A cautious welcome : Personal Finance

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The Independent Online
The mini-Budget could be counted as a small redistribution from car-driving, whisky-drinking smokers having a good time to the elderly, who have to pay a disproportionate amount of their meagre incomes to keep warm.

Of course, it is not that simple. Many tobacco addicts are not well off, and rural families have to rely increasingly on cars to get around, whether they are rich or poor.

The elderly had some of the cushion put in place to soften the VAT blow whipped away. But anyone who stays at home for most of the day and has a tight income must have welcomed the mini-Budget.

However, elderly people with savings had some good news last week. Interest rates were raised by 0.5 per cent.

All the building societies with the exception of the Northern Rock declared themselves against any change in their rate structures. This was in the interests of home owners, who feared higher mortgage payments, and in the interest of their own business, which relies on a sprightly housing market. But it is not what those with savings and whose mortgages are paid off wanted to hear.

The news about the Government's plans to stop people skipping back into Serps, the Government scheme to give the better-paid extra pension for extra contributions, was a disappointing but hardly surprising muddle.

It is usually worthwhile for younger people earning more than £12,000 to opt out and take a rebate into a personal pension. But as they hit their forties the balance becomes more a question of whether they can feel comfortable with the risk of a pension tied to the perfomance of stock markets.

To try to stop people rejoining the scheme, the Goverment promised age-related rebates that would make it worthwhile staying outside it.

But it could not stomach the cost, so rebates are to be capped at 9 per cent. This means those in their fifties will have to make the same judgements that those in their forties face now.

Whatever the arithmetic may say, I am still in the camp that does not believe the Government can possibly keep promises it cannot afford.

Banks and building societies are not as bad as they used to be about launching new accounts with tempting rates while leaving their loyal customers in old accounts with dwindling interest rates.

But it still pays to be vigilant. The Banking Ombudsman, Laurence Shurman, delivered his annual report last week. And although he believes that banks are behaving a little better, the standards we ought to expect are rightly being raised.

One bank used to have a single deposit savings account. Then it launched the Extra Interest account with a higher rate of interest and a 30-day notice period. A husband and wife had one of these Extra Interest accounts and happily believed their money was earning a bit of extra interest .

In the meantime the bank introduced a new instant access account. So while the couple were being paid 0.75 per cent on their money and suffering a notice period, their bank was offering others instance access and interest of 5.23 per cent.

The Ombudsman ruled that "extra" interest accounts ought to offer extra interest and awarded them compensation. But he reduced the difference between the two rates by half because he said they should have been monitoring their own account.

The bank behaved disgracefully, and the Ombudsman should really name names. The publicity might deter a few more institutions from this sort of behaviour. Even if it means that the tip-top rates are reduced.