http://money-news.money.aol.co.uk AOL Money provides the latest money and finance news. http://money-news.money.aol.co.uk/article/2012/02/04/warning_on_private_sector_pensions N0324621328285870461A Around half a million private sector workers retiring each year are being "short changed" by up to £1 billion from their total future income, pensions bodies have warned. Evidence of "sharp practice and murky pricing" in the annuity market was highlighted in a report from the National Association of Pension Funds(NAPF) and the Pensions Institute (PI) at Cass Business School. It called for more transparency and greater scrutiny from Government, with more "shopping around" to help retirees get the best deal. Failing to shop around for a better deal can wipe 30% off someone's annual pension income and in some cases halve it, the report said. PI director Professor David Blake said: "This report is a wake-up call to the pensions industry, the Government and the regulators. "If the annuity system is not radically overhauled, employees in defined contribution schemes in the private sector will continue to suffer massive detriment and the Government's new auto-enrolment regime will fail the very people it aims to help secure financial independence in retirement." When they retire, workers in the private sector saving in a defined contribution (DC) pension use their pension pot to buy an annuity from an insurer, a decision which sets the size of their pension for life. The report - entitled Treating DC Scheme Members Fairly in Retirement? - said the majority of people stick with their existing pension scheme provider as the "default option". The loss could treble in size to £3 billion as the annuity market matures and as people start being automatically enrolled into workplace pensions from this October, the study said. Mark Hoban, the Financial Secretary to the Treasury, said: "I welcome the NAPF's contribution to the debate on how to help consumers get the best from the annuity market. "The Government recognises that there are particular issues about individuals accessing small pension pots, which is why the Government announced in December measures to allow holders of small personal pension pots to take up to two small pots as a lump sum, and why the Department for Work and Pensions are consulting on options for reform." Money News Sat, 04 Feb 2012 00:04:07 GMT A report has uncovered evidence of 'sharp practice and murky pricing' in the annuity market http://money-news.money.aol.co.uk/article/2012/02/04/house_price_confidence_improves N0307191328238335904A Optimism in the housing market has grown in recent months, with more Britons predicting prices will rise this year than those forecasting a fall, a study has found. Nearly a third (29%) of those surveyed believe house prices will increase in the next 12 months, Halifax said, up from 28% when a similar report was compiled in October. Meanwhile 22% predict a decline, down from 30% when the study was conducted previously. However, most people believe the market will be stable rather than see any sharp change, with two-thirds not expecting to see any increase or decrease of more than 5%. Londoners are the most optimistic, having seen strong overseas buyer interest which could be boosted further by this year's Olympics, while people in the North East, an area particularly dependent on public sector employment, are the least. Those expecting rises outweighed those predicting falls in eight out of 11 regions, compared with just three regions when the research took place in October, according to the latest housing market confidence tracker. Martin Ellis, housing economist at Halifax, said: "The modest improvement in consumer confidence in the outlook for house prices reflects the resilience of the UK housing market over recent months in the face of a weak economic recovery and the deterioration in the outlook for both the UK and global economies." Worries about job security and problems raising a deposit are seen as the main hurdles to buying a home, with squeezed household finances and restricted mortgage availability also featuring highly in the study. This comes despite recent research from Halifax which found that mortgage payments for new borrowers have become their most affordable for 14 years. Lenders have been expanding their mortgage ranges and offering some of their cheapest ever deals, but concerns have been raised that they will tighten their borrowing criteria amid the weak economic backdrop. Half of those surveyed said it was a good time to buy while only one in 10 believed it was a good time to sell. The rental market has seen a boom as those who have been unable to get on the housing ladder have remained trapped in the rental sector. Six out of 10 of the 2,009 adults surveyed believe the cost of private rents will see a further increase over the next year while 3% think they will fall. Alongside London, the East Midlands and Yorkshire and Humber are positive about the year ahead. People in the West Midlands are feeling optimistic, as are those in Scotland, Wales and the South East. However their counterparts in the South West, North East and North West are feeling gloomy. Money News Sat, 04 Feb 2012 00:04:09 GMT Nearly a third of Britons predict house prices will rise in the next 12 months, according to a Halifax survey http://money-news.money.aol.co.uk/article/2012/02/04/lottery_couple_defend_benefit_claim N0330491328340955945A A couple who scooped a £10.2 million lottery jackpot have defended their right to claim benefits more than six years later. Mick and Jean O'Shea won the huge EuroMillions sum in 2005, but Mr O'Shea still receives £500 a month disability allowance because it is not means-tested, the Sun reported. The former builder told the newspaper: "I worked for 40 years and I'm entitled to it. I've been getting it since about 1996. I declared the win to the authorities at the time, but it doesn't matter as it's not means-tested." He said he has osteoarthritis in his legs and rheumatoid arthritis in his hands and has recently had a hip operation. According to the newspaper, Mrs O'Shea, 72, said of the allowance: "It's for his eyesight and arthritis. We're entitled to it." Mr O'Shea, 73, also receives a new car every three years under the Government's Motability scheme for disabled drivers, it was reported. The couple live in Sneinton, Nottingham, but reportedly also had a house built in Co Kerry, Ireland, after their win. Mr O'Shea said the pair give away 10 times more than they receive to good causes every year. Under Government reforms, disability living allowance will be replaced by personal independence payments, which will involve more rigorous checks on claimants but will not be means-tested. A spokesman for the Department for Work and Pensions said: "We do not discuss individual cases but these specific benefits and allowances are not means-tested." Money News Sat, 04 Feb 2012 07:43:11 GMT A couple who scooped a lottery jackpot have defended their right to claim benefits http://money-news.money.aol.co.uk/article/2012/02/03/britons_still_facing_finance_woes N0307181328238326117A Personal insolvencies have dropped to their lowest level since 2008, despite the tough economic conditions, official figures have shown. There were 28,973 individual insolvencies in England and Wales in the fourth quarter of 2011, a 4% drop on the previous quarter, the Insolvency Service said. The total number of personal insolvencies in 2011 was 119,850, a decrease of 11% from 2010. This included 41,845 bankruptcies, which were down 29% on 2010, 49,056 Individual Voluntary Arrangements (IVAs) - down 3% on 2010 - and 28,949 Debt Relief Orders (DROs), a 15% rise on the previous year. Analysts warned that the rise in those taking out DROs hinted that many people could slip further into insolvency as employment conditions deteriorate and bills pile up. In December, the Insolvency Service said that one in four people taking out a DRO is aged between 25 and 34. Dubbed "bankruptcy light" by some, they are a formal process aimed at people who have more modest levels of debt but no realistic prospect of paying it off. The maximum allowable debt is £15,000. Nick O'Reilly, an insolvency practitioner at chartered accountants HW Fisher & Company, said: "The huge leap in the number of debt relief orders - often seen as 'bankruptcy light' - hints at more trouble to come. To qualify for a DRO, a person must have relatively small debts - of less than £15,000. But there's every chance that those struggling with DROs now could slip into insolvency proper." Louise Brittain, a partner in Deloitte's insolvency team, said: "As the labour market continues to deteriorate, we will see more households struggle to pay their debts as unemployment levels increase. We have seen a noticeable increase in professionals filing for bankruptcy and we can see this trend continuing." She highlighted a "boom" in the payday lenders market, and continued: "We will inevitably continue to see large numbers of individuals become insolvent in 2012. We predict the number of individuals entering in insolvency in 2012 will top 120,000." Money News Fri, 03 Feb 2012 03:50:38 GMT People are still being squeezed by high living costs, insolvency experts said http://money-news.money.aol.co.uk/article/2012/02/03/million_face_100_late_filing_fine N0322151328279506746A One million taxpayers face a £100 fine for failing to submit their self-assessment tax returns on time, HM Revenue and Customs (HMRC) has said. But more than nine out of 10 people met the deadline, the highest proportion since the revenue body was created in 2005. A record 9.45 million self-assessment tax returns were filed on time this year, meaning 90.4% of taxpayers met the deadline. The original online filing deadline of January 31 was extended to February 2 because of a strike by tax office staff. The proportion of people who filed online this year rose to 80%, also a record high, and up from the 78% of taxpayers who used the internet last year. David Gauke, Exchequer Secretary to the Treasury, said: "I'm delighted so many people filed their tax returns online this year. The record number proves that it's quick, easy and secure to do. "HMRC have always been clear that they want returns not penalties, so it is good news that over 90% of all returns were submitted on time." Under the revenue body's new penalty system, those who miss the deadline face an initial £100 fixed penalty, even if there is no tax to pay or if the tax due is paid on time, and additional daily charges of £10 will accrue after three months. A maximum penalty of £1,600 could eventually be due. The busiest day for online returns was January 31, when HMRC received nearly 445,000. The "self-assessment rush hour" occurred between 4pm and 5pm on that day, when 37,460 returns, equating to more than one every six seconds, were received. Some 1,100 people filed online on Christmas Day last year and 11,648 used the internet to do this on New Year's Eve. Money News Fri, 03 Feb 2012 14:54:11 GMT More than 90 per cent of taxpayers filed their self-assessment tax returns on time this year, but one million face a fine for failing to do so http://money-news.money.aol.co.uk/article/2012/02/03/house_sale_and_rent_deals_on_hold N0320871328276550400A A last resort for households faced with repossession has been blocked after the transactions were found to be unaffordable or unsuitable. The "sale and rent back" (SRB) market, which has seen people selling their properties to companies, sometimes for around 60% to 70% of their market value, before renting them back, has been temporarily shut down. The Financial Services Authority (FSA) said the market has been halted after it carried out a review of all regulated SRB firms to protect "vulnerable" customers. The FSA said: "The review identified widespread poor practice among SRB firms. The main conclusion is that the majority of SRB sales were either unaffordable or inappropriate. "This means consumers have entered into agreements that have either already led to a detrimental outcome, or are highly likely to in the future. This is unacceptable, and we are taking immediate action to address this." The move follows campaigning from Which?, which found in its research last year that advice being given to SRB consumers was "woefully inadequate". It has been estimated that around 50,000 SRB transactions had taken place by October 2008. Of the 22 firms the FSA reviewed, many have stopped doing SRB business altogether and others do not plan to do so in the foreseeable future, while one firm has been referred to its enforcement division, meaning the entire market is temporarily shut. The FSA found that some firms did not fully assess how appropriate an agreement would be for the customer and simply allowed them to enter into it because they wanted to. Some firms committed customers to unnecessary and high charges early in the sales process and high pressure selling techniques were used, the report found, while some required excessive or unnecessary signatures and legal jargon was often used. A number of tenancy agreements also allowed landlords broad discretion to vary rent levels, and it was not clear to customers whether they could challenge this, the FSA said. The watchdog said in its report: "In many cases it was not clear from the file that the surveyor owed a duty of care to the SRB seller. It was therefore not clear if these customers received an offer that was based on a fair assessment of the value of the property." Money News Fri, 03 Feb 2012 13:54:49 GMT 'Sale and rent back' options for householders faced with repossession have now been blocked http://money-news.money.aol.co.uk/article/2012/02/03/bankers_big_pay_needs_correction N0310821328259203628A Bankers' pay is too high and needs to be "corrected", the chairman of the Royal Bank of Scotland Sir Philip Hampton has said. But Sir Philip said that, relative to other bankers, the rewards offered to RBS chief executive Stephen Hester - who last week waived a £1 million bonus after coming under extreme public and political pressure - were not high. Mr Hester, who took over as chief executive after the Government bailed out the near-bankrupt RBS in 2008, was doing a "great job" in turning the bank around and protecting the taxpayer's 83% investment in the business, he said. Sir Philip, who himself turned down a £1.4 million bonus earlier this month, confirmed that he had signed off Mr Hester's proposed package of £963,000 worth of RBS shares - which was 60% of the maximum he could have received under a performance-related scheme - and admitted the RBS board "under-estimated" the public outrage which it would provoke. He denied that he had been swayed by Government pressure to keep the bonus under £1 million and said that it was Hester himself who decided to give up the payout in order to protect his own reputation and that of the bank. Despite widespread speculation, the RBS board never threatened to resign over the bonus issue, said Sir Philip. Asked whether he now expected Mr Hester to walk away from his job, he acknowledged that intense scrutiny of his bonus had been "challenging" for the chief executive, but described him as "a tough character" who was "dedicated to turning the business round". Sir Philip told BBC Radio 4's Today programme: "I think if this bank is fully returned to profitability by an able management team, that is very much in the interests of the British taxpayer. Stephen Hester and his team are, I think, doing a great job. "I recognise absolutely that some of the pay levels are very high, very difficult for people to understand, but by the standards of this market they are not high." Sir Philip acknowledged public unease about the scale of rewards across the financial sector, saying: "Pay has been high for too long, particularly in the banks, particularly in the investment banks. Shareholders have done pretty badly and employees have done pretty well over the last 10 years. "That needs to be corrected. It isn't a society or fairness issue, it is a straightforward business issue. Too much of the money is not going to the right place and the shareholder rewards have not been sufficient." Money News Fri, 03 Feb 2012 09:05:12 GMT Sir Philip Hampton, the chairman of the taxpayer-funded Royal Bank of Scotland, has said bankers' pay is too high and needs to be corrected http://money-news.money.aol.co.uk/article/2012/02/03/spending_cuts_should_be_eased N0299531328195780271A Britain's economy will fall into recession in the first half of the year and the Government needs to ease up on its tough package of spending cuts, an influential think-tank has warned. The UK economy will shrink 0.1% in 2012 as cash-strapped households tighten their purse-strings and nervous businesses hold back on investment, said the National Institute of Economic and Social Research (Niesr). Chancellor George Osborne's austerity measures are contributing to low demand in the UK, which in turn is damaging the broader economy, so a temporary softening of his fiscal stance would give the country a much-needed boost, said Niesr. The think-tank said an increase in Government investment would not derail the Chancellor's long term goals or prevent him hitting his fiscal targets. Elsewhere, it said the UK economy would rebound in 2013 with 2.3% growth - but only if a successful resolution to the ongoing eurozone debt crisis is found. Meanwhile, the group forecast global growth of 3.5% for 2012, led by Asian powerhouses China and India, while the US should see 2% growth. The UK is already close to another recession - defined as two consecutive quarters of decline - after the economy shrank by 0.2% in the fourth quarter of 2011. It said unemployment will rise to about 9% this year, from 8.4% in the three months to November and will remain above 7% in 2014. A jobless figure at this elevated level for a long period is likely to do "permanent damage" to the supply side of the economy, with large long-run economic costs, Niesr warned. The think-tank added: "The UK economy currently suffers from deficient demand; the current stance of fiscal policy is contributing to this deficiency. A temporary easing of fiscal policy in the near term would boost the economy." The eurozone is also expected to enter a recession as the debt crisis continues, lending conditions remain tight and unemployment is high. The Chancellor last month pledged to stick to the coalition Government's austerity programme, which has been attacked for choking off the recovery, after the fourth quarter GDP figures were published. He said: "Britain has substantial debts. If we don't deal with those debts, our problems will be worse." A Treasury spokesman said: "As Niesr have said today, the Government's commitment to deficit reduction has helped maintain market confidence. They expect the Government to meet its fiscal mandate and for the UK economy to grow more strongly than the euro area this year and next." Money News Fri, 03 Feb 2012 00:06:41 GMT Chancellor George Osborne has pledged to stick to the coalition's austerity programme http://money-news.money.aol.co.uk/article/2012/02/03/uk_families_save_less_than_chinese N0296191328193531377A UK families are saving a proportion of their income which is around nine times lower than those in China, a study has found. Typical UK households manage to save around 5% of their take home pay, but in China the savings ratio has soared, from 27% of disposable income saved in 2001 to 47% last year, the Family Savings report, by Lloyds TSB and thinktank the Future Foundation, said. The report compared financial habits in the UK, Germany and China to see how families in the two similar European economies differed from those in a rising power. Households in Germany tend to save around 10% of their income, and the report said the widening gap between the two European countries and China largely reflected the lack of a social safety net in China. UK households have around £5,000 in savings, £3,600 less than families in Germany and around a quarter of the amount saved by households in China. Savings in the UK have taken the biggest "hit" in the past year, tumbling by 11% or around £600, as families have been squeezed by high living costs including soaring fuel bills and low returns on savings. While inflation has begun to ease, deteriorating employment conditions are expected to continue to put pressure on household finances. German nest eggs have also suffered, falling by 5%, but the savings of households in China roared ahead, increasing by 7% over the year to average £19,334. Greg Coughlan, head of savings at Lloyds TSB, said: "While these findings should perhaps not be surprising in view of the figures we have seen on savings ratios, they are still remarkable. "Despite significantly higher income levels, today's British and German households are both being roundly beaten in the savings stakes by urban Chinese households. However, UK families seem to be getting more engaged with their finances and savings, so we would hope to see some of these figures improve further over time." The study suggested that financial planning is on the increase, with seven in 10 UK households trying to set a weekly budget, compared with just over half before the financial crisis struck. Some 3,000 adults took part in the study, with the majority of Chinese respondents living in urban areas such as Beijing and Shanghai. Money News Fri, 03 Feb 2012 00:07:44 GMT British families are saving around five per cent of their take home pay, yet those in China stash away 27 per cent of their disposable income http://money-news.money.aol.co.uk/article/2012/02/03/home_insurance_claim_hotspots_named N0281711328151182232A Home owners in Stoke Newington in north London are the most likely to have made a claim for theft or burglary on their home insurance policy, according to research. MoneySupermarket.com analysed some three million home insurance quotes run on its website and found that for every 1,000 people living in Stoke Newington, covering the postcode N16, almost 34 had previously made a theft-related claim. Seventeen areas, including Bodelwyddan in Denbighshire, Wales, Elgin in Moray, Scotland, Peterlee in County Durham and Helston in Cornwall, were found to be the least likely to have made such a claim, effectively recording none per 1,000 people. Meanwhile Apperley Bridge in Bradford, covering the postcode BD10, and West Bromwich in the West Midlands, with the postcode B71, recorded almost 32 claims per 1,000 enquiries in the UK-wide burglary hotspots study. London and Yorkshire feature particularly strongly in the chart showing the highest proportion of burglary claims, including Streatham, Wood Green and Mill Hill in the capital as well as swathes of Bradford, Leeds, Doncaster and Sheffield. Julie Fisher, head of home insurance at MoneySupermarket.com said: "Being in a higher risk area doesn't necessarily mean where you live is bad or rife with crime - many thieves will target more affluent areas purely for the rewards on offer." The website urged people to install measures such as security lighting to deter thieves as well as replacing old locks. The quotes analysed were run on the website between December 1 2010 and November 30 last year. The study of 20 UK postcodes revealed Stoke Newington was followed closely by Apperley Bridge, Bradford, where 31.7 claims had been made. Next was West Bromwich, West Midlands, where there had been 31.7. Some 30.3 claims had been made in Wood Green, London, while 30 had been made in Bramley, Rodley, Swinnow, Leeds. Money News Fri, 03 Feb 2012 00:07:47 GMT Research suggests a north London borough is the most likely place for homeowners to have made a claim for burglary on their home insurance