Thursday, 28 June 2018

FIND GOOD FINANCIAL ADVICE

How do I find a good financial adviser? It's a question I am often asked. And there is no easy answer. Especially if you do not have a lot of money.  


My first question is do you need financial advice? Unless you have a big lump-sum (tens of thousands of pounds or more) or a lot of surplus income to invest (hundreds of pounds a month) you probably don't need financial advice and probably will not want to pay the fees good advisers charge. See free financial advice below for other services that can help you.  

But if you do want regulated financial advice then here is my guide. Many people first want or need advice when they think about exercising their new pension freedoms. Some with a fund worth than £30,000 or more which comes with a guarantee have to take regulated financial advice before they can transfer their money out either to another pension or, ultimately, to cash.

I have three filters to sort the best advisers from the others. 

Filter One - Independent
Only ever use an Independent Financial Adviser. This term is now regulated and policed not by UK regulators but by a body called the European Securities and Markets Authority or ESMA. And no I don't know what will happen when we leave the EU! I will be updating this blog when I do.

These EU rules - called MiFID II - began on 3 January 2018. There are two main sorts of financial advisers.

The sort you want is called 'independent'. That can mean one of two things.

1. They give advice on all financial matters and looks across the whole of the market and give that advice on any financial topic where they might recommend a product.

2. they give advice on a specific type of product - such as annuities or pensions - and not on other types of product. But they must still look across the whole of the market relating to that product. This may be called 'focused independent' or may just be called 'independent'.

Any adviser who is not independent does not look at the whole of the market and may be tied to one or more firms and can only recommend products from those firms. In the UK these advisers are called 'restricted' though hardly any of them used that term. Never ever use an adviser who is restricted by products. If you ask 'do you offer independent financial advice' and the answer is anything but a clear 'yes' then reject them. Many work for a bank or insurance company and of course only recommend you buy their products. That is just sales masquerading as advice.

A lot of advisers will be rejected by Filter One. The only way through it is to become independent.

Filter Two - Planners
Only ever use an IFA who is a chartered or certified financial planner. The very best qualified financial advisers are chartered (or certified) financial planners. This brings you down to the best qualified 6000 or so of the 33,000 regulated financial advisers. They are beyond what is called QCF Level 6. So they have put a lot of effort into being the good guys and the chances of a bad guy (or gal) remaining in there is small. Some firms are chartered which means that at least some of their advisers are chartered themselves and the rest are probably working towards it.

Lots of good advisers will be rejected by Filter Two. Sorry. Get the qualifications.

Filter Three - Payment
Only use a financial planner who you can pay in pounds. Never choose one who wants to charge you a percentage of your money. You earned, made, or inherited it. Charging a percentage is like taxing your wealth. Even HMRC is not entitled to do that. 

Percentage fees are a hangover from the days of commission when advisers lived on a percentage of your money they took off year after year. If you cannot afford the fee in pounds you probably do not need or cannot afford financial advice.

You should also pay upfront from your non-invested resources rather than out of your invested money. One drawback of that approach is that a fee taken out of your pension fund comes from money which has already had income tax relief. So ultimately that fee costs you less than if you paid it out of your taxed income. It is all part of the massive taxpayer subsidies for the financial services industry (relief for finance and insurance from VAT costs £11 billion a year). That should be stopped of course, but at the moment it is an EU law. It is very unlikely to change after the UK leaves the EU on 29 March 2019. If you must, then pay in tax-subsidised pounds from your pension fund. But ideally - and with all other investments - pay in pounds out of your non-invested resources. That way you see the money you are paying and can ask yourself – is it worth it? And never pay a percentage of your fund. Ever.

Contingent fees
One iniquitous method of charging has grown up recently around pension transfers. If you have a good company pension that promises you a pension related to your salary - called Final Salary or sometimes Career Average schemes (they are branded Defined Benefit or DB schemes by the industry) you may be tempted to transfer it to a pension pot scheme - a money purchase or Defined Contribution (DC) scheme.

At the moment transferring out of a DB scheme into a DC scheme can seem very tempting because you will get a massive amount to move away from the guaranteed DB pension. It is usually a bad idea. Some financial advisers will consider this for you (you have to get advice if your pension is worth a transfer value of £30,000 or more) but will charge on a 'contingent' basis. That means you only pay them if you take their advice and transfer your fund. Normally this contingent fee will be a percentage of the total and often an ongoing annual percentage charge as well.

Always say no to such fees. They create a conflict of interest between you and the adviser who only gets paid if you transfer.

Next steps
These three filters will take you a long way towards finding good, safe, but often expensive, financial advice. There may be adequate or even good, safe, and perhaps cheaper advisers which have been filtered out. They can get themselves through my three filters by becoming independent, getting financial planning qualifications, and changing the way they charge.

I must also add that there are a small number of well qualified independent financial advisers who have given dreadful advice (especially about pension transfers), have gone out of business, or have even turned out to be crooks. So these three filters are not a guarantee but they are a good start.

Website research
You can apply your three filters using online directories of financial advisers.

1. Unbiased lists around 18,000 financial advisers. Most of them pay to be on the site - though some can have a basic listing free. Some pay more for a higher position in the listings. They can be identified by a pale blue background and the word 'Ad beta' in the top right corner. I would ignore all of those. The one below it may be better.

With care you can use the site to apply my three filters.

a) Click the red arrow by 'I'm looking for a financial adviser'.
b) enter your postcode (you won't have to give any other information) and click the red arrow.
c) tick 'Search locally' and click the red arrow.

That will bring up a list of advisers. Then apply my filters.

Click the ˅ arrow by Payment options
Tick Fee, Fixed Fee, and Hourly Rate

Click the ˅ arrow by More filters
Click the ˅ arrow by Adviser restrictions
Tick Independent Financial Adviser

Click the ˅ arrow by Individual accreditations
Tick Chartered Financial Planner and Certified Financial Planner. Unbiased now checks all qualifications carefully.

As you make your ticks the list of advisers changes dynamically.

There are other choices you can make such as specialisms or qualifications. You can even pick a male or a female adviser.

The entries for the advisers listed will show if the first meeting is free and what level of wealth they would like you to have.

2. Vouched For uses its algorithms to provide a list of advisers for you. They are ordered to take account of how local they are to you, reviews by customers, and ratings. Advisers cannot pay for a better position in the list. The site checks qualifications by asking for an image of the certificate.

You can filter by speciality - but not yet by independent, qualification, or how advisers charge.

Each entry shows clearly if the adviser is independent or restricted - always reject the latter of course. It will also show the minimum amount of money you need for them to take you on as a client. 

Vouched For lists about 5000 financial advisers who choose to pay the fees to be included. 

3. Adviser Book is the newest directory. Unlike the others no-one pays to be included. It has the complete list of 12,000 FCA regulated adviser firms on it but it does not yet list individual advisers separately. It clearly states who is verified as independent and you can filter by qualifications and specialisms. At the moment you cannot filter by how fees are charged. But you will see what level of wealth the firms want their clients to have.

Other listings are available but they are much less useful. The Personal Finance Society lists all the advisers who have its qualifications and are Chartered Financial Planners, or are on the way to becoming Chartered, or work for a firm which is Chartered. That is a useful check.

Next steps
After using these sites and checking for independence, qualifications, and how they charge, you should then pick two or three you fancy.

I would only use an IFA who has a website where you can find out more. Ignore the slick sales patter which usually reads as though it is generated by a PR machine. You'll find similar meaningless platitudes on most of them.

Most adviser websites do not tell you how much they charge - I would tend to pick only those that do. Certainly make that your first question when you meet them.

Most advisers will give you one free session. Go prepared with details and information about yourself. Try two or three and see which you prefer. Do not be embarrassed to say 'no' to them.

If you pick an adviser but later regret it you can leave by just writing them a letter telling them that they are no longer your adviser. Ask them to return any documents and destroy all your data. If you feel you have been badly advised or locked into investments you did not want, then complain and pursue the complaint to the Financial Ombudsman Service.

Free financial advice 
If you want financial advice outside the regulated professionals, then try the free, Government approved Money Advice Service whose website is very good on a whole range of money issues, some of which many financial advisers will know little or nothing about. Or you may want to consider paying £1 for a month's trial of the Which? Money Helpline. After that you will pay £10.75 a month for full Which? membership.

If you have pension questions then the Pensions Advisory Service offers an excellent website and a helpful helpline on 0300 123 1047. The service is free and approved by the Government.

Specific advice about the pension freedoms which began in April 2015 can be found at the Government's Pension Wise website. If you are over 50 you can call 0300 330 1001 to book an appointment for one-to-one telephone advice, or a face-to-face interview at a nearby Citizen's Advice office.

At some point in the next year these three free advisory services will be combined into one organisation and rebranded. At the moment the name for that organisation is the Single Financial Guidance Body but a more sensible name is being sought. If you find one let me know! My favourite so far is the 'I can't believe it's not advice' Agency.

Footnote
Only the term 'independent financial advice' is regulated. Anyone can call themselves a 'financial adviser', an 'investment manager', or a 'property specialist'. And they do. Those terms are meaningless. If an adviser does not use the word 'independent' or does not say simply say 'yes' when you ask if they are independent, then they are not. Avoid them. And always ask for a FCA number and check it out on the Financial Services Register. Sadly - and madly - the register does not say if the adviser is independent or restricted.

If you are ever cold called or receive a text or email from an adviser you have not found and researched just say 'no'. No-one ever lost money by doing that. Many have lost money by not doing that.

Paul Lewis
28 June 2018
Vs. 2.00

Monday, 14 May 2018

WHY YOUR GAS BILL IS WRONG

Domestic gas users are being overcharged by an average of £46 a year. That is the claim by an energy firm Canetis Technologies.


More than 20 million households use mains piped gas to provide hot water and central heating and often to cook their dinner too.

The way gas is charged for is an approximation. Canetis has calculated that three errors in these approximations leads to us being overcharged by an average of £46 a year.

Origin
Gas comes into the country from the North Sea, from Europe, and by tanker mainly from the middle east. It then passes through 190,000 miles of pipes and ends up flowing into what is usually a rather primitive meter in our home.

That meter measures the volume of gas passing through it. Traditional meters use a pair of bellows to measure the gas flow. The bellows then push a plastic clockwork mechanism to convert that flow into a numerical display which records either cubic metres (cu.m) or, in older and often greyer meters, cubic feet.

Formula
That volume then has to be converted into the kilowatt-hours units which energy firms charge us for. The formula used to make that conversion will be somewhere on your gas bill and should look like this:

Units used x the calorific value of the gas x a volume correction of 1.02264 divided by 3.6.

Definitions
1. Units used is the volume of gas recorded by the gas meter in cubic metres or cubic feet.

2. The calorific value of the gas is the amount of energy stored in the molecules of the gas.

3. The volume correction takes account of the average pressure and temperature of Great Britain which is different from the standard used to work out the calorific value of a cubic metre of gas.

The same amount of gas – the same number of molecules which store the energy which is released when it burns – will not fill a constant volume. As the pressure rises the molecules are squeezed together and the volume falls. As the temperature rises the molecules get more excited and the volume increases. That means the same volume of gas at different temperatures and pressures will give different amounts of energy when burned.

When the energy stored in a volume of gas is calculated the international standard is to use a temperature of 15C and atmospheric pressure at sea level of 1013.25 millibars (mb).

This correction adjusts that calorific value to take account of the temperature and pressure of Great Britain.

Each of these three parts of the formula is subject to error. The final part is not.

4. Divided by 3.6. Calorific value is measured in MegaJoules per cubic metre. A MegaJoule (MJ) is a million Watts per second. So to convert a MegaJoule (MJ) to a kiloWatt-hour (kWh) you multiply by 1000 and then divide by the number of seconds in an hour. So 1000/3600 = divide by 3.6. That is the one accurate number in the formula!

Errors
1. Units used
The energy technology firm Canetis claims that old style meters systematically overstate the volume of the gas passing through them. They are tested over a wide rage of gas flows. Low flows overstate the volume; higher flows underestimate it. But the meters are limited in the flow they are allowed to use and modern gas appliances tend to use lower flows anyway. The result is that the actual flows are always in the lower part of the range where the volume is systematically overstated.

2. Calorific value
The calorific value of natural gas varies depending on its exact composition - different sources have different mixtures of gases. It will be between 37.5 and 43.0 MJ per cubic metre.

Great Britain is divided into seven regions reflecting where the gas arrives. The calorific value of the gas in those regions is measured every day. The value on your bill is the average of those daily amounts in your area over the days the bill covers . It will therefore be approximate but the hope is that the over- and under-estimates will average out to zero.

3. Volume correction
In 1996 the Government decided that the international standard temperature of 15C and pressure of 1013.25mb for measuring the energy in a volume of gas were not correct for Great Britain. The average temperature in GB was lower at 12.2C. So the measured volume at that temperature was lower than it should be. And despite the UK being at an average height of 66m above sea level, when the pressure inside the meter was added it came to 1026mb, which is higher than the standard. So again the measured volume is lower than it should be.

As both errors lower the volume, the measured volume was multiplied by 1.02264 to correct it. This amount is set down in law.

Canetis and other engineers claim the assumptions behind the volume correction are wrong.

Pressure: recently analysed postcode data from the Office for National Statistics shows that GB homes are on average slightly higher than 66m above sea level, and the meters are normally above floor level. So the pressure is lower at the meter and the volume of gas greater than the regulations assume.

Temperature: the actual ambient temperature over the year is around 12C but most meters are located indoors in heated rooms so gas enters the meter at a warmer temperature than outside, again raising the volume.

So the volume correction is simply wrong.

Overcharge
The result is that these three errors
  • meters which overstate the volume flowing through 
  • higher temperature at the meter than allowed for
  • lower atmospheric pressure at the meter than allowed for 
all create an over estimate of the volume of the gas passing through the meter for the standard energy contained in it. So charging by volume overcharges us for the energy stored. Canetis claims the average overcharge in England is £46 a year.

Action
Under the rules governing gas nothing can be done about any of these factors. They are all set in various laws and standards. 

All customers can do is try to ensure that their gas meter is as low and cool as possible rather than high up in a heated room. 

vs. 1.01
16 May 2018

Tuesday, 10 April 2018

TARGET 164 - BOOST YOUR NEW STATE PENSION

UPDATED 10 April 2018

More than a million people who reach state pension age in the years from 6 April 2016 will not get the full amount of the new ‘flat-rate’ state pension - currently £164.35 from 6 April 2018.

But many of them could boost their pension towards or up to the full flat rate amount.

This guide is for men born 6 April 1952 or later and women born 6 July 1953 or later who paid into a good pension at work or, in some cases, into a personal pension.

There are other groups who can boost their state pension. Separate links for them are listed at the end of this guide.

NEW STATE PENSION
The new state pension was supposed to be simple. A flat-rate amount for everyone who had at least 35 years of National Insurance contributions. This year 2018/19 that amount is £164.35 a week (£8546 a year) and is taxable. However, there are around one and a half million people who will reach pension age in the next ten years who will get less than that even if they have 35 years or more National Insurance contributions.

That is because an amount is deducted from the pension for every year they paid into a good pension at work. I call it a contracted out deduction because they were ‘contracted out’ of part of the state pension called SERPS or State Second Pension (S2P). They paid lower National Insurance contributions and instead of that additional state pension they get a pension from their job which was supposed to replace it. The Government prefers to call it 'Contracted Out Pension Equivalent' or COPE. It is that COPE amount that is deducted from your new state pension.

This group includes most people who worked in the public sector, such as

  • nurses, doctors, and others in the NHS
  • teachers in schools and universities
  • police officers and fire brigade staff
  • civil servants
  • local government workers
  • armed forces
  • Post Office workers
It also includes many people who worked for one of the privatised industries such as British Airways, British Rail, British Steel, and Royal Mail.

Another large group affected are people who worked for a private sector employer who paid into a good scheme at work that promised them a pension related to their salary. They used to be called ‘final salary’ schemes and nowadays are called Defined Benefit or DB schemes. In the past many large firms ran such schemes. There are still nearly 6000 of them and if you paid into one at any time from 1978 your new state pension will be reduced.

Also included are some people who paid into a personal pension and who were persuaded to contract out of part of the state scheme – at the time it was normally called ‘contracting out of SERPS’.

For all these people their new state pension will be reduced for the years they paid into a contracted out pension scheme. That deduction applies even if they have paid the 35 years which is needed to get a full pension – the deduction is made after the full pension is worked out. It can also apply even if they were contracted out for a short period and paid in 35 years or more when they were not contracted out. These deductions can be very large but normally can never leave you with less than £125.95 a week of the old or 'basic' state pension.

Please do not ask me why that is fair! It may not be fair, but it is the law. The good news is that you can reduce that deduction and, depending on your age, you may be able to get your pension up to the full flat-rate £164.35.

THE DEDUCTION
If your new state pension has an amount deducted from it because you spent some time paying into a good pension scheme at work then you can reduce that deduction or even wipe it out. This guide is of most use to people who are currently aged at least 56. It will help even if you already have 35 years National Insurance contributions or more.

If your new state pension is reduced because you paid into a good pension scheme at work then every year of National Insurance contributions from 2016/17 to the year before you reach state pension age will mean that deduction is less.

If you work and earn more than £116 a week you will get contributions credited or paid to your account (you start actually paying for them when you earn above £162 a week; under that they are credited). If you get child benefit for a child who is less than 12 then you will also get a credit for each week. If you get jobseeker’s allowance, employment and support allowance, or working tax credit then you will get a credit for each week you get that benefit. You can also get credits if you are a carer in some circumstances. Check here for more details of who can get credits. Some are given automatically, others have to be claimed.

Men can get credits for years between women’s state pension age and 65. They get a credit for the tax year in which they reach women's state pension age (unless they also reach 65 in that tax year) and any subsequent tax year before the tax year they reach 65. So these man credits are only available to men born before 6 October 1953. See footnote.

If you are self-employed then you must pay what are called Class 2 National Insurance contributions if your profits are £6205 or more. They are called Class 2 and are £2.95 a week (£153.40 a year). Self-employed people can also pay these contributions voluntarily even if their profits are below £6205 - but only for years in which the were genuinely self-employed. These Class 2 contributions will end from 6 April 2019.

If you will not pay National Insurance contributions at work or as self-employed or get credits for them you can pay voluntary contributions, called ‘Class 3’. They will cost you £14.65 a week (£761.80 for a year). For each extra year of contributions your pension will be boosted by £4.70 a week (£244 a year) so the payback is rapid – just over three years for non-taxpayers; almost four if you pay basic rate tax; just over five for higher rate taxpayers, and almost six for top rate 45% taxpayers. Contributions for 2017/18 and 2016/17 are less - £740 and £733.20 making them even better value for money.

The new state pension up to £164.35 a week comes under the ‘triple lock’ promise and will rise each April by prices, earnings, or 2.5% whichever is the highest, at least until April 2022.

If you have paid some contributions at work or as self-employed during the tax year but you are short of a full year you can pay individual weeks through Class 3 (or Class 2) to make your record up to a full year.

You can only pay Class 3 contributions for the years before the tax year in which you reach state pension age. That limits the number of years you can pay to boost your pension. The table show which years you can pay Class 3 contributions for to set against the contracted out deduction and the maximum boost that may give to your pension. Your pension cannot be boosted to more than £164.35. So if it is more than £125.95 then the maximum boost is less than £38.40.

BOOSTING A NEW STATE PENSION THAT IS SUBJECT TO A CONTRACTED OUT PENSION EQUIVALENT (COPE) DEDUCTION
Reach State Pension Age in
Men born
Women born
Years you can pay
Maximum pension boost (2018/19 rates)
2016/17
6 April 1951
5 April 1952
6 April 1953
5 July 1953
0
£0.00
2017/18
6 April 1952
5 April 1953
6 July 1953
5 Oct 1953
1
£4.70
2018/19
6 April 1953
5 Jan 1954
6 Oct 1953
5 Jan 1954
2
£9.40

Men and women born


2019/20
from 6 January 1954
to 5 July 1954
3
£14.10
2020/21
from 6 July 1954
to 5 April 1955
4
£18.80
2021/22
from 6 April 1955
to 5 April 1956
5
£23.50
2022/23
from 6 April 1956
to 5 April 1957
6
     £28.20
2023/24
from 6 April 1957
to 5 April 1958
7
     £32.90
2024/25
from 6 April 1958
to 5 April 1959
8
     £37.60
2025/26
from 6 April 1959
to 5 April 1960
9
     £38.40 (max)


NEXT STEPS
There is no hurry to do anything. You can pay voluntary Class 3 contributions in the tax year they are due or up to six years after that. You cannot pay them in advance. The price may rise as time passes so it will be cheaper to pay them as soon as you can.

If you will reach state pension age in 2018/19 you may want to act soon to see if you can boost your pension by paying National Insurance contributions for 2016/17 or 2017/18. Otherwise it is probably best to wait.

You can phone the DWP’s Future Pension Centre on 0345 3000 168 and ask for help. Ask them what your ‘starting amount’ is and ask if there is a deduction for being contracted out. If your starting amount is less than £164.35 and there is a contracted out deduction then you may be able to boost it using the information in this guide. 'Starting amount' is explained in the notes below. If you have a deduction for a pension which you cannot trace use the Government's free Pension Tracing Service.

Many people have contacted the DWP and been told they cannot boost their pension because they have 35 years of contributions. That is incorrect. Some officials seem to be confusing this scheme with one to fill gaps in your contribution record. There is a separate guide about that – see Filling Gaps below. Others have been told that they need more than 35 years to get a full pension. That can be true in the circumstances in this blogpost. 

You may get more sense from the free and excellent Pensions AdvisoryService or call on 0300 123 1047. Beware of similar sounding commercial organisations.

You can check your starting amount at this Government website. You will have to go through security procedures which can be a pain. Make sure it includes your 2015/16 contributions. In future this website may let you see how you can boost your pension by paying extra National Insurance contributions. It will be a lot easier to check these things when the website is fully operational, probably in a year or so.

NOTES
1. All the rates in this guide are correct in 2018/19. 

2. If your income is low then you may get extra money from pension credit or help with your council tax or rent (rent or rates in Northern Ireland). If you buy Class 3 contributions to boost your pension those benefits will be reduced but it will almost always still be worthwhile.

3. Your ‘starting amount’ is the calculation of how much state pension you have built up at 6 April 2016 under the old and the new rules. Your starting amount is the one that is bigger. It will take account of National Insurance contributions paid up to 2015/16 and will also make a deduction for years you have been ‘contracted out’ of part of the state pension system called SERPS. If it shows you have fewer than 35 years of National Insurance contributions then you may be able to pay more to boost that number towards 35. See ‘other groups’ guides link below.

4. SERPS, the State Earnings Related Pension Scheme, was an earnings-related supplement to the basic state pension. People paid into it as part of their National Insurance contributions from April 1978 to April 2016. From April 2002 it was changed and renamed State Second Pension (S2P). It was SERPS and S2P – sometimes called ‘additional pension’ – which people ‘contracted out’ of if they paid into a good pension at work or in some cases into a personal pension which they chose to ‘contract out’. They paid lower National Insurance contributions. The pension they paid into was supposed to replace the SERPS or S2P but it does not always do so in full.

5. Tax years run from 6 April one year to 5 April the next. So 2018/19 runs from 6 April 2018 to 5 April 2019.

6. If you have an old pension you cannot trace, use the Government's free Pension Tracing Service.

7. Contacted Out Pension Equivalent is the amount deducted from your new state pension to take account of the time you were contracted out of SERPS/S2P. In theory the amount deducted should be paid to you by the pension scheme you paid into as part of being contracted out. But that will not always happen especially if you were contracted out into a personal pension. This government guide to contracting out sort of explains it.

8. Man credits. These man credits - called auto-credits - are only awarded for whole tax years, not individual weeks. Men born 6 April 1952 to 5 April 1953 can get a year of contributions credited for 2016/17. They may also get earlier years credit but they do not help with reducing their contracted out deduction. Men born 6 April 1953 to 5 October 1953 can get a year credited for 2017/18.

The credit is given for the tax year in which they reach women's state pension age (unless they also reach 65 in that tax year) and for any subsequent tax year before the tax year they reach 65.

BOOST YOUR PENSION GUIDES FOR OTHER GROUPS
Men born 6 April 1951 or later and women born 6 April 1953 or later.
·         Filling gaps in your National Insurance record – new state pension 

Men born before 6 April 1951 and women born before 6 April 1953
·        Filling gaps in your National Insurance record – old state pension 
·        
There is also a comprehensive guide to what you can do to top up your state pension available as a download from the mutual insurance company Royal London written by former Pensions Minister Steve Webb it is well worth a couple of hours study.

Version: 2.1
25 May 2018 
Previously: Target 155

Sunday, 1 April 2018

OXFORD UNIVERSITY TO ABOLISH STUDENT FEES


One of Britain's top universities is to abolish student fees after the Supreme Court allowed it to charge a royalty on every use of English words online.

From 6 April 2018 Oxford University will use a monopoly granted by Henry VIII to demand money from the one billion people who write online in English. They will automatically be billed a ‘nanocharge’ of 0.0001p by Oxford University Press for every word they publish online if it is in the Oxford English Dictionary. Fees from the estimated fifty trillion English words written online each year will allow the university to make education free at all levels.

The Oxford English Dictionary itself only began in 1859 and rapidly became the definitive record of the language. 

But under Letters Patent of 1523 Henry VIII granted the University “our speciall lycence” to collect money “from thoos persons who prynt in the language of Englonde” and use such money “for the supporting and maynteynyng of the vnyuersite of Oxenford” and the order “shulde passe and be sealed vnder our greate Seale as by our said comaundement as ye haue more parfite knaulage of the language of Englonde than any other”.

Henry VIII Letters Patent of 1523 granting Oxford University rights to all English words ‘in perpetuity’. 

The royalty could have been charged at any time since 1523. But early attempts to levy printer’s type led to riots against the so-called “taxes on knowledge”. The situation changed this week when the Supreme Court held unanimously that the words of the Letters Patent could not be clearer” and gave Oxford the right “in perpetuyte” to the copyright on the words in its Dictionary. The court rejected a counter-claim by rival publisher Collins that the Letters Patent were repealed by the Monopolies Act 1624. “No such provision exists in the Statute” said the President of the Court and Oxford graduate Lord Justice Neuberger. Significantly, Justice Lady Hale, the Deputy President who went to Cambridge, did not dissent.

Professor Fiona Nomura, a Proctor of Oxford University Council, told me in an exclusive interview

“For nearly half a millennium Oxford has allowed England, Britain and the world to use the English language free of charge. However, the University is increasingly uncomfortable at Government demands to raise the fees charged to our undergraduates, this year to £9,250. So Congregation decided to use this ancient right to levy a charge on every online use of the words which are the University's copyright and make education at this world beating institution free again.”

She pointed out that Henry VIII himself was a great patron of education and founded several grammar schools and colleges.

Oxford claims the amount “will be too little for an individual to notice but will mean much to our students”.

All words published online will be compared with the online Dictionary and an automatic PayPal debit applied for each word in it. The nanocharge of 0.0001p levied on the estimated 500 trillion online uses of English words each year will raise £500m – more than enough to replace the £110m in fees paid by Oxford’s 12,000 undergraduates. The balance will be used for bursaries and to support its 11,000 postgraduates – who Congregation called “the entrepreneurs of tomorrow” in the so far secret meeting that made this historic decision.

However, Professor Angie Buff of Trinity College Cambridge said the move was a backward step. “It will lead to people misspelling and making up words to try to avoid the nanocharge. They may even start tweeting in foreign languages. It may help a few Oxford students but it will damage literacy and, ultimately, English itself.”

The levy will cover all websites and social media including blogs, Twitter, Facebook, LinkedIn, and even the subtitles on YouTube. Twitter alone publishes 3 trillion English words every year. Oxford is working with GCHQ to extend the nanocharge to encrypted services such as SnapChat.

Professor Nomura confirmed that the copyright only extends to the 600,000 words defined in the Oxford English Dictionary. “Neologisms such as ‘selfiecide’, ‘mansplaining’, and ‘nmh’ will still be free to use, should any ignoramus wish to do so.”

She warned however that the fee would be levied on one new word. At an emergency meeting of the Words Admission National Council English Register this week ‘Brexit’ was added to the Dictionary with immediate effect. Such speed is unusual for an organisation which took twenty-four years to admit the word ‘snozzle’. Professor Nomura denies the haste was to cash in on the word’s popularity. "It is simply because the definition is so clear" she said "Brexit means Brexit," Fi Nomura smiled, “end of."

UPDATE: I have learned that the nanocharge will be brought forward five days and will be applied from 0001 on Sunday 1 April.

Vs 2.0001
1 April 2018




Friday, 12 January 2018

CREDIT CARD FEES BANNED

From 13 January 2018 charging customers more if they pay by personal credit card is banned.

Before the ban people paying for goods or services online were often made to pay an extra fee if they chose to pay by credit card. These surcharges were typically 2% but could be as high as 5% of the price and often were not made clear until the very last moment.

Firms made excessive charges despite a cut in the fees which credit card providers charged them and in defiance of a law passed in 2013 which stated a surcharge could only reflect the actual cost of accepting a credit card payment,

So from Saturday 13 January 2018 such charges are banned completely. And not only for credit cards - the ban extends to any plastic payment and to PayPal, ApplePay and other electronic payment systems.

Enforcement
The law is clear but unfortunately how it will be enforced is not. Enforcement is principally in the hands of the local Trading Standards office. But the Trading Standards Institute has told Radio 4's Money Box programme that it is unlikely to be a priority.

"With no extra funding, budgets cut by over 56% within a decade and 250+ pieces of legislation to enforce and consider – it is unlikely to be a priority for any local TS." 

If a major firm is illegally surcharging people widely over the UK then the Competition & Markets Authority can also intervene.

Self-help
If you are charged extra for using a credit card or any other form of payment then you have the right to demand a refund yourself.

You could email the Chief Executive of the firm something like this

"When I bought XXXX from you on <date> you applied a surcharge of x% to the price because I paid by credit card.

I am writing to you for a refund of that surcharge under Regulation 10 of the Consumer Rights (Payment Surcharges) Regulations 2012.

Since 13 January 2018 such surcharges are illegal under Regulation 6A(1) of the Consumer Rights (Payment Surcharges) Regulations 2012, as amended by paragraph 12 of Schedule 8 to the Payment Services Regulations 2017.

I look forward to hearing from you. Should you not pay the refund within 14 days I shall pursue my case through the Alternative Dispute Resolution process or take action in the courts."

Find the CEO's email here.

Report them
You should also report the matter to trading standards. The way to do that is through the Citizens Advice Consumer Service on 03454 04 05 06. If Trading Standards get enough complaints about a particular firm it may take action. If the trader is based outside the UK but in the EU or Iceland, Norway, or Liechtenstein then the case will be passed to the UK European Consumer Centre. You can call them direct on 01268 88 66 90.

What firms might do
Firms can work round the new law in several ways.
  • Refuse all credit card payments - this is the line that HMRC has taken. From 13 January 2018 you cannot pay your tax by credit card. The new law will not prevent a firm from setting a lower or upper limit for accepting credit card payment. 
  • Impose one charge for any means of payment - even if you turn up with cash. As long as the charge is the same regardless of how you pay that is lawful.
  • Put up prices generally to cover the extra cost. 
Exemptions
The ban applies to any retail payments when both parties are located anywhere in the European Union or in Iceland, Norway, and Liechtenstein. So it would not normally apply if you bought tickets online directly from an American airline.

The ban applies to any charge made from 13 January. But a charge made after that date under a contract entered into before 18 July 2017 is allowed.

It does not apply to goods or services bought using a corporate credit card. But even then the surcharge cannot exceed the actual cost to the company of that means of paying.

Further information
This Government guidance is useful for detail.

The Regulations implementing this law were made as a result of the EU Payment Services Directive 2015/2366.

Paul Lewis
version 1.02
13 January 2018

Sunday, 19 November 2017

UNHAPPY CHRISTMAS

Around 25,000 people in weekly paid low paid work who top their wages up with Universal Credit will get less benefit or none at all in the month leading up to Christmas. 


Introduction
Universal Credit is supposed to make work pay. It uses real time information passed to Her Majesty's Revenue & Customs (HMRC) by employers to adjust the benefit each month according to how much income is earned. So the Department for Work and Pensions (DWP) should know immediately if income changes in the month it is assessed over.

The underlying problem for weekly paid people is that weekly into monthly doesn't go exactly and they tend to budget weekly when the bulk of their money comes in, not monthly as the Department would like them to.

Jane
Jane lives in Altrincham with her daughter Zoe aged 5. After her well-paid partner left her she claimed Universal Credit on 9 September 2017. Her assessment period started seven days later (the infamous waiting period) and thus ran from 16 September to 15 October. She then had to wait seven days for the benefit to be credited to her bank account. It arrived on 22 October and will do so on the 22nd of every month. 

She is paid weekly and her earnings are constant so she expects the same amount of UC each month. In fact the amount she gets each month will depend on her income in the assessment period which runs from 16th to the 15th of the month. 

Jane works 40 hours a week at £12.50 an hour. Her Mum looks after Zoe outside school hours. In October and November she got £220 UC which was a great help. Her December payment is due on 22 December and she is glad it will come just in time for a late Christmas shop and stop her getting overdraft charges. Her employer pays her weekly on a Friday. In assessment period leading up to her her December payment she is paid on 17 and 24 of November and 1, 8, and 15 of December. Those five pay packets mean her income is 25% more than it was in the four pay packet months of October and November. That is enough to stop her entitlement to Universal Credit in December.

Although she has had extra income from her job in that assessment month her weekly pay is always earmarked to pay £520 a month rent, food, utility bills, council tax, and travel to work costs. She was counting on the usual Universal Credit payment to top up her earnings on 22nd to give her a bit more for her children after Christmas. When it is zero Jane has to abandon those plans as she budgets weekly and is not sure why the payment has stopped. 

Chris
Chris is 22 and moved to Southend-on-Sea in the summer to get a job working 38 hours a week on £7.05 an hour minimum wage. Chris had been homeless and in a hostel for some months. He rents a one bedroom flat which is allowed in those circumstances under Universal Credit rules. After tax his pay is £245 a week, nearly half of which goes to pay his rent. So when he is told he can get Universal Credit he is very pleased. He claimed it on 9 September too and was puzzled he had to wait so long for any money. But nearly £140 arrived in his bank account on 22 October and was very helpful, not least to pay back some money his work mates had lent him during his six week wait. The same amount arrived on 22 November and friends told him he would now get that every month. But it did not arrive on 22 December. He thought it was late over Christmas but it was still not there when he went back to work on 27th. 

By the end of the week his boss said he should call the Universal Credit helpline and kindly let him use the office phone in his lunch hour. He was told the lack of a payment was correct as he was no longer entitled to Universal Credit. He now has to reapply for his benefit before 15 Jan to make sure he gets his next payment on time on 22 January. He has to do that online. When he first claimed he used the local library. When he finally gets a time slot to use a computer there he is told he needs his username and password which he cannot remember. After two goes he answers his security questions and can eventually log on and re-claim. Not everyone would be so lucky

Why it happens
The experiences of Jane and Chris are not errors. They happen because Universal Credit is assessed over a period of a month - from the nth day of one to the (n-1)th day of the next (If the assessment period begins in the last days of the month, then it assessed from the end of one month to the end of the next). So the assessment period can be 31, 30, 28, or 29 days. The money is paid into a bank account seven days later. In four out of the twelve months in the year people who are paid weekly will have five paydays. In the other eight they will have four paydays. When their income in the assessment period changes that alters the amount of their universal credit. In the periods when they have five paydays the benefit will be reduced and in some cases it will disappear altogether.

Neil Couling, the Director General of Universal Credit agrees. Responding on Twitter @neilcouling when I first reported this story, he tweeted
  • This so called problem would have occurred at Christmas 2013, 2014, 2015 and 2016. In fact it is just the system working as intended, adjusting to changes in household income.  
The same thing will happen to Jane and Chris four times every year. The next occasion will be the payment due on 22 April 2018, just after Easter. The effect is they will have to reclaim their benefit every four months. 

Numbers
The latest figures from the Department for Work and Pensions (15 November 2017) show there are 250,000 people on Universal Credit who work and the DWP has told me that 67,000 of them are paid weekly. Every month about a third of those weekly paid people will find that they have five pay days taken into account and their money will be reduced. The DWP has confirmed it will happen to 25,000 claimants in December, as it will every month. For some, like Jane and Chris, the rise will be enough to wipe out their entitlement to Universal Credit. Others will just get less Universal Credit. The Department points out that their wages and their total income will be higher in five week assessment periods. That is strictly true. But as the first payday arrives on the 17th and the next on the 15th of the next month it is not much help when juggling regular outgoings on a limited weekly budget, especially over Christmas.

The DWP has also said in a @dwppressoffice tweet
  • UC payments adjust to people’s earnings so they get a stable income each month including over Christmas
But the figures show monthly incomes are not stable. Chris will have a total income from wages and benefit of £1122 in months with four weeks and £1229 in five week months - a difference of around £107 which is hardly stable. Jane's monthly income changes by £185.

The problem is recognised in the official explanation of payment cycles which confirms that people paid more frequently than monthly will face reduced or missing Universal Credit payments in some assessment periods.
  • You will need to be prepared for a month when you get 5 wage payments in one assessment period and budget for a potential change in your monthly Universal Credit payments.
As Neil Couling said in his tweet, this is how Universal Credit is supposed to work. Which does not of course make it right or convenient. But, again as the DWP and many welfare rights specialists say, it is a lot better than tax credits which are normally worked out on income a year in arrears.

Re-claiming
If the benefit does vanish, the method for re-claiming is different depending on the Jobcentre where the claim was first made.
  • In Live Service areas (also called Gateway areas) the claim should just be rolled over automatically. It only ends if an individual is above the income limit to get some benefit for more than six consecutive months. Live Service areas will disappear by the end of 2018.
  • People in Full Service areas - like Jane and Chris - will have to reapply. This should be a simple online process and if done promptly the claim should be accepted and they should keep the same assessment period and payday.
The Jobcentre Plus or Work Coach should know which sort of area it is. It can also be checked on this website. If the benefit is reduced rather than extinguished it will be higher the next month.

Other payment periods
The problem does not just affect those who are paid each week. People paid fortnightly will have two months in the year in which they get three pay packets instead of two. Anyone who is paid four weekly will get two pay packets in a single month once a year. Even those paid monthly can be affected if their firm brings forward a payday to before a Bank Holiday, such as Christmas or Easter, and that means there are two monthly payments made in one assessment period. Tax rebates and payments from the Student Loans Company can also affect one month's benefit. In all those cases it is more likely than with weekly payments that the Universal Credit will be wiped out and a re-claim will be required in Full Service areas.

Roll out
As Universal Credit is rolled out across the UK during 2018 all areas will become Full Service areas. New claimants of working age benefits will normally have to claim Universal Credit rather than the old benefits such as Tax Credits, Housing Benefit and the income-related versions of Jobseeker's Allowance and Employment and Support Allowance. There are some exceptions but those will probably end from December 2018 when the roll out is complete. Note that the contributory versions of Jobseeker's Allowance and Employment and Support Allowance will still be available for up to six and up to twelve months regardless of income to people who have sufficient National Insurance contributions and fulfil other conditions.

In the run up to Christmas 2018 many more people will be affected by these five and four week paydays as the number of those claiming Universal Credit will have risen due to the national roll out for new claimants. After 2018 people already getting the old benefits will be moved in stages to Universal Credit. By 2022 everyone on the old benefits will have been moved to Universal Credit and an estimated eight million people will get it. On present figures that would mean 300,000 working people who are paid weekly would face a lower or missing UC payment in December if their Assessment Period has five paydays in it.

The calculation
Before the DWP provided a figure of 25,000 there was some dispute about how many people are in Jane's position. The calculation is fiddly but perfectly possible.
  • Take the 31 possible UC payment days in the month before Christmas from Friday 24 November to Saturday 23 December
  • Look at the corresponding 31 assessment periods which begin with 18 October to 17 November and end with 17 November to 16 December.
  • Count the number of work paydays (assumed to be Fridays) in those 31 assessment periods. There are 12 assessment periods with five Fridays and 19 with four Fridays. 
  • The proportion of assessment periods with five Fridays is 12/31 = 38.7%. With a total of 67,000 weekly paid Universal Credit claimants that gives the figure of 25,935 whose assessment period will have five paydays in it. 
  • Using different paydays there are either 10 (Sunday, Monday, Tuesday),11 (Wednesday, Thursday, Saturday) or 12 (Friday) assessment periods with five paydays. Friday is the most common payday so I used Friday. Using other paydays the number of those affected is 21,613 for 10 and 23,774 for 11. Those results are not unexpected. With 67,000 weekly paid and each being affected one month in four a simple average gives 22,333 affected each month.
  • The main assumptions are that weekly pay is constant and people are equally likely to apply on any day of the year.
The DWP now says 25,000 people had five weekly paydays in December. It cannot yet say how many will lose all and how many will some of their UC. The ones who lose it all will be those with UC payments that are relatively small.

Fiddly bits
There will be a very few people among those who have a 'work allowance' whose income from their job is so low that the extra week's pay will not reduce their Universal Credit.

People who lose all their UC payment in five week months but get some in four week months will end up over the year with more UC than if they were paid the same annual income but monthly. At lesat, they will if the make sure they reclaim the UC in time.

The DWP cannot at the moment say how many of those affected by the five week problem will lose all their Universal Credit and how many will lose only some of it.

The loss of Universal Credit in a month can affect entitlement to other benefits such as council tax support, free school meals, and free or cheaper NHS services. Some older NHS forms may not have a 'universal credit' box to tick to get the help even if it is available. If the DWP takes a third party deduction for rent arrears or other items these will also stop if there is no UC in a month to deduct it from.

In Scotland people in Full Service areas who claimed from 4 October 2017 can choose to be paid twice a month.

All employers do not pass the information on pay on to HMRC immediately and that can mean Universal Credit is - wrongly - assessed on reported income rather than income actually received.

Exemplars
Jane and Chris are exemplars, not real case studies. The numbers are rounded and may differ by a pound or two from the actual amounts they would get. All the figures have been checked with two or three sources. It is assumed that neither of them has savings or other income.

Jane and her erstwhile partner did not claim tax credits before he left her. Jane will also get Child Benefit and possibly maintenance from Zoe's father. Neither would affect her Universal Credit payment. Neither Chris nor Jane is entitled to help with their council tax - their incomes are too high.

version 2.1
20 December 2017