Personal Finance: Watch out over income

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The Independent Online
OFFERS of high income need to be viewed with a sceptical eye.

The problem is that the word 'income' can mean different things to different people. The cautious investor may regard it as a sort of natural surplus that does not endanger the capital, in the way that building society interest or even perhaps the dividends paid on shares represent a separate stream of income from the granite lump of capital.

But the investment manager may regard 'income' as money that is paid into an investor's bank account each month no matter how it is derived.

This could cloak a hidden warning that the capital may be plundered to maintain the 'income' flow.

Imro, the financial regulator, is sending out warning notes to financial companies reminding them that what really counts is that investors understand the nature of the investment and the risks that are involved.

The risks and possible rewards should be given equal treatment. It is time for someone to get tough with companies that are exploiting the public's desperation over falling income levels.

HOUSE the Homeless is a Business Expansion Scheme supported by the Peabody Trust, the housing charity founded in 1862.

Housing the Homeless, on the other hand, is a BES to be launched next week out of Northamptonshire with a prospectus that names a bank that has denied all knowledge of the company and solicitors that wish to be dissociated from the issue.

The company has agreed to stick a disclaimer from the Peabody Trust on all prospectuses.

Martin Ryan, the administrator of the upstart company, says the motive is to house single people and families, and provide somewhere for people who would otherwise be refused bail.

He admits that he may have to look for another firm of solicitors and believes that although Midland Bank denies all knowledge of the scheme, things can be sorted out tomorrow when someone returns from a holiday.

Charitably, one would have to say that the whole effort may have had the highest motives, but to put it at its kindest, the execution has been at best amateurish and discourteous.

And frankly, no one with any sense would pass across serious amounts of money to an outfit that has so little idea of the right way to go about something so highly legalistic and technical as a business expansion scheme.

DIVORCED fathers, second wives and even lone mothers caring for children have been up in arms about the way that maintenance payments are assessed and collected.

The furore over the working of the new Child Support Agency has not been in vain.

Last week, it was announced that MPs are to set about reviewing the agency and will report their findings before Christmas.

What was sold to the public as a way of bringing irresponsible, runaway fathers to face their financial responsibilities has turned into a nasty scrap for thousands of easy-to-find fathers who were already paying maintenance.

In some cases, they may have been paying far too little, but in others the two parents had agreed a settlement taking the wider financial situation into account.

The problem was that the CSA's rigid formula was not moulded to take account of the complication of financial settlements. It's focus was on families on the breadline to save the Government's social security budget.

So loans, the cost of visiting children, private school fees and the like did not fit into the pattern. What the agency produced from looking at just a part of the overall picture was inevitably unfair.

Quite why the agency needs to get involved in the payment and collection of maintenance in cases where it is running smoothly should be brought into question.