Money News July 2012

Cancel that payment
When you buy something online or over the phone you will usually give your credit or debit card number. But sometimes you can find you are not just paying for the service once – the payment may be taken regularly – every month or year. They are called continuous payment authorities or recurring payments. They can be useful – perhaps for an insurance or subscription you want to continue with. But they can also be used to take money from you when you do not expect it. Some firms – often based outside the UK – trick customers who order a sample health or beauty product to sign up for regular monthly supplies.

In the past these continuous payments have been very hard to cancel. The official line from most banks and card providers was that you had to cancel them with the firm concerned and until you did they continued to make the payments.

In fact that has not been true since 1 November 2009 when a new law came into effect. And now the city watchdog the Financial Services Authority has confirmed what the new law means.

As soon as you tell your current account or card provider that the payments must stop it has to obey your instruction. And it must reimburse you for any money paid out since you gave it. If you incur bank charges or other fees they must be reimbursed too.

More information about stopping these payments and getting your money back for any wrongly taken since 1 November 2009 is in my blog
http://paullewismoney.blogspot.co.uk/2012/04/continuous-payments-racket.html

Safe savings again
From the end of next month all banks, building societies and credit unions who take your savings and pay you interest will have to display a prominent sign in their branches and websites telling you how much of your money is protected by the Financial Services Compensation Scheme (FSCS).  As I explained in February that amount is £85,000 per person per financial institution. The FSCS aims to make a payment within seven days of the firm going out of business and guarantees it within 20 days.

Banks based in the European Economic Area (the EU plus Iceland Liechtenstein and Norway) can trade here under their home licence. Money deposited with them is covered by their own national compensation scheme and the limit is €100,000. At the time of writing that is worth less than £80,000. EEA banks trading through branches in the UK include ING Direct, Triodos Bank, Allied Irish Banks, and Alpha Bank.

Banks from outside the EEA which trade in the UK must be separately licensed here and they are covered by the FSCS scheme. Money deposited directly with firms outside the EEA – including the Channel Islands and Isle of Man as well as more exotic locations – is only protected by that country’s home scheme – if it has one. Check carefully before depositing your money with them.

The FSCS also protects money that is invested – but only up to £50,000.  

More information:
Financial Services Compensation Scheme fscs.org.uk
Which banks are linked: http://www.fsa.gov.uk/consumerinformation/compensation/brands
EEA based banks: http://www.fsa.gov.uk/consumerinformation/compensation/abroad/foreign-banks

Monkey with a Pin
How do professional investors compare with a monkey sticking a pin into a list of funds? Generally not very well. On average the monkey beats two out of three humans. Last year it beat 90% of the entrants. No monkeys are harmed in this annual UK Stock Challenge. The ‘monkey with a pin’ is just a computer making random share picks pitted against hundreds of experienced investors trying to win the prize and beat their peers.

Author and investor Peter Comley took the idea for the title of his new free book which exposes the myths and reveals the facts of the investment industry - Monkey with a Pin.

Most of the information about the relative merits of investing versus keeping money in cash comes from the very people who want you to invest with them and take a percentage of your money whether their scheme lives up to your hopes and expectations or not. In other words they make money whatever happens to yours. As Comley points out this data often excludes the costs of trading shares such as commission, management fees, stamp duty, and the spread between the buying price and the selling price.

He told Saga "Investing in shares comes with a lot of costs and issues that are not always made clear in sales literature. The book exposes the real returns from investing as opposed to those projected by the finance industry. It shows that stock market investments could perform 6% a year worse than that projected by the industry.”

He concludes that for the last twenty years your money would have done better in a cash ISA. Every one of his claims is supported by research and – unlike most investment books – it has footnotes so you can check original material. If you invest, or are thinking of it, read this book first. It could save you a fortune.

Monkey with a Pin is free from monkeywithapin.com in print and audio formats.

Equitable Life Payment Scheme
Twelve years since the court case which led to the near collapse of Equitable Life a million policyholders have finally been told if they will get a compensation payment or not and an indication of how much it will be. Some of these letters come with a prepaid addressed reply envelope and ask for more information or proof of identity. Payments are being made first to the oldest people; some have already been made. The final cheques will not be sent out until 2014. If the policyholder has already died their estate will get the money. Payments are free of UK income tax and capital gains tax. But if they form part of an estate they could be subject to inheritance tax. The Scheme will never send an email asking for information though inevitably some scam emails are around – delete them. If in doubt about any communication write to Equitable Life Payment Scheme PO Box 4110 Glasgow G58 1EL or call 0300 0200 150.  More at equitablelifepaymentscheme.independent.gov.uk

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