MONEY NEWS DECEMBER 2013
Equitable Life compensation hitch; Premium bond cuts; State pension rise expected; IFAs fined

More than 400,000 elderly investors in Equitable Life may miss out on compensation because the Government has no current address for them. Since the Equitable Life Payment Scheme was set up in 2011 it has paid out less than half of the £1.5 billion it expected to give to more than a million people who bought policies with the failed insurer from September 1^st 1992. Although payments are still being made at around £1 million a day the scheme says it has now contacted every eligible individual for whom it has a current address. The Treasury has had to extend the life of the scheme by more than a year to mid-2015 to give more time to find the missing 400,000.

People with an eligible individual policy who have not been contacted should inform the Payment Scheme as soon as they can. Call 0300 0200 150 to find out the eligibility criteria and to make sure the Scheme knows of your interest. More information at equitablelifepaymentscheme.independent.gov.uk

Similar problems may be found with plans to make ex gratia payments to around 10,000 people who bought a with profits annuity from Equitable Life before 1 September 1992. A special scheme is being set up to give them a payment of £5000 with an extra £5000 for those who were getting Pension Credit on November 1^st 2013. Eligible pre-1992 with-profits annuitants should have received a letter from HM Treasury about these payments with information about what to do. Anyone who has not received a letter should write to Equitable Life Pre-1992 WPA Payments, HM Treasury, 1 Horse Guards Road, London, SW1A 2HQ with policy details and a current address. More information www.gov.uk/government/publications/equitable-life-payments

Less of a premium
The rate of interest on Premium Bonds which forms the prize fund has been cut from 1.5% to 1.3%. National Savings & Investments has also reduced the odds for a bond to win in the monthly draw from one in 24,000 to one in 26,000 and has cut the number of prizes below the £1 million jackpot. There will be only three prizes of £100,000 instead of five. The number of £25,000 prizes has been nearly halved from 20 to 11. And prizes of £100 and £50 are cut from more than 33,000 to less than 12,000. The number of £25 prizes will fall from 1.8 million to 1.7 million.

If you pay income tax the 1.3% rate tax-free is equivalent to 1.63% on a normal savings account where interest is taxable. For higher rates taxpayers it is the equivalent of 2.17%. However, more than nine out of ten prizes are now for just £25 and winning more than £25 is very unlikely. So the realistic rate of return on your money is more like 1.15%, equivalent to 1.44% for a basic rate taxpayer and 1.92% if you pay tax at the higher rate.

You need a lot of bonds to have a chance of earning that sort of return regularly. The maximum holding is £30,000 and with that you could expect to win at least once a month. But if you have only £100 it would take more than 21 years to have an even chance of a prize. Unless you win you get no return. If you hold less than £30,000 you can ask for prizes to be used to purchase more bonds. You can also manage your premium bond account online. More at www.nsandi.com

SCAMWATCH
Two independent financial advisers have been banned for life and fined £885,000 between them for misleading more than 300 investors who have lost up to £35 million in property deals in the UK and abroad. Mark Bentley-Leek and his associate Mustafa Dervish of Bentley Leek Financial Management promised clients returns of between 6% and 18% and in some cases assured them that the money invested could not be lost. Those promises were not true. The two advisers also failed to inform customers that they were directors of the property firms they recommended. The Financial Conduct Authority which regulates investments said both had “demonstrated a lack of integrity and competence” and imposed the highest fines ever on individual financial advisers - £525,000 on the senior director Mr Bentley-Leek and £360,000 on Mr Dervish. The two men deny doing anything wrong and blame market conditions for the failures http://www.fca.org.uk/news/two-financial-advisers-banned-and-fined-after-investors-lose-out

Almost all the firms involved are now in administration. The Financial Services Compensation Scheme has declared Leek Financial Management in default and is accepting claims. The compensation it can give is limited £50,000 which is less than half the average loss of the investors. Property is a dangerous investment especially outside the UK, though some IFAs still recommend it. Avoid it unless you are familiar with the market here and abroad, are prepared to lose some or all of your money, and understand the risks of investing in another currency. Always take your own legal advice from a lawyer who you find yourself.

Triple locked
The basic state pension should rise by £2.95 to £113.10 a week from April 7^th 2014. The Government has promised to increasing the state pension by the annual percentage rise in earnings or by prices as measured by the CPI or by 2.5%, whichever is highest – called the ‘triple lock’. In the last twelve months earnings rose by well under 1% but annual CPI inflation went up by 2.7% in September so it is being used for the 2014 rise in the basic state pension. The married woman’s Category B pension will grow by £1.80 to £67.80. Graduated pension and earnings-related SERPS and S2P additional pension should also all rise by 2.7%. Pension credit is expected to rise by rather less than that.

Many other benefits will increase by just 1% as they are no longer linked to inflation. They include the in-work benefits for those under pension age such as Jobseeker’s Allowance, basic Employment and Support Allowance, and tax credits. Child Benefit is frozen. Disability, carer’s and bereavement benefits and premiums should rise by 2.7%.

A Government announcement is expected in the first or second week in December.

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