First, 50,000 people who bought products which were supposed to be safe and offer good returns will get a share of a £194 million compensation package. They had invested in what are called ‘zero dividend preference shares’ – commonly called ‘zeroes’ or sometimes ‘splits’ – which were advertised widely as offering a worry free and secure return. The investments magnified the effects of stock market changes and much of the money disappeared when markets collapsed in 2000. In the end many people lost all the money they had invested. Estimates of the losses to individuals vary but are at least £350 million and could be £650 million, far more than the compensation on offer. Anyone who bought ‘zeroes’ or ‘splits’ should check to see if they are eligible by calling Fund Distribution on 0845 606 6389 or +44 1224 857555 from overseas or log on to www.funddistribution.org. If you do not register you will not get compensation.
Second, the insurance company Axa has been fined £500,000 and forced to withdraw misleading adverts for its Bonus Cash Builder Plan and its Guaranteed Over 50 Plan. The adverts, fronted by personalities Carol Smillie and June Whitfield, made false comparisons between what the product offered and the return that could have been obtained in a building society account. The FSA also says the adverts also ‘focused attention on the benefits of the products…but gave less prominence to key information about the risks’ – in particular the fact that investors may get back less than they had paid in and that over some periods of time the money would have grown more in a building society account. Around 200,000 people bought the products after seeing the misleading ads in newspapers and magazines and on television. Axa has written to some of these people but the letter did not make clear that they could have their premiums refunded, plus interest, if they chose. Although £1 million has been paid out, many more customers may feel they were misled by the adverts and would prefer to have their money back and invest it somewhere else. If you bought either product between January 2002 and January 2004 and have concerns about it, the number to call is 0800 904 7675.
THE TAX TRAP
Will the Chancellor use his Spring – and probably pre-election – Budget to get rid of a tax trap which affects people aged 65 or more? At that age, every pound of annual income between £18,900 and £23,070 is taxed at a higher rate – and once you’re 75 the trap extends up to £23,310. Income from a pension or job within that band is taxed at 33p in the pound and the interest on savings is taxed at 30p in the pound instead of the normal rates of 22 per cent (pensions) and 20 per cent (savings) which apply both below and above that level.
This is not higher rate tax – that starts for everyone at £36,145. It is a tax trap and only people aged 65 or more pay this rate on this band of income. It comes about because the Treasury claws back with one hand what it gave with the other. People over 65 are allowed a higher allowance before they start paying tax but when their annual income goes over £18,900 the tax man starts taking that extra allowance back. Only when income reaches £23,070 and the allowance has all been clawed back do pensioners drop back to the same rate of tax as everyone else.
LOAN SCAM
If you see a small ad in your local paper offering loans to people who have found it difficult to borrow in the past, beware. It could be an expensive scam. Canadian criminals are placing the ads offering fast loans, even to people with a poor credit record. The loan is quickly approved but instead of handing over the money the crooks ask for a payment of ten per cent of the loan to cover insurance. When the money is sent as instructed by Western Union or MoneyGram it disappears and the loan is never made.
The Office of Fair Trading is warning people that they should only borrow
money from UK registered companies they know. And the OFT says never send an upfront fee abroad. It has no power to block the ads but is asking newspapers to refuse them and report the matter swiftly to the nearest Trading Standards Office or the OFT on 0845 04 05 06.
TOP DRAWERS
The world’s most expensive piece of furniture is about to go on display at the Liechtenstein Museum in Vienna. The Badminton Cabinet was bought in December at Christie’s by the ruler of the tiny country, Prins Hans-Adam II. He beat off three other bidders to pay £19 million – a record for a piece of furniture or indeed for a decorative work of art. Made in Florence around 1730 for the Duke of Beaufort, the ebony, bronze, and lapis lazuli cabinet is considered the greatest work of Florentine art of its time and will form the centrepiece of a new gallery.
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Even if you do not have £19 million to spare, Nick McElhatton, Director of Furniture at Christie’s more affordable sale room in South Kensington, says now is the time to buy old furniture. "Georgian and Victorian prices bottomed out about six months ago and you can pick up extremely nice pieces for reasonable prices – a dining table for example for £1000. Compare that with reproduction or modern furniture, it is amazing quality and very unlikely to lose its value. With new furniture you will only ever get a fraction of its cost back." |
Christie’s South Kensington has furniture in its sales every Tuesday in March and is open for viewing every weekend.
FLEXIBLE CHARGES
Eagle eyed readers have contacted Money News to ask why some receipts for payments made by credit or debit card say that the customer has agreed to pay 2.5% of the price for ‘credit card services’.
The 2.5% charge is a device that some stores are using to pay less VAT. It works like this. Suppose you buy a suit for £100. Of that £14.89 is VAT and the shop gets the rest - £85.11. But if you pay with a credit card, then the shop has to pay the credit card operator £2.50 for processing the transaction. So the bank gets £2.50, the same £14.89 goes in VAT and the shop gets £82.61. Now the retailers say this is unfair. They think they should only pay the VAT on £97.50. The tax man disagrees. So many retailers have come up with a wheeze. They set up a separate company to process all credit and debit card transactions and that company charges the retailer £2.50 for every hundred pounds spent. So the shop says that it is getting £97.50 for the suit and the £2.50 for bank costs is exempt from VAT. That means that the retailer saves 37p on its VAT bill. With turnovers of billions that adds up to an estimated £300 million so far. The wheeze has been upheld by the High Court and now the EU may step in to stop it. The shops promise further legal challenges – and so does the Government.
The card that's hard
When some wealthy people flash their plastic it might turn out to be metal. American Express has launched a version of its famous green card made of titanium. As strong as steel but less than half the weight, the silver metal is found in aircraft frames, hip joints, and golf clubs. Amex says the new card will not just be a status symbol. It will also be more secure as the special tools needed to produce it make forgery too expensive to be worthwhile.
Meanwhile top bank Coutts, which counts members of the Royal Family among its customers, is sticking with plastic for its latest card – but dying it purple. The Coutts World card will cost customers £350 a year, though that fee will be waived for those who spend at least £50,000 a year with it. Despite the cost this is not a credit card – like Amex and Diners it is a charge card and the balance has to be paid in full every month.
e-mail Paul Lewis on paul@paullewis.co.uk