Money News October

DON’T BANK ON LAND
I had a sad letter from a reader whom I will call Julia.

“I wonder if you are able to give me any information on [a land investment company]. They have stopped answering my emails and I am concerned.”

Well she may be. Julia had spent a total of £20,000 on two small plots of land after the company promised her that planning permission would be obtained and she would make a good profit in three to four years. That time has now passed and she has nothing to show except title to plots in a field.

I have written before that no-one has ever made money out of putting their savings into a scheme promising big returns from small rectangular plots in country fields. This land-banking business takes £200 million a year off gullible investors and the only people who ever make a penny are the firms who sell them.

The pitch is always the same. We need more homes. The Government is relaxing planning rules. Why not make money by buying a bit of a field and then cashing in when it gets planning permission for housing?

Put like that is seems quite reasonable. But it can never work. First, the plots – although often close to other housing – are in areas protected from development where the chances of getting planning permission are effectively zero. Second, even if it was given, the plots of land are the wrong shape for housing and often too small for a single house to be built. Third, firms which develop homes already have plenty of land (Bovis for example owned more than 20,000 plots at the end of 2010, enough for ten years’ building) and no developer would buy a field from dozens of separate owners. Finally, these plots usually have no access. And what there is will be kept by the land-banking company just in case the impossible happens and the land can at some future point be developed.

I investigated one such scheme earlier this year and a local estate agent told me that the plot of land which one ex-soldier had bought for £10,000 was worth just £75.

The fact that land banking advice is in the ‘scams and swindles’ section of the Financial Services Authority website tells you all you need to know. Read more about it at www.fsa.gov.uk by searching ‘land banking’. The FSA has closed down seven schemes and is investigating another 20.

The chances of recovering your money from one of these schemes is almost zero. But it is important to report it to the national fraud authority through Action Fraud on 0300 123 2040 www.actionfraud.org.uk. If they prosecute the firm you might – just might – get a small amount back.

CLAIM IT – IT’S YOURS!
Millions of people aged 60 or more could share as much as £5 billion to help with their day to day expenses, council tax and, if they are a tenant, rent. Many do not claim because they simply do not know that they can claim or how valuable it may be. Others think these means-tested payments do not apply to them or they have tried before and been refused. But if you or your partner are at least 65 you can get some help with your income if it is below £188 a week (single) or £277 a week (couple). Savings of up to £10,000 do not affect this right. savings above that will reduce what you can get. So it is always worth trying.

Claim It! by Paul Lewis is a complete and simple guide to all these benefits and some others such as funeral payments and free TV licences. Read or download it free. It is free. But it could bring you hundreds of pounds a year if you follow its simple advice.

HIGH COST CREDIT
Should lenders be able to charge annual interest of more than 1,000% on the money we borrow? For years campaigners who deal with people in debt have said they should not. But many others – including some charities and politicians – have said that controlling the maximum interest on credit would simply drive low income households to illegal loan sharks.

But now the Government has ordered more research into expensive short-term credit. For example, pay day loans are intended to tide you over from the time you run out of money in the month until the next pay day. One well-known lender charges £75 to borrow £300 over 28 days. That works out at an APR of 1,737%. But the firm says that is and better value than, say, a bank overdraft. In fact if you need to borrow relatively small amounts of money over a short period then a credit card will always work out much cheaper.

These firms have seen business boom in the last couple of years. But now the Government wants to see if those eye-watering APRs should be controlled.

COMMISSION TRAIL
If you are paying into a personal pension you are almost certainly paying a small percentage of your fund every year to the Independent Financial Adviser who sold you the pension. It is called trail commission and will probably be half a percent of the value of your fund – and it could be more. Trail commission carries on even if you stop paying in to your pension and will continue to drip out every year until you retire and convert your pension pot into an income. That can take thousands of pounds out of the money you have saved to buy yourself a pension.

The commission is supposed to pay the IFA to keep an ongoing eye on your money. But many IFAs see it simply as a source of income. The official watchdog Consumer Focus wants the insurance companies who hold our pension funds to stop paying trail commission to advisers who do nothing for it. Meanwhile all you can do is change to another IFA and ask if they will earn the commission – or hand some of it over to you.

All commission on new sales will be banned from January 2013. But any trail commission which was agreed before that date will continue.

How to get your trail commission back

END DOORSTEP SELLING
 Scottish and Southern Energy has broken with its competitors and said it will stop calling door to door to persuade people to change their energy supplier. The practice has been widely criticised and the energy regulator Ofgem found that four out of ten people persuaded to change supplier through a doorstep call ended up with a more expensive tariff. It laid down rules about how energy was sold door to door but it is now investigating four of the big six energy companies for breaking those rules.

The best way to see if you can get a better deal for your electricity or gas supply is to go to one of the approved sites that must offer access to every tariff on the market. You can find a list of those at www.consumerfocus.org.uk/get-advice/energy/confidence-code. If you do not have access to a computer your local library should be able to help. You will need details of you current usage – take your last four quarter’s bills.

If someone comes to the door to sell you energy just say ‘no thanks’ and shut the door.

CHEQUES SAVED
Plans to get rid of cheques in 2018 have been scrapped. The banks announced in 2009 that they intended to close down the cheque clearing system by October 2018 if they could find an acceptable alternative. After 18 months searching they failed to find one. But as recently as June the Payments Council – which is owned by the banks and runs the plumbing our money runs through – said it was still pressing ahead with its plans despite widespread hostility. Then a powerful Parliamentary Committee followed by Treasury Minister Mark Hoban told the Council that it must scrap its plans if it had no realistic substitute. So the Council announced in July that “cheques will continue for as long as customers need them”. All preparation to scrap them has now ended.

Unfortunately the reprieve for cheques does not extend to the cheque guarantee card. It ended on 30 June and will not be revived. And most retailers will continue to refuse to take cheques. But payments to charities, clubs, tradespeople, schools, and of course for Christmas and birthday gifts will still be able to be made by cheque for the foreseeable future. Hooray.

e-mail Paul Lewis on paul@paullewis.co.uk