“IT DOES what it says on the tin.” The Ronseal advertising slogan has entered the language because it speaks to the longing for simple, no-frills products. This desire for simplicity affects all ages: on the London Tube this week I saw a slick, thirtysomething man, the type usually assumed to crave the latest technology, proudly using a Vodafone Simply. This is the big-button, call and text-only mobile aimed at senior citizens immune to the appeal of gadgetry. Less is not only more, it may also be all you want.
Such is the appeal of “it does what it says on the tin” that financial firms are keen to ascribe this quality to their latest offers. Unfortunately, what lies beneath is often highly complicated. Increasingly, banks and building societies are offering stock market-linked accounts to savers fed up with low returns. As we explain on page 9, these accounts, more correctly called guaranteed equity bonds (GEB), are very different from a standard-issue savings account. The GEB is the equivalent of the state-of-the art Sharp 902 phone; the savings account, the equivalent of the straightforward Simply. But some institutions are not making this entirely clear. Money in a guaranteed equity bond may be protected, but the return is not guaranteed. And, even if the FTSE 100 index soars away, your gains will be limited. The current scheme from Birmingham Midshires gives, at most,
75 per cent of the growth in the index over five years. But the index would need to rise by 37 per cent to give you the same return as a savings account with a rate of 5 per cent.
The Financial Services Authority said this week that it needs more time to decide whether hedge funds should be marketed to small investors. The watchdog seems aware that hedge funds — rich men’s investment schemes that aim to make money however markets are performing — could be flogged too easily as the simple, all-weather option for everyone. Yet fat cats are advised not to place more than 10 per cent of their millions with a hedge fund because of the risks. They would also ask tough questions before signing the cheque. If an investment offers you more, you too need to ask more questions to see whether this is what you want and need.
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Tax credit victims treated with contempt they don’t deserve
TAX credits are supposed to be a reward for hard-working families on low incomes who pay tax and national insurance and shun the black economy. Instead, the 1.8 million households that have been the victims of the tax credit overpayment debacle have received instead a first-hand lesson in government mismanagement, obfuscation and cruelty — a word that I do not use lightly.
Last August, Times Money was the first to expose the plight of families being pursued
by Revenue & Customs for overpayments of their child tax credit. These overpayments arose from Revenue errors. The system for the calculation of the credits, which are means-tested allowances, is so complex that few recipients can check whether their payments are correct. Yet the Revenue is clawing back lump sums, saying that parents should somehow have assessed their exact entitlement.
When Times Money takes up the cudgels on behalf of readers ill-served by financial firms, the company involved will re-examine the complaints, at the very least. The Revenue’s conduct throughout our reporting of the £1.9 billion overpayment debacle has been entirely different from that of even the most hard-nosed banker. There has not been even a pretence of accountability The Revenue would not apologise, explain or admit to any flaws in its systems. It would not say why a number of readers who had queried the generosity of their payment were assured that all was in order, then later were informed to the contrary. There may be a wider message for all taxpayers, rich and poor, in this strategy: the Revenue is always judge and jury in any dispute.
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The Prime Minister may have said sorry for the mistakes, after the Parliamentary Ombudsman’s report into the affair. But the Revenue will continue to claim back the money, making up the rules as it goes along.
Two million hard-up pensioners do not claim the pension credit — the state pension top-up. In light of the tax credit debacle, how can they feel confident to do so?
Identity fraud is still a bigger threat than lax bank security
THE high street banks have saved billions by encouraging customers to use internet and telephone services. Not a penny of these savings has been passed on in the shape of higher interest rates. Online banking may be a convenient way to manage your money, but you are still entitled to wonder why your current account remains such a poor deal.
After the disclosure that bank customers’ details held in Indian call centres are being sold, the banks say that they have launched an investigation. We must hope that they are not trying to save even more money by cutting corners on security in both UK and overseas call centres.
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But, like it or not, we must also recognise that the new arrangements impose responsibilities on us, especially as banks are clinging to one old-fashioned practice — lots of letter writing, sending us literature of one sort or another at least twice a week. Depositing this unwanted correspondence in the bin without shredding it still puts you in greater danger of identity fraud than any threat from lax security at a call centre.