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Spend & Save

Julian Knight: Virgin banks? It can only be good news for customers

If high-street giants feel a chill, that will be the bearded one breathing down their necks

Until last week I had never heard of Church House Trust – a tiny private bank with offices in Leeds and Yeovil. It made a pre-tax profit of just £450,000 in 2008 – about the price of a good-size family house – but has now been bought for the more than £12m by Sir Richard Branson's Virgin Money.

What piqued the interest of the bearded one? Well, Church House Trust comes with a UK banking licence, which means it is allowed to take deposits and offer mortgages. As a result, Virgin Money – which offers credit cards, insurance and pensions – will morph into Virgin Bank and be able to compete with that discredited rabble called the High Street Banks on their own territory.

Whatever you think of Branson and his yen for publicity, Virgin is a great brand. In my experience of their gyms, airlines and, yes, even their trains, I have always found their focus on customer service pitched just about right. The Virgin name in banking and the goodwill it brings should be a massive cause for concern for the high- street names, as is the long-trailed entry of Tesco into the marketplace over the next couple of years.

I can see Virgin and Tesco carving out a decent niche in the market (without blowing it wide open) and, fingers crossed, this will bring a much needed injection of competition. Ideally, the battle will not just be over rates for savers and borrowers but, crucially, customer-service standards. And, with most banks reassessing plans to charge for current accounts – after the Supreme Court decision in November – the new decade could be a more interesting one for customers.

HIPs have their good point

Like most personal-finance hacks I have long subscribed to the view that Home Information Packs (HIPs) are a colossal waste of time. The information in them is limited and much of it is replicated by the buyer's solicitor, and it doesn't include – thanks to a loss of nerve by the Government – the one thing that would be of any use to a buyer, namely a full structural survey. As for energy-performance certificates; really, we don't need to be told that our housing stock is useless this winter, we just feel the draughts.

Still, I had my views challengedlast week by – of all people – estate agents. At HIPs' introduction, estate agents would look to the heavens and bemoan bureaucracy, but of late many have changed their tune. It seems the expense of a HIP (£300-£400), which falls on the seller, is deterring those who just want to test the water. One agent told me that the number of sales falling through had halved. It's not how HIPs were supposed to work – the idea was that they would speed sales up – but at least they are having a partly positive impact, although they could still do with a full structural survey being made mandatory pronto.

A pension by any other name

It has been announced that the long anticipated personal-accounts pension saving scheme is being rebranded – still years before its introduction. Personal accounts are going to be known as National Employment Savings Trusts, a name obviously picked for its acronym Nest, as in Nest-egg. Very clever, I'm sure. But this isn't the first rebranding of Nests or personal accounts – or whatever they are called this week. When the scheme was proposed in 2004 by Lord Turner it was the National Pension Savings Scheme, but the word "pension" is the marketing kiss of death, so they morphed into personal accounts. Now, six years later, we have Nests.

But whatever they are called Nests may not survive a change of government. In any case, the way in which the scheme is set up – particularly the unfairness that savings in a Nest will bar you from state benefits, so people who don't save will be just as well off – means that killing it off and starting again might be the best idea.