Money News

Bank fines
In 2011 the Financial Services Authority got tough with the banks over how they treated their customers. For the first time it fined five banking groups and one building society a total of £38.1m and every fine was for some action or another that led to expense or poor treatment of some of their customers.

The list begins with HSBC. In December it was fined  £10.5 million for misadvising nearly 2500 elderly customers about paying for long term care through its NHFA subsidiary. The second highest fine was levied on RBS Group. Its posh bank Coutts was fined £6.3m for mis-selling high net worth customers £1.45bn of investments and its more day to day RBS and Natwest brands were fined £2.8m for the way they handled customer complaints.  Barclays had the third biggest fine in the year – £7.7 million for mis-selling investments to 12,331 mainly elderly customers. And in the rear was Lloyds Banking Group. Its Bank of Scotland subsidiary was fined £3.5m for mishandling customer complaints about retail products. In addition to the big four, Credit Suisse was fined £5.95m for sales of £1bn of unsuitably risky products to some wealthier customers. And Norwich & Peterborough Building Society was fined £1.4m for giving unsuitable advice about risky investments marketed by Keydata.

It is the first year that so many banks have been fined for the way they treated customers. In fact nothing like it has ever happened before. Perhaps they will treat us all a bit better in 2012.

More information: www.fsa.gov.uk/pages/about/media/facts/fines/index.shtml

Small pension pots
Pensions Minister Steve Webb has a mission – he calls it his big fat pension pot project. He wants to make it simpler to find and amalgamate small pension funds perhaps earned in a dozen employments over a lifetime. He is concerned that the problem will get bigger when auto-enrolment into a pension scheme starts in October. At first only the largest firms will have to enrol all their workers into a pension scheme – and pay into it themselves. But over the next few years all employers will have to join in and there could be millions people every year who move jobs and leave behind a small pot of pension savings. So the Minister is consulting on how this problem could be resolved.

More information: www.dwp.gov.uk/consultations/2011/small-pension-pots.shtml

Meanwhile the rules about cashing in small pension savings are to be relaxed. if your total pension savings from all sources amount to a capital sum of £18,000 or less  you can already cash them in – a quarter will be tax-free and the rest taxed. But soon you will be able to cash in an individual pension pot of no more than £2000 however big your pension entitlements. To avoid abuse by people splitting their pension into lots of little pension pots you will only be able to cash in two such pots in a lifetime. The new rules will probably begin in April.

Quadrillion
It is barely eight years ago that I wrote in Saga about the appearance of the number one trillion in our national accounts. I predicted then it would become commonplace and so it has. But now its thousand times bigger brother has appeared in the national accounts of Japan. The number is called one quadrillion and it is a one followed by fifteen – yes fifteen – zeroes. Put another way it is a million billion or a thousand trillion.

Late last year Fumihiko Igarashi, the senior vice-minister in the Japanese Ministry of Finance predicted that the country's debt could exceed one quadrillion Yen by March. With 78 Yen to the dollar, even a quadrillion of them is still less than the US Government's debt – currently estimated at around $15 trillion. The US debt crossed the bar of a mere trillion dollars as long ago as 1982. This month or next the UK's debt is expected to cross the trillion pound barrier and, as I wrote here at the time, the total debt of UK households including mortgages reached that milestone in June 2004. But with another thousand-fold leap required for us to pass Japan, its sole ownership of quadrillion seems unlikely to be challenged for many years.

Plastic protection
New protection has started for five million people who have debit cards with the Maestro brand. They are now covered by a system confusingly called ‘chargeback’ which refunds your money if the item you buy does not do what it promised or does not arrive. Mastercard – which owns the Maestro brand – offers the new protection for any items bought from with the card from [15 October 2011]. It is slowly converting all its debit cards to the Mastercard brand and those cards are covered as well.  Visa debit cards have been covered by a similar system for some years. Both have a minimum spend of £10 for the cover to work but anything you buy online, by phone or face to face should be protected. You should always take the matter up first with the retailer but if that does not work then the chargeback protection can be used.

Chargeback is different from the statutory protection when you buy with a credit card. That is given by consumer credit law and protects any purchase of goods or services between £100 and £30,000. If something goes wrong or the item does not arrive quote s.75 of the Consumer Credit Act and ask the card provider to reimburse you in full.

More information: www.which.co.uk and put ‘chargeback’ in the search.

Safe savings
The current global economic crisis has left many people wondering just how safe their cash savings are if the worst should happen and a bank went bust. In the UK up to £85,000 of cash savings is guaranteed by the Financial Services Compensation Scheme and ultimately by the Government. The limit applies per person so cash in a joint account is guaranteed up to £170,000. There is only one guarantee per financial institution – so if you have two accounts with the same bank the overall limit is still £85,000. It is often difficult to find out if two apparently separate financial institutions are linked. For example, NatWest which is owned by RBS has a separate banking licence and still counts as separate from RBS. But Cheltenham & Gloucester which is owned by Lloyds TSB shares a banking licence so only £85,000 spread across both is protected.

When Northern Rock collapsed in 2008 the Government stepped in to make sure no saver lost money, however much they had in savings. But there is no certainty it would do so again. So the cautious approach is to limit savings in any one firm, or linked firms, to £85,000. That way all your savings are covered in full if the worst happens.

Some banks based in other parts of the European Union trade in the UK but are not covered by the UK scheme. The Government of the country where they are based will guarantee up to €100,000 but getting your money back may take longer. Foreign banks based outside the EU have to be covered by the UK scheme to trade here. If you deal directly with a bank outside the UK (including the Channel Islands and the Isle of Man) then it is not protected by the UK scheme and you should check carefully what protection it has.

Further information: www.moneysavingexpert.com/savings/safe-savings

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