bank. Now, UK Financial Investments (UKFI), are selling bits of it off to try and recoup the money.
Thus far, the Treasury has got around £8.5bn back.
UKFI is really getting a wriggle on with the sales though, and in recent weeks, have upped their work on it in a bid to exploit a surge in the Lloyds’ share price.
In a statement, George Osborne said: “These sales are part of our plan to return Lloyds to the private sector and get taxpayers’ money back. The proceeds will be used to reduce the national debt.”
The government still own 79% of the RBS Group, who themselves got a £45bn bailout in 2008. Again, Osborne is promising a quick sale on that if he ends up keeping his job as chancellor.
According to the Bank of England, the UK households’ inflation expectations dropped to their lowest level in over a decade. Last month, inflation expectations for the coming year fell to 1.9%. The BoE reckons it could turn negative in the next couple of months.
This will pique the interest of the Bank’s Monetary Policy Committee, who yesterday, voted to keep interest rates at 0.5%. Their survey displayed the proportion of Brits expecting interest rates to rise over the next year fell and the Bank have said that they could cut rates if low inflation becomes embedded. That said, Governor Mark Carney thinks there’ll be a rise.
YouGov also did a similar survey, which also showed that the British public’s expectations for inflation in the next 12 months fell.
Basically, households are expecting prices to go up in 2015, but at a much slower rate than seen before, thanks to inflation falling to record low. However, there’s usually something of a disconnect between the perceptions of inflation and the official consumer prices index (CPI), so we’ll just have to wait and see.
The Serious Fraud Office are going to investigate the Bank of England, with particular interest in how they injected cash into the money market at the peak of the financial crisis. Of course, the bank did their own inquiry into all this, and the findings from the were handed over to the Serious Fraud Office.
The Bank of England (BoE) confirmed that there was a new investigation, but for some reason, didn’t want to talk about it too much.
In a statement, the BoE said: ”Given the SFO investigation is ongoing, it is not appropriate for the bank to provide any additional comment on the matter at this time.” The SFO said that they are ”investigating material referred to it by the Bank of England concerning liquidity auctions” during the crash, most notably the period just after the collapse of Northern Rock.
The chairman of Parliament’s Treasury Select Committee (TSC), Andrew Tyrie MP, chipped in: “The bank referred this to the Serious Fraud Office when Lord Grabiner’s initial findings were made clear to them – this was the right thing to do. We must now await the outcome of the SFO’s work. The sooner their findings are published the better.”
As an aside, the BoE announced earlier today, the historic low base rate of 0.5% would be in force for 72 months.