Finance Markets Finance News | UK Personal Financial News & Daily Finance Market News Wed, 15 Feb 2012 21:23:00 +0000 en hourly 1 16-year olds should manage own bank accounts Wed, 15 Feb 2012 21:22:01 +0000 Jan Harris Experts say 16-year olds should manage own bank accounts

Parenting expert and author Andrew Watson has added his voice to those calling for young people to learn money management at an early age.

Mr Watson, who wrote a book for dads-to-be when his wife was expecting their first baby, suggests that allowing young people to make financial mistakes will help prevent them making more serious ones when they are older.

He says it could be beneficial for parents to allow their children to manage their own bank account when they reach the age of 16.

Teaching children to manage money is as important as reading, writing and arithmetic, he said, especially in the current economic climate.

Last month Simon Culhane, chief executive of the Chartered Institute for Securities & Investment (CISI), called for the government to give all 16 year olds a bank account of their choice, when they receive their National Insurance number.

With the use of online payment and transfers growing rapidly, Mr Culhane argues that mandatory bank accounts at the age of 16 would help young people understand personal finance at a much younger age.

His comments follow a debate in the House of Commons on a proposal to make financial education a compulsory part of every school’s curriculum.

The proposal, which was put forward by Conservative MP Justin Tomlinson, was supported by all political parties.

Research suggests that many people lack basic financial knowledge, with only 36 per cent of people understanding that the term APR relates to interest payments.

In the CISI’s magazine, Mr Culhane commented: “Financial education is too important to be tagged on as an also-ran; it should be fully integrated into the maths syllabus and tested”.

Mr Culhane suggested that a lack of financial understanding was contributing to the rapid increase in the number of people taking out payday loans with excessively high interest rates.

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Budget could end higher-rate pensions tax relief Wed, 15 Feb 2012 10:13:00 +0000 Jan Harris Budget could end higher-rate pensions tax relief

Danny Alexander, chief secretary to the Treasury, has told The Telegraph that he wants to cut tax relief on pensions to 20 per cent across the board, eliminating the higher rate of tax relief currently enjoyed by high earners.

The reform would help to pay for an increase in the tax allowance to £10,000.

Under current rules someone paying 40 per cent tax can claim tax relief on pension contributions at this rate.

When they retire, their pension payouts are taxed at their tax rate.

Although the change hasn’t been officially announced, pension experts are advising higher-rate taxpayers to top-up their pension fund before the Budget on 21 March in case the changes are introduced without prior warning.

Up to £50,000 can be put into a pension each tax year and the allowance from the three previous years can be carried forward if no contributions were made in those years.

The maximum annual pension contribution was cut from £255,000 a year to £50,000 in April 2011 and it may be reduced further in April 2012, which is another reason for people to act swiftly.

Nick Clegg has been pushing for some time for a tax break for lower earners, and changes at the high end of the tax scale would help to pay for this.

It costs the Treasury around £7 billion a year in higher rate tax relief.

Raising the Income Tax Personal Allowance from £7,500 to £10,000 would save £500 in tax for families whose incomes are under increasing pressure.

However today’s news that Britain’s AAA credit rating could be downgraded together with an expected increase in the unemployment figures, could put the plan to accelerate the introduction of the £10,000 personal allowance at risk.

Britain’s credit rating may be cut because of the impact of the eurozone crisis and slower than expected growth in the UK economy.

The Income Tax Personal Allowance will rise to £8,105 in April and Mr Clegg has been calling for a further increase next year.

The current deadline for the personal allowance to increase to £10,000 is 2015.

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Inflation down to 3.6% in January Tue, 14 Feb 2012 19:49:43 +0000 Jan Harris Inflation down to 3.6% in January

Inflation fell sharply in January to 3.6 per cent on the Consumer Prices Index (CPI), from 4.2 per cent in December, according to the latest official figures.

Retail Prices Index (RPI) inflation, which includes housing costs such as mortgage interest and council tax, fell to 3.9 per cent from 4.8 per cent.

Although CPI inflation has fallen for the last four months and is now at its lowest level for 14-months, it is still substantially higher than the Bank of England’s 2% target.

However the downward trend is expected to continue throughout the year.

In a statement the Treasury said: “Inflation fell significantly in January for the second month in a row, which is good news for family budgets.

“The Bank of England and other forecasters expect inflation to keep falling through this year, providing additional relief.”

The fall in inflation is seen as justification for the Bank of England’s decision to launch another round of quantitative easing to boost the economy and stave off another recession.

Last week it decided to inject £50bn into the economy by creating electronic money and buying gilts.
It suggested that without further quantitative easing, inflation was likely to fall below its 2% target due to rising unemployment and falling energy prices and with January 2011’s 2.5 per cent increase in VAT no longer a factor in the annual comparison.

In his letter to the Chancellor explaining why inflation was still more than 1 per cent above target, the governor of the Bank of England, Mervyn King, said:

“Although inflation is now falling broadly as expected, the process of rebalancing still has a long way to go. Growth remains weak and unemployment is high”.

Although lower inflation will help to ease the strain on household incomes, savers with index-linked savings accounts should be aware that it will mean lower interest payments.

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Prime Minister promises action on car insurance Tue, 14 Feb 2012 09:52:23 +0000 Jan Harris Prime Minister promises action on car insurance

David Cameron is attending an insurance summit at Downing Street today in an effort to tackle Britain’s reputation as “the whiplash capital of Europe”.

It is estimated that claims for whiplash injury following accidents are adding £90 a year on average, to car insurance premiums, which have risen by an average of 17% over the last year.

Britain’s “compensation culture” encourages motorists to submit claims even for trivial injuries and many claims are for excessive amounts, generating around £2bn a year in costs for insurance companies.

Although accident rate have fallen by 16 per cent over the last three years, whiplash claims have risen by a third.

David Cameron is expected to outline proposals to protect companies being sued for trivial or excessive claims in return for a reduction in the cost of motor premiums.

Plans by the Commons Transport Select Committee for a higher threshold in order to claim for whiplash injury will be discussed.

This may involve the introduction of tighter criteria including a minimum driving speed below which any whiplash claim could be rebutted, as well as medical evidence from independent experts.

The use of ‘black-boxes’ to monitor young drivers, reforms to the ‘no win, no fee’ system and a cut in the amount solicitors can charge for small personal accident cases, will also be discussed.

Industry representative at the summit will include the Association of British Insurers and insurance firms Admiral, AXA, Aviva, CFS, RBSI and Zurich.

With changes being introduced this year that could push premiums even higher for certain groups, the summit has come at a key time.

A landmark ruling by the European Court of Justice could see the cost of insurance rising for women, who have traditionally benefited from cheaper insurance premiums than men because of their safer driving record.

However, following a case brought by a Belgium-based consumer group, the European court ruled that it is unfair to assess car insurance premiums based on gender.

The ruling will come into force in December.

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Offset mortgages recommended to first time buyers Mon, 13 Feb 2012 20:28:39 +0000 Jan Harris Offset mortgages recommended to first time buyers

Paula John, the editor-in-chief of Your Mortgage magazine, has advised first-time-buyers to consider paying for their home through an offset mortgage.

Offset mortgages are “the way forward” she said, suggesting they are “the most tax-efficient way of using any excess income”.

However offset mortgages are only suitable for potential house buyers who have a significant amount of savings, as they take into account the amount of savings a borrower has, and ‘offset’ the mortgage loan against it.

If a house buyer has £15,000 in savings and a mortgage of £100,000, for instance, the interest on the mortgage would only be payable on £85,000.

Monthly repayments are based on the full amount but the reduced interest payments mean that the mortgage is paid off more quickly.

With the base rate at 0.5% and savings earning very little interest, offset mortgages can be a good way of making the most of a nest egg.

Ms John said: “I am staggered by how few people in this country take advantage of offset mortgages; they certainly are the way forward and everyone I know in the mortgage industry has got one themselves.”

The latest figures from the Council of Mortgage Lenders (CML) suggest that the first-time buyer market is improving.

The number of mortgages agreed for first-time house buyers increased to 18,700 in December, 7 per cent more than the previous month, and a 14 per cent increase compared with December 2010.

The CML attributes the increase to a race by first-timers to buy a property before the end of the stamp duty holiday.

The government temporarily suspended the 1% stamp duty rate for first-time buyers, on properties worth between £125,000 and £250,000, but it is due to be reinstated in March 2012.

In contrast, there was a 6 per cent fall in the overall number of mortgages agreed, with just 509,500 mortgages approved last year.

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NBNK considering bid for Clydesdale Bank Mon, 13 Feb 2012 10:43:40 +0000 Jan Harris NBNK considering bid for Clydesdale Bank

New bank NBNK is believed to be considering a bid for Clydesdale and Yorkshire banks after it was announced that the two banks will undergo a strategic review.

The review, by parent company National Australia Bank, could lead to Clydesdale and Yorkshire banks being sold or floated on the stock market.

NBNK has not confirmed the takeover rumours, saying in a statement “We continue to assess a number of opportunities.”

NBNK was formed by Lord Levene and a consortium of senior business figures in 2010 with the aim of building a large UK retail bank by acquiring other banks.

Its CEO, Gary Hoffman, helped to restabilise and restructure Northern Rock after it collapsed in 2007 and had to be bailed out by the UK government

NBNK’s focus will be on its customers, initially in retail and small business banking, with a move into wealth management possible at a later date.

Its initial attempt at establishing a foothold in the UK banking sector, through the purchase of 632 branches being sold by Lloyds Banking Group, failed after The Cooperative Bank’s bid was accepted last month.

The Co-op’s bid, which was believed to be worth around £1m, was accepted because it was believed to offer a smoother transition than selling the branches to NBNK.

NAB is expected to complete its review of Clydesdale and Yorkshire banks by May.

There is speculation that investment group Sun Capital Partners and private equity firm JC Flowers could also be interested, if the banks are eventually offered for sale.

Meanwhile, Clydesdale has announced plans to tighten its business lending criteria in order to boost its performance.

The decline in margins and earnings at the bank, which helped to prompt NAB’s review, has been partly attributed to lower returns from business lending.

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M&S Money launches 3% cash ISA Fri, 10 Feb 2012 22:14:37 +0000 Jan Harris M&S launches 3% cash ISA

M&S Money has launched an Advantage Cash ISA paying 3 per cent, and which allows transfers in from other ISAs.

It can be opened with a minimum deposit of £100 lump sum followed by minimum monthly deposits of £25.

The 3% rate is variable, but there is no short-term bonus so the return won’t plummet after a few months and savers will be informed by post if the rate changes.

Fleur Carruthers, savings and investments manager at M&S Money said: “We hope that keeping Advantage Cash ISA simple will reassure customers that their tax-free money is in safe hands.

“We have handled thousands of ISA transfers from other providers in recent years, so customers can be confident that transferring their other ISAs to us will be simple and straightforward.”

An unlimited amount of withdrawals and top-ups are allowed, but once a saver reaches their annual deposit limit, withdrawals cannot be re-invested in an ISA.

Another new ISA coming onto the market is Lloyds TSB’s Junior Cash ISA which will be available from 13 February.

It will be offered at a tax free flat rate of 3 per cent AER, compared with the average rate currently available with Junior ISAs of 2.63 per cent.

Greg Coughlan, head of savings for Lloyds TSB, said: “The Junior ISA allows parents to set aside money throughout their child’s life in a tax efficient way, building that all important nest egg which could either help fund their university education or help them take that first step on the property ladder.”

“We are delighted to be the first of the major high street banks to announce such an account for customers.”

The Junior ISA locks away savings until the child turns 18 and will then mature into an Adult Cash ISA.

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Google suspends UK Compare Mortgages site Fri, 10 Feb 2012 16:43:19 +0000 Jan Harris Google suspends UK Compare Mortgages site

Google has closed its UK mortgage comparison site which it launched in July last year, after it proved to be less popular than expected.

Mortgage comparison sites are designed to allow visitors to compare mortgages quickly and easily without having to visit each lender’s individual site.

Google was competing with several well-established comparison sites, including and

Prior to closing the UK site, Google had already closed its US mortgage comparison site.

This was launched on a trial basis in 2009 and eventually became part of Google Advisor, a site designed to help visitors find financial products.

The UK mortgage comparison service was suspended in September to undergo a revamp but following a review of its products Google has decided to close the site down, although a final decision on its future has not been made.

The company said: “We tested a mortgage comparison product in the UK for a short time during the summer of 2011.

“That test is no longer running and we have not made a decision on our next mortgage comparison step in the UK.”

There was further bad news for Google in the US, with security researchers revealing concerns over Google Wallet, a Near Field Communication (NFC) payment service which turns a mobile phone into a credit card.

Security firm Zvelo revealed that the Google Wallet PIN can be accessed by cyber criminals through an exhaustive numerical search.

Gaining access to the PIN would allow them to make purchases.

Google is working with Zvelo to resolve the issue.

The company is believed to be in talks with UK retailers, distributors and banks over trials of the device in the UK and the service could be available in time for the 2012 Olympics.

It would allow Android phone users to tap their device on a reader in order to pay for goods and services.

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AA launches ‘black-box’ policy for young drivers Fri, 10 Feb 2012 14:02:56 +0000 Jan Harris AA launches ‘black-box’ policy for young drivers

The AA is launching an innovative car insurance policy called Drivesafe which could help younger drivers save up to £850 a year.

Younger drivers already pay substantially higher premiums than other motorists and these costs are increasing.

A new study by suggests insurance costs for younger driver have gone up by 5.7 per cent in a year.

Young males are the most heavily penalised, with the average insurance quote for a male driver aged between 17 and 20 totalling £3,730, while a female driver in the same age group would pay £1,959.

With premiums at this high level, the AA’s latest policy is likely to be welcomed, even though it requires the driver’s performance to be monitored.

Under the Drivesafe scheme a black box device is fitted to the policy holder’s car to monitor a range of driving skills and conditions including speed, braking severity, cornering and the types of roads used during certain times of day.

The system relays the data it collects to the insurer and the driver can check their performance online.

They will also be warned by email if they are driving dangerously.

Although the information could be used as evidence in the case of an accident, it will only be revealed if a court order is presented.

Similar black box technology is already being used by the Co-Op and Coverbox and Direct Line is planning to launch a similar system shortly.

Insurance broker Motaquote today revealed a partnership with sat-nav manufacturer TomTom which will allow drivers to check their performance in real time via an online dashboard.

Simon Douglas, director of AA Insurance said: “Most people can improve their driving standard and Drivesafe can help them to do that.

“I believe that in time, systems of this type will become increasingly widely used by drivers of all ages,” he continued.”

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ATOL scheme updated to protect online bookers Thu, 09 Feb 2012 21:45:40 +0000 Jan Harris ATOL scheme updated to protect online bookers

ATOL, a financial protection scheme managed by the Civil Aviation Authority, is being extended to protect up to six million more holidays a year.

The scheme ensures that holiday makers do not lose out financially if a travel company collapses, and that they are not stranded abroad.

An increase in the number of holidays booked online and of flight-only trips has meant that many holidays are not covered by the ATOL scheme.

From 30 April 2012 “flight-plus” holidays, which are not currently covered by ATOL, will come under the scheme’s protection.

These are holidays comprising a number of elements, including a flight, where the different elements were bought within specified period of time.

The reforms also mean that passengers will be given a certificate when they purchase their holiday, clearly stating whether their trip is protected by ATOL or not.

Further changes could be introduced under the Civil Aviation Bill currently going through Parliament, including bringing holidays sold by airlines, and holidays arranged on an “agent for the consumer” basis under the scheme’s protection.

The fund which covers ATOL’s payouts to holiday makers is running at a deficit and it is hoped that the reforms will strengthen its financial position.

Travel organisation Abta has warned that the reforms could lead to rising prices for holidaymakers.

In related news AA Travel Insurance revealed that nearly one fifth of travellers do not take out insurance for their winter holiday, even though winter sports such as skiing pose considerable risks.

Eighteen per cent of respondents to an AA/Populus study of 2,000 AA members who are taking a winter holiday said they don’t bother to buy travel insurance.

Only 34 per cent of those who do buy insurance make sure that the cover is adequate for their needs.

Alan Purvis, director of AA Travel Insurance, said: “More than a million people go on a snow holiday every winter so potentially, up to 200,000 are uninsured”.

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