Weekly Money: round-up of the personal finance stories you may have missed 2 to 6 March

 

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The Independent Online

Pensions risks; new tax break; energy-efficiency handout: Scottish Power sales ban; Amazon Prime ad banned; Have you a winning Premium Bond?; the stories we noticed this week

6 March

People could end up losing out on thousands by being persuaded into the wrong retirement product. Consumer group Which? reckons the new pension freedoms coming into effect in April could lead to more people using so-called income drawdown, which allows money out gradually each year. But its research uncovered high charges among these products, including one that charges 2.7 per cent.

It wants a charge cap of 0.5 per cent introduced to protect people. Which? executive director, Richard Lloyd, said: “We want the Government to take action to secure better pensions so people have just as much protection when they take money out of their pension as when they put money in.”

 

* * *

From 6 April more than 4 million married couples and 15,000 civil partnerships will be eligible for a new tax break. The Marriage Allowance will allow a spouse or civil partner who doesn’t pay tax to transfer up to £1,060 of their personal tax-free allowance to a spouse or civil partner – as long as the recipient doesn’t pay more than basic rate income tax.

You’ll need to register to claim the tax relief.

 

* * *

More than 1.75m mortgaged households have never experienced a rise in the Bank of England base rate. That puts them at risk of a financial shock when rates do increase, the Money Charity warns.

It says a rise could catch households by surprise, particularly as new mortgages are cheaper than ever. In January new mortgages attracted an average interest rate of just 2.81 per cent, meaning monthly payments on a £150k mortgage would be £697. In September 2008 it was 6.09 per cent, meaning a repayment of £975.

 

5 March

A £70m handout to households to improve the energy efficiency of homes is expected to be snapped up in days. The third phase of the Green Deal Home Improvement Fund opens on Monday 16 March when households can apply for up to £5,600 for energy saving measures such as solid wall insulation.

But Energy Secretary Ed Davey warned that the cash will be gone in “not much longer than a week”. For more information call the Energy Saving Advice Service on 0300 123 1234 or Home Energy Scotland on 0808 808 2282.

 

* * *

The new pension freedoms that come into effect next month may be encouraging people to consider wrongly switching out of defined benefit pension schemes, the City regulator has warned.

The new rules allow people aged 55 and over to choose what to do with the cash in their pension pot, including being able to take the whole lot in one go. But they do not apply to holders of defined benefit schemes, known as gold-plated pensions because they promise a certain, guaranteed income in retirement. Despite that, members could be tempted by the chance to get their cash early to switch out of their DB scheme, which could be a costly mistake.

Christopher Woolard of the FCA said: “We need to ensure that those considering moving away to other arrangements are fully aware of the potential benefits they are giving up.”

 

* * *

The widening gap between house prices and wages leaves first time buyers having to pay £77,000 more for a home, new research published today by Shelter suggests.

 

4 March

One of the Big Six energy giants has been forced to accept a 12 day sales ban after failing to meet customer services targets imposed by the regulator.

Scottish Power has been under investigation by Ofgem since November, when the energy Watchdog reported that the firm was hitting customers with “unacceptably long call waiting times.”

It gave the energy giant just three months to clear its problems, demanding improvements in three key areas: call waiting times, late bills and, crucially, clearing a backlog of Ombudsman complaints by November.

Despite telling the regulator it had cleared the backlog in time, Ofgem subsequently uncovered new evidence that showed the company had not met its November target.

As a result Scottish Power will not be allowed to flog – or “proactively sell” in the regulator’s parlance -its energy deals for 12 days from yesterday.

 

***

There’s some small solace for all those who feel tricked into inadvertently taking out a £79 annual subscription to Amazon Prime: the company has been rapped and accused of being “misleading”.

The internet giant attracted millions of people to take out a “free trial” of its Prime service over Christmas with the offer of free next day delivery.

But a Twitterstorm erupted last month after thousands complained of unexpectedly having cash taken from their account because the free trial was automatically turned into a full paid-for subscription unless they cancelled within 30 days.

Today the Advertising Standards Authority has ruled that a mailshot from the firm misled consumers about subscription fees and mustn’t be used again.

 

***

Three-quarters of us are paying up to £250 a year more than we need to heat and light our home, reckons Caroline Flint, Labour’s Shadow energy secretary. She’s accused David Cameron of failing to live up to his promise made two years ago of forcing energy suppliers to put all customers on the best deal.

That’s because 75 per cent of households are still on their supplier’s standard variable tariff, even though on average they’re £180 a year more expensive than the cheapest tariff. Ms Flint said: “Millions of households are still being routinely overcharged by hundreds of pounds every year.”

 

* * *

There’s a gender divide when it comes to investing: women are less aggressive investors and tend to take less risk than men. But is that a good thing? Maike Currie of Fidelity Personal Investing thinks not. In a video interview with me she warned that focusing on keeping savings safe can mean losing out on better returns.

 

* * *

It’s just a month until more than a million savers no longer have to pay tax on their nest eggs. Under plans announced in the Budget, from 6 April a million savers with an annual income under £15,600 will be able to get interest paid tax-free while 500,000 could get back some of the tax they’ve paid on interest. You can check eligibility at a new online calculator launched today.

 

3 March

Independent energy supplier Ovo is scrapping its exit fees from today. Most suppliers charge between £25 or £30 for each deal you want to cancel, which can mean a £50 charge for switching a duel fuel tariff.

We’d rather customers stayed with us because we’re giving them better service and cheaper energy, than because they’re tied in by exit fees,” said David Gooch of Ovo Energy.

 

* * *

The best way to save money? Forget websites or apps, listen to friends or family. We each save an average of £177 per year by following up recommendations from those close to us, reckons American Express. The biggest savings - at £60 - are on holidays, but we also save on shopping, eating out and entertainment by acting on word of mouth.

 

* * *

Savers have just over a month to make use of their 2014-15 tax-free Isa allowance. You can stash up to £15,000 before than in an Isa and pay not tax on the proceeds.

As we near the deadline, more new attractive Isa deals are likely to be launched. Anna Bowes of SavingsChampion, said: ““We have seen an increase in Isa activity as we move towards the end of the tax year, with more providers launching new Isas.

“Both Shawbrook Bank and the State Bank of India have launched new best buys and HSBC has introduced an incentive that will encourage its customers to pay into their Isa.”

A new bank - Charter Savings Bank - has also launched with some competitive new accounts, she said. “New faces to the savings market are always a welcome sight, particularly if they can encourage more competition by challenging the current best buys. Hopefully some of the established providers will take on the challenge and react to the new kid on the block.”

 

2 March

There are “dark corners” in the wold of occupational pension schemes, the Pension Minister said this morning.

Steve Webb said: “There is a fear that the dark corners of the investment and pensions industry hold some nasty surprises.”

The Department for Work and Pensions and the Financial Conduct Authority have joined forces to investigate transaction charges in occupational pension schemes as the fund industry faces growing criticism for lack of transparency about charges.

A 0.75% cap on the charges on workplace pension comes into effect next month but doesn’t include transaction costs.

“We have a duty to throw light for the first time on potential hidden charges - and restore faith and fairness in British pensions,” Mr Webb said.

 

***

Good news: more of us are getting the savings habit. In fact three quarters of us say we are currently saving, according to new research published today by Scottish Widows. Five years ago the figure was less than two-thirds.

The average amount people have in savings now stands at £32,407, compared to £30,175 last year, marking a 7 per cent rise.

David Lascelles of Scottish Widows said: “Greater flexibility on savings vehicles including Isas and pensions have provided more incentives to put money away for the longer term while the increase in long-term savers suggests more people understand the need to prepare for their financial future.”

* * *

Are you a Premium Bond £1m jackpot prizewinner? A woman living in Stoke-on-Trent who only bought her Premium Bond last June has won one of March’s jackpots. The other winner is a man from the London who bought his winning Bond in 2004.

Meanwhile there remain more than a million unclaimed Premium Bond prizes worth collectively around £48m. There is no time limit for claiming prizes so even if you won decades ago - the first draw was June 1957 – you money will be waiting for you. You can check at nsandi.com.

* * *

The mortgage rate battle continues. Latest to reduce rates is NatWest and RBS. They now have trackers from as low as 1.39 per cent and fixed rates from 1.49 per cent.

Last week Chelsea Building Society cut rates including a five year fixed at 3.04 per cent for those with a 15 per cent deposit. Meanwhile Santander launched what it claimed were market leading zero booking fee two year fixed rate mortgages.

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