Two Pennies Worth

Rip-off Britain is here to stay

Consumer champion, Sam Dunn tells Confused.com warns us that the most common day to day rip-offs are here to stay.

If you took the reins of a major UK company, would you instinctively hustle your customers?

I only wonder because every month or so, another swathe of the British public falls victim to hucksterish rip-offs.

Last week, Consumer organisation Which? filed a so-called “super complaint” with the Office of Fair Trading (OFT) in a bid to kibosh "rip off" surcharges levied by companies on debit and credit card transactions.

Teams of Which? researchers discovered that, while the cost to companies for processing a payment by debit card hovers around 20p and is no more than 2 per cent of the transaction value for a credit card,  companies regularly charge far higher fees.

Egregious examples included train-ticket booking site the Trainline slapping on a £3.50 charge for credit card payments while Eurostar laid it on extra thick at £4.

Naturally, the retailers themselves contend that they’re trying to recoup the cost of charges levied to them by banks and card issuers.

The Which? salvo is just the latest in a frankly ludicrous litany of criminal charges and rapacious rip-offs that continue to leave the average UK punter blinking in a state of incomprehension.

What could go wrong with council tax band valuations? Easy: estate agents drove down streets in second gear and wrongly valued some 400,000+ homes leaving many overpaying thousands since the early 1990s.

Or how about the sale of over-priced payment protection insurance on credit cards and personal loans?

And don’t forget monstrous personal pension mis-selling in the late 1980s where providers creamed the fattest of commissions for their own pay packets while convincing retirement savers to swap a secure final salary scheme for the vagaries of the stock markets.

Then there’s endowment mortgages (cheap interest-only home loans were an easier selling point than complex stock market-related endowments), high-risk precipice bonds for elderly savers, door-step selling, split cap investment trusts….

It would all seem to suggest that being a modern-day mountebank is either too lucrative to ignore – hang the inevitable penalty fines that ultimately come with it! - or that it doesn’t take much to swindle the ordinary British customer.

But I wonder how much of it is vanquished victims and the rest middling mugs?

Part of the problem is that enough of us, when faced with outrageous card charge hikes or preposterous sales pitches, still plough ahead and buy anyway.

In worst-case scenarios, many won’t have a choice because of lack of income or poor knowledge – especially among the vulnerable and elderly – and that’s a nasty exploitative situation we can all do without.

However, it’s also the case that many more who do have a choice will be complacent and won’t think to cast even a fleeting glance at small print; won’t blink at a spiralling credit card charge because they can afford it; or are simply too trusting to ever balk at a particular charge and say ‘Excuse me, did you just say that would cost me X? I’ll have to think again.’

Of course, there’s greed too: barrelling headlong into a financial arrangement – take your pick from store finance to hire purchase or credit card promotion – simply to get your hands on favoured goods is nobody’s fault but our own.

Unfortunately, all these flaws favour those with money over those without: and if enough of the former carry on with their daily financial routines like this, it’ll simply get worse for the latter.

Rip-offs thrive in such adverse conditions as, when consumers don’t all pull in the same direction, their overall protection remains stunted.

Until this changes, all manner of snake oil salesmen, profiteers and traders seeking to make a fast buck – whether dressed up in corporate suits or flogging fakes in back streets - will continue to creep into our lives.

So look lively: the rip-off is here to stay for a long while yet.

Could David Cameron protect drivers from soaring costs?

As fuel costs soar yet again, Prime Minister David Cameron has floated the idea of a “fair fuel stabiliser” to stop drivers being priced off the road. But how would it work? Confused.com’s Stephen Jones takes a closer look.

Motorists in Britain have long bemoaned the soaring cost of fuel, which has crept above the £1.30-a-litre mark in recent weeks. Consecutive governments have failed to deal with the problem and, with scenes of civil unrest dominating media reports in recent weeks – students in particular have made headlines after smashing windows and poking royalty (see below) – the Con-Lib coalition could do without a repeat of the nationwide fuel protests Tony Blair encountered 10 years ago.

Perhaps sensing that trouble may be afoot in the months ahead, David Cameron used a speech at Caterpillar’s factory in Leicester to float the idea of a “fair fuel stabiliser”, a price mechanism by which the government could reduce fuel tax when petrol inflation is at its highest.

A nice idea, perhaps, but this isn’t the first time the Conservatives have mentioned it. Indeed, a consultation on the measure was actually promised in their pre-election manifesto. There was, however, no mention of the stabiliser in the coalition agreement, and the proposal looked to be dead in the water by September, when an Office for Budget Responsibility study dismissed the idea for being too costly.

All of a sudden, though, the stabiliser has mysteriously re-appeared. Whether this is political posturing, or a genuine attempt to offset rising costs for drivers, it’s difficult to know. What’s certain is that most motorists would welcome any moves to drive down the price of fuel.

If David Cameron really does want to help drivers, he might also want to keep a close eye on next week’s debate into the rising cost of car insurance. The Transport Select Committee will meet to discuss the issue for a second time on 11 January, after hundreds of you contacted us to tell your stories about soaring premiums.

Goodbye!

And that's my last rant on Two Pennies Worth... I'm moving onto pastures new, so a big thanks to everyone who's followed this blog and especially to everyone who has commented or emailed me with your stories.

Farewell, it's been emotional!

Got a view on the rising cost of driving? Would a fair fuel stabiliser work? Have your say by commenting below or email: editor@confused.com.

Will 2011 really be "a horrible year"?

2010 was yet another tough year, with Britain pulling slowly out of recession and witnessing the start of tough new government money-saving measures. But trade unions are now warning that we should expect even worse in 2011. Are they right? Confused.com's Stephen Jones considers it all.

Most Brits could be forgiven for breathing a huge sigh of relief as 2010 draws to a close. It's been a tricky old year, and few, if any, have escaped the pain altogether - whether they've suffered from low interest rates, continued job losses, stuttering property prices, falling annuity returns or indeed anything else that's come with this economic downturn.

However, if the Trades Union Congress is to be believed, we could be in for worse in the coming 12 months. In a cheery New Year message, general secretary Brendan Barber warned that "2011 is going to be a horrible year", before arguing that cuts to benefits and public services, along with increases to taxes such as VAT will lead to growing public hardship in the coming months.

Is this fair? Well, certainly things will get tougher for some. Charities such as Shelter have warned of a rise in home repossessions as a result of government cuts to housing benefit and mortgage support schemes, while this would undoubtedly be exacerbated if interest rates were to rise from their current record lows. And of course, an estimated 500,000 public sector job losses aren't likely to help.

On top of that, the Bank of England predicts that the Consumer Prices Index (CPI) is likely to stay above its 2 per cent target throughout 2011 – meaning earnings and savings rates are likely to stay below inflation for the next 12 months at least.

But there are some reasons to be cheerful, even if they might be hidden underneath all the bad news. The British Chambers of Commerce recently pointed out that growth in the private sector would mean that the country shouldn't slip back into recession next year, and a recent study by the Forum for Private Business predicted that more than half of small businesses would create jobs in the coming 12 months.

It may seem that economists are just damning our economy with faint praise, but you only have to look at Greece or even across the Irish Sea to see how much worse things could get. So let's be grateful for small mercies, and keep our hopes up for a prosperous 2011.

And on that note –thanks to everyone who has followed this blog during 2010, I hope you all have a very happy new year. Here's hoping it's not so horrible after all!

What are you expecting for 2011? Have your say by commenting below.

Forget tuition fees, it's younger students I fear for

As students rampage through the streets of London, all the talk is about soaring tuition fees. But one cut is arguably a far bigger barrier to poorer children entering university, argues Confused.com’s Stephen Jones.

A lot of hot air has been blown about the big hikes to tuition fees coming into effect in 2012. Whether or not you think it’s fair that students should be forced to bear a bigger portion of the cost of learning, the argument that increasing fees will prevent people from going to university doesn’t, to me, stand up to scrutiny.

That’s not to say the changes won’t be painful, but I fail to see that a student choosing university will be put off by the cost – for a start, it’s not something I really thought about when I was 17. That was for my parents to worry about.

Plus, due to the low-cost nature of student loans, it’s less the size of the borrowing, but more how it’s paid back that should be taken into account. With these new measures, students won’t actually start paying back their loans until they reach £21,000 – the current level is £15,000. That leaves students nearer the bottom end of the pay scale better off at the start of their careers, the time when they most need it.

Of course, it does mean paying for longer, leaving less disposable income for people as they have kids, take on a mortgage – in reality many may never pay off their loans in full by the time they retire. But, seeing as a university education is thought to increase your lifetime earnings by £100,000 on average, I don’t see that this will come into the thinking of many people deciding whether to go into further study.

A much bigger problem, in my view, is the announced cut to the Education Maintenance Allowance (EMA). For those not familiar, the EMA offers up to £30-a-week for teenagers going through further education such as A-levels, on a means-tested basis.

Students will no longer be able to claim EMA from January 2011, meaning many poorer students will have to find another way of funding their tertiary education. £120 a month, whichever way you look at it, is a big amount of money to lose for anyone at a young age, and, aside from the increased hardship, it could well put people off continuing their studies altogether.

I have a few friends that claimed EMA when I was going through school, and any of them would tell you that it made a massive difference – allowing them to work reasonable part-time hours that didn’t impede on their studies. Without it, there would definitely have been some questions raised as to whether college or 6^th form was either worthwhile or affordable.

And, unlike tuition fees, this is money that students will be losing out on right away. Like many others, my worry is that young people will be put off continuing their education. Unlike most, I fear that it will happen long before university even comes into the equation.

Got a view on the fees? Let me know by commenting below or email me: stephen.jones@confused.com.

Interest rates: Is now the right time for a rise?

The Bank of England announced this week that inflation is likely to stay high for the rest of the year, prompting some calls for interest rates to rise in response. Confused.com's Stephen Jones weighs up the options.

Bank of England governor Mervyn King attracted yet more attention this week following his warning that inflation is likely to stay (un)comfortably above target for at least the rest of the year.

Announcing the grim news for consumers, he said that the Bank would ready themselves "like the English batsmen preparing to defend the Ashes, watching carefully, perfectly balanced in the crease, ready to play forward or back according to the length of the incoming delivery... in order to keep inflation on track to meet the two per cent target in the medium term."

Bizarre cricketing analogies weren't the only thing raising eyebrows. In case you didn't know, I'm hooked to Twitter, and the responses on there to King's statement were pretty pronounced to say the least.

One fellow tweeter, Dr Ros Altmann - a hugely-respected pensions expert and newly-appointed director general of Saga – put her point across:

"at last Bank of England waking up: inflation is too high, no deflation. Growth is faster than forecast. So why are interest rates so low?!"

In less than 140 characters, she pretty much voiced what most beleaguered savers are feeling right now. With CPI inflation at 3.1 per cent, the vast majority of Brits' savings are actually losing value year-on-year. Whichever way you look at it, it's fair to say that savers are getting a pretty raw deal.

However, there is another side to the story. Housing benefit cuts, real-terms reductions to mortgage interest support and a tough economic backdrop mean a rise in interest rates could be devastating for thousands of homeowners. That's not to mention what it would mean for British businesses.

The Bank and the government are playing a careful balancing act, with loose monetary policy offsetting harsh fiscal measures such as the VAT increase and cuts to benefits and other public spending.

As a result, one major concern is that raising rates now may well be seen as the measure that pushes the UK economy from uncertain recovery to double-dip recession. And none of us want that.

Have you got a view? Let me know your thoughts by commenting below.

Why should I pay for a pensioner’s TV licence?

There was always going to be a bit of inter-generational tension when it came to dishing out spending cuts, but it seems to me that George Osborne really opened a can of worms with his spending review on Wednesday. 

In recent weeks we have heard that university tuition fees are set to soar, potentially leaving students with tens of thousands of pounds in extra debt, if they choose to go into higher education at all. In comparison, those who went to uni in the pre-Blair years will have enjoyed largely-subsidised study.

In the same speech, Osborne announced the end of the Education Maintenance Allowance (EMA) - which gave a small but valuable weekly allowance to encourage poorer youngsters to keep on learning -  while continuing to promise free TV licences to everyone over the age of 75, regardless of their income.

However, perhaps the biggest issue that cements this generation gap is housing. Osborne announced changes to limit social housing availability and plans to cut the building of new homes substantially, despite the fact that house prices are still artificially high due to a desperate lack of supply.

One commenter noted, quite rightly, that many older people will also have benefited from house price increases that would make your eyes water over the last half a century, while young families in 21^st Century Britain often struggle to access the market for years.

I was covering the spending review live, and unease with this particular paradox was pretty clear. To gauge the mood, I put out a little poll among those in the room. Of those that responded, 43 per cent thought that 16-30 year-olds would be worst affected by the cuts.

While this was hardly the most comprehensive of research, it’s fair to say that it still reflected the mood.

Now, I’m not saying that we should hike tax on pensioners across the board, or ruthlessly strip away benefits to people who need them. I could never argue that a person who has lived through war and paid taxes throughout their life doesn’t deserve to be well looked after in retirement.

Equally, I realise full well that most pensioners aren’t rich, and many would find their lives significantly worsened if their local services or benefits were cut. It’s not the fault of the elderly that we have a huge budget deficit, any more than it is mine or my parents’.

But it does seem to me that the "fairness" balance here isn’t quite right – with no means-testing, some older people will continue to receive benefits they really don’t need while others suffer. Should a young worker, doing 40 hours a week just to keep their job, really be paying for a rich pensioner to watch Bargain Hunt? I'll leave you to answer that one.

Got a view? Comment below to have your say. I also want to hear how you’ll be affected by the spending cuts – leave us a comment or email me: stephen.jones@confused.com.

Child Benefit: Just tell it to me straight

After a week of hyperbolic press coverage, Confused.com’s Stephen Jones cuts through the controversy and asks, ‘exactly how fair is the Child Benefit cut?’

Another week, another big debate about cuts. If the British weren’t such a resolute bunch, I think we’d all be on the verge of breakdown. Yes, we have a budget deficit to cut. No, it doesn’t mean we should all be cowering behind the sofa in fear of the taxman’s deathly knock.

This time around Child Benefit was the subject of ceaseless discussion in the papers, after Chancellor George Osborne announced that any family containing a higher-rate taxpayer would see its eligibility cut. This led to complaints from almost all sides that a couple bringing in a single wage of £45,000 between them would lose out, while a pair earning £40,000 each would not.

I, like many, can’t help but think the changes are pretty ham-fisted and, moreover, that coalition ministers have been more than a little disingenuous when constantly attacking the admittedly confusing tax system that was passed over from Labour.

Gordon Brown was, as many of us are aware, a big fan of means testing and tax credits – something which has become a source of ridicule, particularly from Conservative members of the government. They feel, perhaps rightly, that in many cases this has led to a confusing and costly exercise of giving with one hand and taking with the other.

However, just a day after the cut had been announced, David Cameron suggested that some families might be compensated with the introduction of a married persons’ allowance. Aside from this begging more questions about fairness – should marriage really be rewarded in the tax system? - it also smacks a little of hypocrisy. Isn’t this the same sort of to-ing and fro-ing that the prime minister and his colleagues have been mocking since opposition?

False platitudes aside, the cut itself is one of the inevitably painful effects of the Treasury tightening the purse strings. While our politicians must get into the habit of telling it to us straight, so we must also prepare for a squeeze on our household incomes.

This doesn’t mean we should all be living in fear; it’s simply the case that we’re going to have to be smarter with our money, saving a little more and spending a little less – whatever the Bank of England may say to the contrary.

As I pointed out recently, there are ways that some taxpayers can avoid losing the payments, for example by investing more in a pension. For others, sadly, there is no escape this time, but you can be certain that we’ll all be paying our way in one way or another.

For more information on the Child Benefit cut, see our guide to the changes. If you want to have your say on the issue and how it affects you, comment below or email me at stephen.jones@confused.com.

Should you pay for the taxman’s errors?

As another computer catastrophe sees millions at risk of having paid too much tax, Confused.com’s Stephen Jones weighs up the options available to those affected.

If you've opened a newspaper this week, you may well have noticed there has been an unusual amount of interest in tax. The subject: whether the victims of HMRC’s massive tax blunders should ‘stick ‘em up’ or fight back against the taxman.

The miscalculation is down to a PAYE system error which, according to HMRC, will lead to a £2 billion unpaid bill, with as many as 1.4 million people affected. Some papers have even put the total number affected by the blunder close to 10 million, but HMRC is refusing to recognise this figure at present.

If you have had your tax miscalculated, it’s likely that you’ve had a change of circumstance in the last year, perhaps by moving jobs or entering a company pension scheme.

I suppose it all comes down to a question of responsibility. On the one hand, if I sent all the correct information to customs, I would fully expect an institution that has been collecting income tax since 1799 to do its sums properly. To then be told that I owe hundreds of pounds some way down the line would be a pretty nasty shock, and one that I’d be loathe to accept.

Having said that, were I to receive part of the reported £1.8 billion payout, I’d no doubt be absolutely delighted to accept. So does this mean I’ve got a shocking set of double standards? Probably. Nonetheless, I’m going to stick my neck on the line and recommend that those who have underpaid should stick their neck on the line too and challenge it.

The Low Incomes Tax Reform Group (LITRG) has produced yet another excellent helpsheet for those receiving the government’s P800 forms - the first 45,000 of which should land on UK doorsteps this week.

LITRG points out that, if 12 months has passed since you alerted HMRC of your change of circumstance and your tax code has not yet been changed, you’ll be able to cite what’s called Extra-Statutory Concession A19. This gives you the right to challenge any outstanding debt on the basis that you had reasonable cause to think your tax affairs were in order.

Furthermore, it’s important to note that any calculation you receive is just that – a calculation and not a demand. If you do receive one, whichever way it falls, make sure you write to or call HMRC (0845 3000 627) to clarify your position, and be prepared to fight your corner should you believe you have a case. 

If you have underpaid and eventually receive a demand for money right away, refuse and offer an alternative schedule of payments over a more manageable period - remember that this is the taxman's fault, not yours. Click here for a full guide on what to do if you've been taxed incorrectly.

Have you been hit by the HMRC tax scandal? I want to hear your stories – comment below or email me Stephen.jones@confused.com.

More pensions pain on the way

As the government announces changes to the ways that private sector pensions are indexed, Confused.com’s Stephen Jones explains what it means and how it could affect your retirement income.

This week, new pensions minister Steve Webb stood up in Parliament to announce a change to the way final salary pension schemes will be indexed. While this at first might seem a relatively minor move, estimates suggest that it could have a dramatic impact on those affected.

Currently, increases in pensions are linked to the Retail Prices Index (RPI), a measure of prices which includes mortgage interest payments among other housing costs. However, the government now proposes to switch this to the “more appropriate” Consumer Prices Index (CPI) for defined benefit pensions, as well as those paid through the Pension Protection Fund and the Financial Assistance Scheme.

Though the coalition is presenting this as a move that better represents pensioners’ needs, it is in fact a pretty transparent method of saving businesses money. According to analysis from actuaries Hymans Robertson, this could potentially result in pensioners receiving only around three quarters of the increase they would have got under the previous method.

Of course, we have seen a spate of well-publicised pension deficits among major British employers in the last few years, from BA all the way to dear old Auntie Beeb. This move alone is estimated to close that gaping private pensions gap by around £50 billion.

Something does need to be done, and the government certainly doesn’t want to see these black holes result in companies collapsing. It is, however, worrying that pensioners – a group already seriously under the cosh – are being forced, yet again, to pay the price.

Will the move affect you? What are your views on the government’s changes? Let us know by commenting below.

Are we facing pensions meltdown?

In amongst the continuous talk about public deficit reduction, unemployment levels and repossessions, one ongoing area that no political party seems to have all the answers to is how to solve a British pension crisis that appears to be getting worse. Just this week, official figures have shown that only half of employees in the UK are now covered by pension schemes run by their employer.

HMRC statistics also showed that the amount of money paid into personal pensions has fallen by 5 per cent during the recession. All this is despite constant reminders that the state pension is insufficient to live on in retirement (in case you didn’t know, government records show that close to one in five pensioners live in poverty).

The cause of the crisis

So what’s wrong with our pension system? Well, at the risk of oversimplifying, the major problem is caused by demographic shifts (I know that sounds dull, but stay with me).  The so-called ‘baby boomers’ are now in retirement or reaching retirement age, which, added to growing life expectancy, means the over-65 population has increased rapidly in the last decade and is estimated to swell to more than a fifth of the overall population by 2025.

Of course, this creates an ever-growing burden on the state, as well as on those companies paying out on ex-employees who are now living longer than ever. With this in mind, more and more responsibility has been put on individuals since the 1980s to maintain their own retirement income. Examples of this include the removal of the link between earnings and the state pension, and the gradual phasing out of final salary schemes in place of the now more commonplace defined contribution schemes.

This is fine, to a point. However, one problem with this is human nature – many people are simply going to underestimate how much they need to save. Throw in a global recession which caused equities and house prices to take a dive, and you’ve got the explosion of a pensions crisis – meaning millions are now approaching retirement with a fraction of the savings they might have been counting on a few years ago, or simply need

The options? Retirees are increasingly having to find ways of topping up their retirement income through methods such as equity release or are simply having to work longer.

The solution

So, it’s clear that the incoming coalition government has a fine mess to sort out when it comes to retirement provision – not helpful when you’ve got a public deficit to shred. Already, indications are that the rise in the state retirement age to 66 will be brought forward, although the government has promised it will not be sooner than 2016 for men and 2020 for women.

At the same time, the new government  is expected to go ahead with auto enrolment, a pension reform  which will see  eligible workers  automatically opted in to a workplace pension scheme from October 2012– a move which, it is hoped, will create a much-needed change in public attitudes to early pension provision.

There is, however, much more work to be done to fix this broken pensions model. The coalition government has indicated that it will simplify pension rules to encourage people to invest in personal pensions. This is very welcome, but as many approaching retirement will tell you, the key is stability - too many rule and taxation changes in the last decade have led to a general mistrust of pensions as a savings vehicle.

It may only be the start of the radical reform necessary, but the government’s first priority must be to obliterate public apathy towards retirement saving by introducing simple, workable rules that will last.

Did the recession ruin your retirement plans? Are you worried about your pension savings? If you’ve got any thoughts on the UK pensions crisis, leave us your thoughts below.