loadsamoney 300x187 Cash   no longer the payment everyone loves

The best things in live are free – but you can give keep them for the birds and bees, I want… well… a card transaction or an online payment would be nice, actually.

You see, for the first time, cold hard cash is not the favoured method of paying for stuff in the UK, as cards and online transactions have overtaken the use of coins and notes. You want stats? Figures show that, last year, £19.8bn was spent using cards, online payments or cheques while £18.3bn was paid in actual physical money.

Of course, this doesn’t mean cash is going to vanish overnight – it is really pathetic to see someone trying to ‘make it rain’ in a stripclub by sending money via PayPal. No-one ever flaunted their wealth by simply pointing at the banking app on their mobile. You can’t really 2p someone with BitCoins.

Either way, the Payments Council reckon that, by 2024, less than a third of the money we spend will be in cash. And it looks like, with the advent of contactless payments and Click And Collect services, that people will have less reason to carry loads of money about their person, which is obviously bad news for muggers.

Stats show nearly 1-in-10 people say they now use cash machines less than once a month.

prostar offer 0407 bogof 300x150 Which!!! special offers actually cost you more?We all like a good BOGOF every now and again, but a new Which!!! investigation has uncovered some situations where buying products on special offer might not only not save you any money, but in some cases would cost you more than if you  had bought the product when it was not on offer.

Coming on the back of Which!!!’s super-complaint to the CMA last month, complaining about supermarkets’ dodgy pricing strategies and offers, the consumer group have now highlighted some examples of offers that blatantly flaunt consumer guidelines  on special offers and some that actually cost you more money.

The worst offending ‘offers’ both came from Asda, who would like you to buy two 2-litre bottles of Pepsi for ‘just’ £3, which at a cost of £1.98 each saves you a tidy 96p. Unless you consider the fact that, when not on special offer, you can buy the same bottles of pop for £1 each, meaning the ‘special offer’ actually costs you £1 more. Similarly, Elvive shampoo and conditioner costs around £2.80 each, but you can buy two products for £4, allowing you to pocket the difference of £1.60. Yet anytime the products aren’t on special offer, they actually cost £2, so the offer saves you precisely zip.

Government guidelines set out how retailers should use special offers that aren’t misleading and ensure they’re complying with the law. Which!!! identified three ways in which the bigger supermarkets appeared to be breaking the guidelines:

Running a special offer for longer than the higher ‘was’ price was in effect. This makes it appear like shoppers are getting a discount, when actually the lower ‘discount’ price is a more accurate reflection of the value of the product because it’s been available for longer. Gillette Venus razors, for example, were sold at £2 in Asda for 37 days, then 97p (‘was £2’) for 86 days, more than twice as long.

Referring to a higher ‘was’ price that was used for fewer than 28 days in a row (on a non-food item). The short period of availability is again not the best reflection of the value of the product. Which!!! found Sainsburys had a cracking deal on Finish dishwasher tablets for £6, but the higher £9 price had only been available for 19 days prior to the offer starting.

Not referring to the price immediately before the offer started as the ‘was’ price, but referring to an older, higher ‘was’ price instead, exaggerating the amount of discount. Asda (again) were selling Hovis white bread at ‘just’ £1, with a crossed through price of £1.20, despite the fact that the bread hadn’t actually cost that much bread for 116 days.

Overall, the supermarkets are just making things worse for themselves, and this extra evidence is sure to help Which!!!’s CMA complaint, a decision on which is due in the next couple of months. It’s no wonder shoppers are eschewing silly offers and turning to discount supermarkets instead, where a price appears to be just the actual price, all the time…

 

£20 note 300x180 Who would you like to see on the new £20 note?The public – aka ‘you reprobates’ – are going to be asked to choose someone to be the face of the new £20 note. Sadly, we’re not going to get rid of the Queen, but rather, whichever pin-making pillock currently resides on the reverse.

Sadly, you can’t just choose anyone you like, so don’t think we’ll all be able to get together and rig the result and end up with Bananaman or Sam Allardyce on the back – The Bank of England has launched a consultation to nominate a painter, sculptor, photographer or fashion designer who has made a great contribution to British society to appear on the money.

Want in? Well, nominations should be made over at the Bank’s website and you’ve got until 19th July to do it and the new note will come into circulation for three to five years, just in case everyone chooses someone rubbish.

Nominations can only be made for dead people, so don’t think about choosing anyone alive.

At the launch of the nomination thingy, governor Mark Carney said: “There are a wealth of individuals within the field of visual arts whose work shaped British thought, innovation, leadership, values and society and who continue to inspire people today.”

“I greatly look forward to hearing from the public who they would like to celebrate.”

So who would we like to see? Well, for starters, we’d like to see Alfred Hitchcock in silhouette form, possibly surrounded by a load of evil crows. In fact, we refuse to think of any other people. That’s clearly the best answer.

PPI complaints still dominate, despite drop

May 19th, 2015 No Comments By Mof Gimmers

ppi 300x202 PPI complaints still dominate, despite dropThe PPI mis-selling scandal trundles on and, in vaguely good news, complaints about them have halved in a year. However, don’t be fooled, as PPI is still a massive issue, dwarfing most others. Basically, it won’t go away.

The Financial Ombudsman Service, which deals with all the unresolved cases, said that they’d received 204,943 complaints about PPI in the 12 months to the end of March, which is still a shedload. Other complaints about financial products don’t even come close.

The ombudsman reckons that PPI cases could still be dogging everyone for a while yet, and could take years to work through.

So far, over £24bn has been paid out via a gigantic programme of compensation. There’s still a chance that the banks are being idiots about the whole thing, still!

The Financial Ombudsman Service found in consumers’ favour in 55% of cases over the year, which tells you how shifty the financial institutions who were selling PPI, have been. Cases are still coming to light, with some banks contacting customers to tell them that they’d applied PPI to credit cards without ever telling customers. Worth ringing your bank up to see if you’re in for some compo.

money 300x168 What are the best alternatives to pensioner bonds?The window for purchasing the Government-backed pensioner bonds closed on Friday, and it is interesting that they are, reportedly, the most popular financial product ever marketed.  The fixed-rate bonds offered market-stumping rates of 2.8% AER for one year and 4% AER over three years, and allowed the over 65s to invest up to a maximum of £10,000 into each type of bond. Although the government had originally limited the available amount to £10 billion for these bonds, the Chancellor then changed his mind, and instead they were on unlimited sale for four months. But now that the door has firmly closed on that investment, what alternatives are there for those looking to stash some more cash?

First up, in advance of the new savings allowance coming in from next April, are cash ISAs, which give a higher equivalent rate of return.Which!!! best buy tables show the best one-year fixed-rate ISAs are from Al Rayan Bank and Punjab National Bank, both offering rates of 1.9% AER. However, they warn that the rate from Al Rayan Bank is an ‘expected profit rate’ from Sharia compliant investments, so returns are not guaranteed. Punjab National Bank also offers the best three-year fixed-rate at 2.3% AER, and a number of others offer rates around the 2.25% mark.

But if you’ve already invested the maximum £15,240 in an ISA for this year you might want to look at savings accounts. Punjab National Bank is again top of the rate pops  for both one-year and three-year fixed-rate savings accounts, their one-year fix paying 2% AER and the three-year fix paying 2.55% AER. Note that if you have a spare £10,000 to stash for three years, figures from Moneyfacts show AgriBank as top banana with an impressive 2.7% return.

Which!!! also recommend looking at current accounts for smaller cash piles. Nationwide’s FlexDirect account pays 5% AER on balances up to £2,500 for the first year and Santander pays 3% AER on balances between £3,000 and £20,000 on its 123 current account, but watch out for qualifying criteria like minimum payments in or direct debits. You could also look at peer-to-peer lending, which offer savers favourable rates, often 5-7% AER over five years, but currently without the FSCS £80,000 savings protection.

Finally, another option open to those likely to have qualified for Pensioner Bonds would be to invest more in the State Pension. Only open between this October and April 2017, qualifying individuals (women born before April 6, 1953, and men before April 6, 1951) can purchase additional ‘annuity’ in £1 per week increments, for a fixed sum now. The capital amount of investment/the amount you will receive depends on your age and gender, but the returns could beat current annuity rates. Take the following official example of a 65 year old man. To get the maximum top up of £25 per week, he’d pay £22,250, which works out at an ‘annuity rate’ of 5.84%, which is inflation-proofed and offers a half-pension to the spouse on death. This is around half the price he’d pay if he bought a similar annuity from an insurance company, and he’d only have to live 17 years to ‘get his money back’, even though the ONS would estimate he’d actually survive a further 21 years and seven months, precisely.

However, the sweeping pension changes recently introduced removed the requirement to purchase an annuity on death, and while a 5.84% return might compare favourably to savings rates available now, you do not get your capital back, and all your cash will be fully exhausted on a second death. Also, who’s to say they won’t change the state pension rules again before you have drawn all your ‘break even’ benefits? It’s not like they’ve totally messed with the system before or anything…

savings 300x235 Access the new tax free savings allowance almost a year early?You may recall that, in March’s Budget the Chancellor announced a new plan to take 95% of savers out of tax on the interest on their savings. However, rather than wait until April 2016 to take advantage, why not start earning tax-free interest now. Interested?

You see, the new limits of £1,000 worth of interest for basic rate taxpayers, and £500 for anyone paying higher rate tax (if you pay additional rate tax at 45%, the Government reckon you can do without the savings allowance), take effect from April 2016,and at that point, given the vast majority of taxpayers won’t be paying tax, banks will stop deducting 20% tax at source (ie before you even receive your interest payment, as they do currently). However, if you are savvy enough to open an account that doesn’t pay interest until after 5 April 2016, then all of the interest falls into the 2016/17 tax year, and the new savings allowance applies.

And it’s official. A spokesman for HMRC told The Telegraph: “If a savings product, such as a one-year bond, taken out now, pays out interest before April 2016, the saver will not be able to benefit from the new personal savings allowance as they have a right to access interest before April 2016. But if they cannot touch the interest before April 2016, the saver can take advantage of the new allowance.”

So, what you are looking for in order to facilitate this wheeze are accounts that only pay interest annually. You might consider the market leading Virgin Defined Access E-Saver, which pays 1.41% gross, which would allow a basic rate taxpayer to stash £70,920 into the before breaching the savings allowance threshold, halved to £35,460 for  higher-rate taxpayers. However, closer inspection of the terms and conditions reveals that the annual interest isn’t paid on the anniversary of account opening, but is instead credited on 11 March each year. Which means the interest will be taxable, and the net equivalent is reduced to 1.13%

Consequently, the second best product on the market, the Paragon Bank Limited Edition Easy Access, begins to look more attractive, given its rate of 1.35% gross paid annually on the anniversary of the account opening, and therefore tax free so long as it falls within the savings allowance amount.

lightbulb 219x300 How much does your car dealership charge to change a lightbulb?Q: How many pedants does it take to change a lightbulb? A: None. They replace one. However, when a headlight bulb goes on your car, with all these shiny new headlight units you might be at a loss as to how to replace it yourself and you might need help doing so. But how much does it cost to change a lightbulb? Car magazine Autoexpress decided to investigate this very question, and found massive variations in charge, with some charging over £70 in some cases. They also found out which marque of car dealership was most helpful in answering telephone queries.

What is, perhaps, not surprising is that most dealerships charged to replace a lightbulb, and the average variance in price between dealers on the same car was around £20. However, what is a welcome surprise is that some offered free labour, and some offered a free bulb, while yet others charged exorbitant fees for a tiny bulb  of over £70.

Auto Express picked 50 of the most popular cars in the UK and anonymously contacted three dealers across the country for each model, enquiring how much a new headlight bulb would cost, and how much they’d charge to fit it. The Nissan Qashqai returned the biggest disparity of £44.60, with prices starting at £5.40, rising to £15.39 and peaking at £50. In second place came the Renault Captur, where one garage offered to supply and fit a new light bulb for free, while another wanted £40.. The Mazda 3 returned the third biggest disparity of our trio, as well as providing the single highest quote for changing a bulb, a massive £71.99.

With some headlamp units harder to access and bulb costs varying, it’s unfair to directly compare models, but the average price of the bulbs plus labour was £22.77.

So if those were the most disparate quotes, which were the most consistent? Good old Volkswagen was the most consistent with all nine dealers contacted  – for the Polo, Golf and Passat – quoting the exact same amount: £16.40. The next best was Skoda, which had a variation of £1 (£15 to £16) between its three dealers for the Yeti. Volvo came in third, with dealers quoting between £10.08 and £15 – all with free fitting – for the XC90. Skoda and Volkswagen, were the most helpful in dealing with the enquiries over the phone.

However Autoexpress say their research highlighted the varying levels of customer service provided by different dealers, with premium brands being, on the whole, the worst performers for phone manner. Audi and BMW dealers were so premium, they wouldn’t even offer an estimate without exact number plate, ownership, and inside leg measurement details.

Of course, this whole exercise simply highlights the need to shop around for anything, even something as small as a headlight bulb. And while pricey quotes from branded dealers might not be a surprise, those who will fit your bulbs for free is worth knowing- who’d have thought it would be cheaper to go to Volvo for lightbulb fitting than to Halfords, for example.

Are Booze Cruises back en vogue?

April 27th, 2015 No Comments By Thewlis

FineWineCellar 300x300 Are Booze Cruises back en vogue?While the idea of a booze cruise nowadays probably conjures up images of drunken teenagers on a shot-filled ‘cruise’ outside a Mediterranean party port, it is the old style booze cruise across the Channel, filling your boot with as much wine as you can carry, that seems to be making a comeback.

The strength of the pound against the Euro has combined with the vast gap in duty levied on wines to make a short trip to Calais an economically sound decision for some, particularly if you’re buying a lot, and figures from currency exchange firm Caxton FX show that cross-Channel spending is on the rise. They report a 14% rise in British buyers shopping at the French supermarket, Carrefour, compared with the same time last year, which means that now 56%  more Britons are shopping at the chain than they were in 2013.

One reason is the duty levied on wine, and despite the Chancellor’s recent freezing of wine duty, UK consumers will pay around £2.05 per bottle in duty, that is then subject to VAT at 20%, before any of the headline price goes to either the retailer or the wine producer. While French duty is also subject to VAT at 20%, the duty rate is eight times lower at just 23p per bottle.

And, provided the wine is for personal consumption,  no Customs duty on import is required, and this includes large purchases for weddings, events and parties. HMRC reportedly say people are “more likely to be asked questions” if bringing more than 90 litres (120 bottles) into the UK, but confirm that there are no limits as long as you don’t intend to sell the wine.

The other factor currently affecting the attractiveness of the booze cruise is the relative strength of the pound against the Euro. Besides thinking about stocking up on Euros ahead of a summer holiday, the exchange rate means that it’s now £11 cheaper to buy a €100 case of wine now than in April last year. Current rates mean €100 would cost you approximately £71 compared with £82 in April 2014 and £86 in April 2013.

But is the combined duty and exchange rate saving enough to make it worth your while? Traditional booze cruises don’t involve a lot of sightseeing, so do the numbers stack up? Part of the cost, of course, is going to be related to how far from the South coast you live- someone coming from Newcastle, for example, is going to have a considerably higher fuel cost to get to a UK ferry port than someone coming from Canterbury. You also need to add on the cost of the Channel crossing, and cheapest fares will normally be midweek, rather than at weekends.

However, some British-owned shops on the other side of La Manche will actually pay for your travel providing you buy sufficient wine. Calais Wine, for example, will currently book and pay for your Eurotunnel crossing (which normally costs from £69 return) if you pre-order £300 of wine. While £300 on wine might sound a lot, buying in bulk does have its advantages, and is especially useful if you’re planning a wedding or a party.

Craig Nelson from Calais Wine Superstore, said: “We have 10 wedding orders a day. On some premium wines you’re saving as much as £10 a bottle, just because of the tax and difference with the euro.”

car in flood Is your car insurance higher because of claim you didn’t make?Everyone knows that you have to disclose an accident or motoring conviction when buying car insurance, and if you’ve made a claim, then your insurer is going to know about it anyway. But what about the situation where there has been an ‘incident’ that was not your fault and you haven’t made a claim? Well, not only are you required to tell your insurer, but they might bump up your premium as a consequence…

If you have been at fault in an accident, it is perhaps reasonable to assume that your premiums will go up, although this might depend on any protected no claim bonus arrangements. Some insurers will also penalise you for a no-fault claim- and while this might seem unfair, from the insurer’s point of view you are a higher risk. Admiral, for example, increase premiums after a single no-fault accident, such as someone driving into your parked car. They claim it’s just risk assessment:

“We use many years of claims data from millions of claims in order to accurately calculate the risk of a customer going on to make a claim,’ a spokesperson said.

“Our claims statistics show customers who have had a non-fault claim are more likely to make a claim in the future, compared with customers who have not had a non-fault claim. By having a non-fault claim our customers fall into a category that we see as a higher risk to insure.”

And while a no-fault accident for which you have made a claim might seem fair game, some insurers will also uprate your premium if you don’t even make a claim:

“We rate on the fact an incident has occurred, whether they have claimed or not,” finished Admiral, haughtily.

Insurers argue that someone who has had an accident is more likely to claim again for many reasons. It could reflect on the types of places that they are driving, or it could also say something about where the car is parked. Insurers might also think that it is a reflection of the motorist’s driving habits; perhaps they drive in ways that are more likely to result in an accident even if they didn’t directly cause it.

But if you don’t make a claim, how will your insurer know, right? Wrong. All insurers will state in their terms and conditions that customers must report incidents regardless of whether they make a claim.

The Association of British Insurers admits that this is partly so that insurers can adjust premiums accordingly, but is also to alert your insurer to the possibility that there could be a claim made against you at some point in the future, for example where an injury becomes apparent or symptoms alleged sometime after the original incident. Yeah, right.

All this information is stored on the Claims and Underwriting Exchange (CUE), a massive database containing 32 million claims records that is shared by all insurance companies. And it means that once one insurer knows something, they all do.

But what can you do about it?  It sounds simple, but you need to shop around- as not all insurers treat this information in the same way. The financial ombudsman says that “some insurers do rate on notification only incidents where no claim has been made, but it usually won’t increase the premium as much as a non-fault claim, which in turn does not increase it as much as a fault claim would.”

Some examples of insurers that don’t increase premiums for no-fault claims include the Co-operative insurance and Direct Line, but there’s no guarantee this would make them the most competitive, nor that they wouldn’t increase premiums for some other, unconnected reason.

So, what if you do not report a non-fault incident? While this is a very tempting option, if you do not report an incident and your insurer later finds out, they may claim that your policy is invalid and refuse to pay out on future claims.

However, in this situation, it would be up to the insurance company to prove that it would not have covered you, would have charged you more or would have offered a lower level of cover had it known about the incident.

The financial ombudsman (to whom an insurance dispute like this might be referred if you and the insurer can’t agree) also said that “ the way insurers calculate their premiums is their own commercial decision, provided they treat everyone in the same situation in the same way, and if consumers are asked about incidents and losses then they should disclose them whether they’re recorded on the insurance central database or not.” So you have been warned.

gas flame 243x300 Can you find the cheapest energy deals with a little help from your friends?The cheapest energy deals can’t be found on suppliers’ websites. Nor on comparison site tables. Despite falling energy prices, the best energy deals are actually being reserved for groupon-style collective switching deals. Power to the people.

Fixed energy tariffs are standing at a ten year low and have dropped below £900 a year –the cheapest deal on the market currently being £899 from GB Energy Supply for an average family usage. However, there are cheaper deals available by signing up to one of the growing number of collective switching programmes, where, a bit like price-drop TV, energy companies compete to offer the lowest tariff to a defined group of committed switchers.

An £876 tariff offer by the Telegraph (newpaper) has just sold out, snapped up by 8,000 people, and today, online comparison service uSwitch has offered a matching tariff with E.On which is available for group switchers until May 23.

The idea is, of course, that the energy companies benefit by instantly getting thousands of new customers without having to woo potential switchers with pricey advertising campaigns. And they’re still making money, as these cheapest deals are actually £419 cheaper than the average energy bill owing to the fact that three quarters of customers are on standard tariffs.

But how likely is it that the lowest collective tariffs are pinching at the profits of the energy giants anyway? Global crude oil prices are less than half what they were in mid-2014 prices, but energy bills are still flying relatively high, resulting in a Government investigation in January into why energy bills were not falling despite a drop in wholesale costs.

The “big six” energy firms claim they buy wholesale gas and oil months in advance, so absolutely totally cannot pass these savings on to consumers straightaway. And we all remember how they didn’t pass on any earlier increases in the wholesale costs as well…

There has been some movement, even in standard tariffs, with “token” price cuts that reduced annual bills by around £35 a year. However, research by our friends over at Which!!!, used hedging models to allow for such short- and long-term forward planning, and they think there is still scope for lower prices, suggesting that gas costs could drop by at least 8.8% and that a standard electricity tariff could fall by 10%

So if you’re looking to switch your energy bills, keep your eye out for a collective bandwagon upon which to jump, and if your fix is finishing soon, watch out for, possibly, even lower prices on the horizon.

EE – who still might be getting taken over by BT – have decided to give the UK its most affordable 4G smartphone, according to themselves.

Interested? Well, you can get the EE own-brand phones called the Harrier and Harrier Mini, which will hit the shelves on April 28th. They say that the Harrier Mini is going to be the cheapest phone in the UK with WiFi calling as a thing.

So how much will they cost? Well, if you’re interested in The Harrier, that’ll set you back £199.99. It has a 5.2-inch full HD screen, a 13 megapixel rear camera, and a 1.5Ghz Octa Core Qualcomm Snapdragon processor. For the Mini, that will cost you £99.99 and has a 4.7-inch display, an 8 megapixel camera, and a 1.2Ghz processor. Both run on Android’s latest version of Lollipop.

EE Harrier Phone 500x433 EE launch UKs most affordable 4G smartphone

Naturally, there’s still some maths to do as you’ll have to get them on a contract. The Mini’s contract is £16.99 per month and the Harrier will cost £21.99 per month.

Pippa Dunn, Chief Marketing Officer at EE, said: “Customer take-up of our existing EE branded products has been phenomenal, so we’ve worked hard to create new feature packed devices. The Harrier and Harrier Mini are another big step forward and will allow even more people to benefit from a premium smartphone without the premium price – as well as provide access to a superfast 4G experience that only the UK’s biggest and fastest mobile network can provide.”

EE also showed off two new portable 4G WiFi gizmos – the Osprey 2 and Osprey Mini 2. They’ll give you 4G data speeds for up to 10 connected devices.

Anyway, under £100 for a 4G smartphone – worth considering.

Wonga to change their name?

April 22nd, 2015 No Comments By Mof Gimmers

wonga ladies 300x282 Wonga to change their name?Avid BW readers will know that Wonga is in a complete mess at the moment, and some fear that it could actually go under.

They made a £37.3m loss in 2014.

However, the payday lender might have a trick up their sleeve as they are weighing up a name-change as they look to replace their toxic brand. With a new name will come a new range of products, according to bosses.

“With the cap on interest rates and lower fees, the margins have shrunk for individual profits,” said chief finance officer Paul Miles. “If we were setting up from scratch, we could build a sustainably profitable business. But we have the issue of our legacy, and how we manage our cost base.”

Wonga’s UK gaffer, Tara Kneafsey added: “We have worked hard to repair our position with the short-term loan product, and coming out of that we have 600,000 loyal customers who like the brand and use the product in the right way. But in the wider 13m market, we have to ask how far the brand travels. There are different customers with different needs.”

So with that, comes a rebranding: “No puppets will feature, nor anything that looks like a puppet,” confirmed Kneafsey. Not surprising as the ad company that came up with the puppets won’t have anything to do with Wonga.

Is this the end of cashback credit cards?

April 14th, 2015 2 Comments By Thewlis

credit card 300x188 Is this the end of cashback credit cards?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?

HMRC to scrap child benefit ‘loans’

April 13th, 2015 No Comments By Thewlis

child saving money 300x204 HMRC to scrap child benefit loansAlthough 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.

pensions 300x187 Top 5 things to think about for Pensions Freedom DayAs 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.