This piece first appeared in Saga Magazine in August 2008
The text here may not be identical to the published text

 

Saga Money

Tax on small pensions, state pension in advance, Dickens's desk, fster payments, boiler room scams

Revenue steps in
If you get a company or personal pension of around £1000 a year or less you may be facing a tax bill next year and a bigger one the year after that. Until this year the Revenue did not charge tax on ‘small’ pensions. In the distant past it had decided it was not worth the hassle of working out the tax and collecting it so it told pension providers not to bother. The word ‘small’ is not defined and each tax office set its own limit, normally around £1000 a year. Now the Revenue has decided to collect the tax. And is doing it in a typically complex way.

Tax is due on the pensions paid this tax year – 2008/09 – but no tax will actually be deducted because the Revenue doesn’t know how much is due. Shortly after April 2009 it will collect the information from pension providers relating to 2008/09 and work out the tax due. Not everyone will have to pay tax – only those whose total income is more than their allowance which is currently £9030 for someone aged over 65 or £9180 if you are over 75. If you do have to pay tax then sometime in 2009/10 it will be deducted each month from your pension. Which could mean a cut of 20% in the amount you get. But it gets worse. At the start of 2010/11 the Revenue will also collect the tax due in 2008/09 but which it did not collect this year. So in 2010/11 you may pay double tax – 40% off your pension. The double tax will continue into 2011/12 as the Revenue collects the tax due at the start of 2009/10 before it started deducting it. Only after that is finished will the tax revert to 20%. If this process causes you hardship the Revenue has the power to spread the uncollected tax over two or three years instead of one.

All this complexity means that the Revenue will make mistakes. Some people who should not pay tax will be taxed. Others who should pay some tax will be charged too much. And no doubt there will be a group who should be taxed but who will be missed. To call it a dog’s breakfast is an insult to pet food. So if you get a small pension that is not taxed and you pay tax on other things then it might be sensible to set aside a fifth of it in a high interest savings account in case you find you have to pay extra tax from April 2010. And if you are taxed in 2009/10 then check it carefully. You may be paying too much.

Weekly state pension
If you have your pension paid into a bank account you probably get it paid every four weeks in arrears. Some people even have it paid thirteen weeks in arrears. But since 2003 you have been able to ask for your pension to be paid into a bank or building society weekly and weekly payments are made in advance. It costs nothing to change and it will mean you get your money earlier. To make the change call the Pension Service on 0845 60 60 265.

Price of fame
A mid-Victorian mahogany desk and a walnut chair of the same era were sold for £433,250 at Christie’s this summer. A similar desk was sold at Chrisite’s in 2007 for just £840, another in 1999 for £2070. Similar chairs sell in the low hundreds. The reason for this extraordinary price is what Matthew Paton of Christie’s calls "The power of provenance". The desk and chair once belonged to Charles Dickens and he sat in one at the other in his study at Gad’s Hill writing hundreds of letters as well as famous works such as Great Expectations and Edwin Drood. After his death in 1870 the furniture featured in a painting of his study by Sir Luke Fildes called ‘The Empty Chair’. As Paton says, "It’s one of the magic things in the auction world
. The lot is unique. Two people were battling it out and many underbidders didn’t get a look in. The auctioneer had a bid to £100,000 and then a telephone bidder who took it up to £200,000 then a second that took it up to final price. The buyer was in the room." The man who sat in Christie’s and paid this extraordinary price was Tom Higgins, an Irish businessman who made his millions offering live tarot and psychic readings over the phone for a minimum of €2 a minute (minimum €15). He will use the historic desk and chair in his second home in Donegal and says "I think I got a bargain". He should know.

Banks get a move on – slowly
At the end of May the UK banking industry finally fulfilled an eight-year-old promise and began to move our money between accounts in different banks almost instantly. Previously bank transfers took several days. The money left our bank account one day, wandered about for a minimum of three days (with weekends and public holidays off) and finally arrived in much the same time it took when men in bowler hats carried bundles of cancelled cheques around the City of London.

The new system – called Faster Payments – will move money within a guaranteed two hours – though in practice it will be practically instant. And it works 24 hours a day seven days a week. But it is being phased in very slowly. Some banks will let you pay money out instantly (no change there then!) but still insist on money taking the country route when it is paid to you. A couple of banks are not taking part at all. Building societies and foreign based banks which operate some of the top savings accounts have to wait for the bank that does their clearing to let them in to the new system. And if you want to pay your credit card bill quickly forget it. That will not happen until the end of the year or later. As for cheques, they are not included at all. Ever.

Your own bank will tell you if you can make faster payments from your account. And you can find out if the bank sort code you are sending money too will accept the faster payment at this website www.apacs.org.uk/sortcodechecker/index.html

Boiler Room Scam
The biggest threat to the finances of middle England. That’s how Detective Chief Superintendent Steve Wilmott describes a con called the boiler room scam. He estimates that £500 million a year is stolen from unsuspecting victims in the UK. The losses range from a few thousand pounds to more than a million. And if you think that you could never be conned
, DCS Wilmott has this warning for Saga readers.

"They are hugely persuasive, very sophisticated. We’ve had professors, doctors, local councillors – even financial advisers have been caught."

The crooks get the names and addresses of people who already own shares – that information is publicly available - and telephone them at home out of the blue. The caller will be English and well spoken and offer a deal on shares in a new company that is involved in something that you know is cutting edge such as DNA profiling, mining for rare metals, a new drug for cancer, or prospecting for oil. The patter will be smooth and the offer tempting, says WIlmott.

"These people are very sophisticated and very knowledgeable about the market. They have glossy – but fake – websites. Sometimes they even refer you to a false regulator who seems to authenticate them. One lady came to us because her husband had committed suicide after losing £225,000. Another lady had power of attorney when her husband fell ill and then she lost £500,000."

Once you show any interest the callers will be persistent, cajoling, persuading, even threatening. If you send them money share certificates will arrive. But then they will be back with tales of takeovers and the urgent need to invest more to make more. And if you decide to sell your shares they will agree but charge you an upfront commission. And never send you any money.

"We’ve known them strip out life savings. My aim is to eradicate these crooks. If someone calls up to offer you shares over the telephone just put the phone down. It’s that simple."

DCS Wilmott has caught some of these crooks and even got back a little money. But he is anxious to collect as much information as he can. Perhaps you have been conned or approached? Or have some odd shares you bought like this which may be worth nothing. If so he wants to hear from you www.cityoflondon.police.uk/CityPolice/ECD/Fraud/boilerroom.htm. And remember. If the phone rings with a share offer just say goodbye and hang up. It could save you a fortune.

August 2008

 


All material on these pages is © Paul Lewis 2008