Sunday, 22 July 2018

SMART METERS - DO THEY THINK WE'RE DUMB?

UPDATED 22 July 2018

Over the next two years or so every home and small business in the UK should have their electricity and gas meters replaced with new 'smart' meters. The plan is to put 53 million meters into 30 million homes and small businesses in England, Scotland, and Wales by the end of 2020. It is a challenging target. By the first quarter of 2018 fewer than 11 million smart meters had been installed in homes, split about 57:43 between electricity and gas. For the first time the quarterly figures fell - from 1.3m to 1.24 m. So it is a near impossible task to replace the remaining 42 million by the end of 2020. That would require one and a quarter million meters a month between now and then - three times the present rate.

The meters already fitted - and being fitted in 2018 - are an early model called SMETS1. Under plans revealed in July, the upgraded meter called SMETS2 will not become the standard to be fitted until 15 March 2019 for all meters installed by 12 un-named smaller suppliers. The same date will apply to all prepayment meters installed by all suppliers. Otherwise the the deadline to start fitting only SMETS2 meters will be 5 December 2018, a deadline that has been put off four times. By April 2018 only 290 SMETS2 meters had been installed in domestic premises - all under test conditions.

SMETS1 meters use the existing mobile phone network for communications and each supplier has its own way of using it and transmitting data. People who have them will usually find that if they switch supplier their meter becomes dumb and has to be read manually. That is more difficult to do with 'smart' meters than it was with old meters designed for reading by a supple human with a torch.

There are plans to upgrade SMETS1 meters to operate with any supplier. They will still not be SMETS2 meters but the workaround will at least mean they can support switching supplier. This process is known as enrolment into the DCC network (described below) and is planned for 2019. However, the Government has indicated in two consultation papers that some SMETS1 meters may have to be replaced. See Maximising Interoperability and Enrolment of SMETS1 cohorts.

What they do
I put 'smart' in inverted commas because these meters are not in fact very clever. They simply report back to the supplier how much electricity and gas the customer uses each day and, with the customer's permission, every half hour. More frequent reporting may be available in future.

The meter also feeds some information about current use to what is called an 'In Home Display' or IHD. There will be one IHD which will cover both electricity and gas if you have it. It will normally be mains-powered and fixed in position but there will be an option for a separate portable battery powered unit. The IHD can show how much fuel is currently being used and can display the cost in £.p. Some of them will have a traffic light system - glowing green when consumption is low through amber to red when it is high. They can also do calculations of past and future use. Some reports suggest that if the IHD is switched off for any reason it is difficult or impossible to get it back online recording usage accurately.

Costs
The costs of the programme are fixed and certain, though there is a strong likelihood that they will increase above their current estimates. The latest cost/benefit analysis was published in August 2016. It estimates that manufacturing and installing 53 million meters, communication devices, and IHDs in 30 million premises will cost £5.44bn. There is also a new communications infrastructure network called DCC which will cost £3.13bn. That was due to be completed late in 2015 but was in fact not switched on until November 2016 and in 2018 is still being tested. The cost/benefit analysis puts the total costs of the programme over 18 years at £11bn. That figure is in 2011 pounds; even without cost overruns to deal with delays and incompatibility issues, that would be about £13 billion in today's pounds. That cost is about £400 per household and will be paid through higher electricity and gas bills.

Those payments are beginning. In 2017 all major suppliers and some smaller ones have put up the cost of electricity by 10% to 15% and each of them blames that rise in part on smart meters. That process continued in 2018.

Savings
Estimates of the savings are more speculative.

Customers will save money because they will use the information from the IHD to cut their energy consumption. That is the theory and the saving from that is put at £5.3bn over 18 years based on a 2.8% cut in electricity use and 2% in gas use.

Achieving those savings requires active engagement by customers. But many will not be engaged and will end up paying more. A report by the old Department for Energy and Climate Change on some pilot smart meter installations found that initially 96% used their IHD but about four out of ten disconnected them during the research. None were able to identify any clear savings due to the IHD. The Public Accounts Committee estimated in 2014 that customers would save on average about £26 a year. A survey by a price comparison site in July 2018 (on a small and perhaps not representative sample) found that less than half (49%) of its sample of 678 people with a smart meter had reduced energy usage. And as standing charges grow - they currently account for 13.5% of the typical bill - the scope for reducing bills by cutting energy use decreases.

Customers will also gain, if they choose to, by faster switching from one supplier to another. The process can take weeks now but a 24 hour service is promised. They will also benefit from suppliers sending an accurate monthly bill of energy used rather than sending out estimated bills.

Energy suppliers will save an estimated £8.25 billion. The biggest chunk - £3bn - will be from ending meter reading and other home visits. Reduced customer enquiries and complaints will save £1.2bn. Another £1bn will be saved by managing pre-payment customers better and there is a big saving of £1.4bn from reducing the cost of customers switching supplier. A further £1.2bn is saved by managing debt better and reducing theft.

Networks and the generators will save £1.8bn between them from smoothing the peaks and troughs of demand and generating less power.

Finally, carbon related benefits and air quality improvements will add £1.4bn to bring total savings to £16.7bn.

These figures are from the 2016 cost/benefit analysis and the technical annex and are in 2011 pounds. Actual costs in today's pounds will be 20% higher.

A new Cost Benefit analysis is not planned until 2019.

Who gains?
Less than a third of the savings will be made directly by consumers. And only for those who engage with the energy saving opportunities. Nearly 70% of the savings will go to the industry. The hope is, of course, that suppliers, generators, and transmitters of electricity and gas will pass some of those savings on. They may. But some of their savings - on debt management and prepayment meters for example - will come at a direct cost to the customers affected though they may be passed on to others. The savings from carbon reduction and air quality improvements will not be felt directly in the pocket by consumers.

So while the customers will pay for the £11 billion cost of the smart meter programme through their bills, the savings of £5.4 billion will be felt only by those who adjust their behaviour and and only some of the remaining £11.3 billion will be felt even if the industry passes on its own savings to customers in lower prices. It is not at all clear that the rather speculative carbon related and air quality savings will ever reach consumers' pockets.

The energy industry has a very poor record in passing on savings. In 2014 they took many months to pass any of the gains from the fall in the wholesale price of gas and none reduced electricity prices even though much of that is generated by burning gas.

Extra costs.
The impact assessment does not take account of one significant extra cost.

Bills will no longer be estimated as they will be based on actual usage over a month. That is promoted by the Government as good news for consumers. But it will be expensive for gas and electricity suppliers. For many years they have encouraged customers to agree to pay estimated bills monthly by direct debit rather than quarterly based on meter readings. The result is that the firms have kept hundreds of millions of pounds on their books belonging to customers. The value of that is shown by the fact that customers who pay a more accurate quarterly bill can be charged 7% extra or more more than monthly direct debit customers. If they no longer make that saving then prices will inevitably rise. Some customers may prefer to keep estimated bills. They are at least constant and that can help with budgetting.

This money the suppliers routinely hang onto is separate from the £400m that Ofgem found they had wrongly kept when customers switched to another supplier. In February 2014 it ordered firms to refund this money. That event does not bode well for hopes that the industry would voluntarily return to customers the savings it makes from smart meters.

Time of use
The report also makes no assessment of the costs or savings to be made from what are called Time of Use tariffs. Once the smart meter network is rolled out suppliers will start making customers manage the load, especially in electricity supply. In other words when demand is high the price goes up. When demand is low the price comes down. And with half hour reporting - and it may be more frequent in future - time of use tariffs could be very specific.

For example, energy could be more expensive between 7am and 9 am when most people are getting up, putting on the kettle, and making breakfast. Or between 5pm and 8pm when evening meals are being cooked. The result would be that poorer families could not afford to eat dinner at dinner time.

Ultimately the cost of power could rise during the adverts in TV soaps or the interval in football matches when millions put the kettle on make a cup of tea.

Time of use tariffs mean that the customer is being drafted in to manage the national power load. By pricing people out of energy use at peak times the peaks and troughs of usage - so irksome to the engineers managing the grid - are smoothed out.

Debt and disconnection
Smart meters will also enable energy suppliers to manage debt and disconnection remotely. Customers can be switched from credit payment to prepayment by the supplier without changing the meter. It also means that if someone has not paid their bill then the supplier will be able to disconnect them remotely. There are currently safeguards about who can be disconnected and when. But once the conditions are met the process of doing so will be much simpler.

Organisation
The delivery of this programme is in the hands of the six large and dozens of smaller energy suppliers. They will each fit the meters for their own customers. Which could mean dozens of different engineers visiting the same street or block of flats to do the same job in neighbouring homes.

The central Data & Communication Company (DCC) is run by Capita. It will be responsible for collecting the data sent back by smart meters and forwarding it to the right energy supplier, the networks and energy services companies. Others may also get access to it. In 2014 the Information Commissioner expressed concerns about the security and use of this data. There is currently no provision to let customers know specifically who has access to it.

The data network will be run by two companies - Arqiva will cover northern England and Scotland using a long-range radio network and Telefonica UK will cover the rest of England and Wales using standard cellular telephone technology with what it calls 'mesh technology' to fill the gaps in the cellular network. The target is to cover 99.25% of dwellings - which if achieved will leave 225,000 premises unconnected. However, remote dwellings, tall buildings, and multi-occupied premises are problems that have not been solved. Some in the industry have said that 30% of homes cannot be integrated into the DCC grid. The Department for Business, Energy, and Industrial Strategy has not denied that figure.

Meanwhile Smart Energy GB will spend £40m in 2018 to persuade us all that the smart meter programme is a good thing. What it calls building consumer awareness and understanding of smart meters and encouraging consumer engagement. It includes advertising, much of it using the Gas and Leccy characters but also a Smarter Britain bus tour with daytime TV housing gurus Kirstie Allsopp and Phil Spencer - who admitted he didn't have a smart meter before he was paid to promote them. His current smart meter status is unknown.

Criticisms
In July 2018 the British Infrastructure Group of MPs and Peers published their report Not So Smart which said that the saving per household would probably be only £11 a year and that the 2020 deadline was not achievable - it recommended a two year extension. It also raised concerns about whether the savings by the energy suppliers and the networks would be passed on to consumers. It was concerned that customers would not know what was happening to their data.

On 7 March 2015 the Energy and Climate Change Select Committee expressed concerns about delays and unresolved challenges in the smart meter programme. "Without significant and immediate changes to the present policy, the programme runs the risk of falling far short of expectations. At worst it could prove to be a costly failure."

In December 2014 the Ontario auditor general Bonnie Lysyk said that the state's smart meter programme had cost twice its estimate and made few if any savings for customers or suppliers and failed to reduce energy consumption.

24 July 2018
vs 2.02

CLAIM £200 to £500 FOR FLIGHT DELAYS

UPDATED 23 July 2018

If you were on a flight that arrived at least three hours late any time in the last six years you may be able to claim compensation of between €250 (£225) and €600 (£535) for each person affected. These amounts are fixed in euros and change with the value of Sterling.These rates are as at 22 July 2018.

Similar rules apply to cancellations at the airport or within seven days before the flight was due to leave If you are given a replacement flight you will normally still be entitled to compensation if that arrives more than two hours later than the original flight - or departs more than one hour earlier than the original flight.

What is extraordinary
The European Regulation EC 261/2004, which makes the compensation rules, gives airlines a get out clause for what are called ‘extraordinary circumstances’. In other words if the delay is absolutely not the airline's fault then compensation is not due.

A dispute is brewing about delays caused by strike action. In 2018 the European Court of Justice ruled that a wildcat strike by airline staff – one that was not properly balloted or announced – was not an extraordinary circumstance after the airline had made a surprise announcement about restructuring. So compensation was due for the delays it caused. The Civil Aviation Authority has now said that strikes are covered by the compensation rules. In particular the strike by Ryanair crews in July 2018 is covered. Ryanair, BA, and Air France disagree. The dispute may end up in court. Strikes by workers outside the airline such as air traffic control or baggage handlers are not covered by the compensation rules but strikes by workers within the airline are. 


Technical issues
Airlines can no longer use technical issues including mechanical failure as an excuse for not paying compensation. Many airlines have been calling technical issues with their aeroplanes extraordinary circumstances and refusing to pay compensation for the delays they cause.

But in June 2014 in a clear and unanimous judgment the Court of Appeal decided in a case against budget airline Jet2 that technical issues were part and parcel of running an airline and that the delays they caused could in no sense be ‘extraordinary’.

Jet2 tried to get the Supreme Court to look at that decision. But it refused to do so. The judgement releases tens of thousands of claims against many different airlines which have been held pending the court case. And any fresh claims for delay compensation because of technical issues such as mechanical failure should be successful. One law firm estimates more than two million passengers a year are delayed due to technical issues.

Some airlines tried to claim that unexpected or hidden technical defects were extraordinary circumstances. But in its landmark case in September 2015, van der Lans v KLM, the European Court of Justice ruled that such unforeseen defects could only be allowed as exceptional if they were, for example, a defect the manufacturer or a regulatory body discovered and announced. Anything else was just a normal part of running a complex system like an airline.

Back six years
Another important decision by the Court of Appeal was in a case against Thomson Airways. It ruled that cases for compensation for delay could go back six years rather than two. Thomson had been refusing claims which were more than two years old on the grounds that the Montreal Convention only allowed claims for that period. But the Court of Appeal decided unanimously that local law prevails so claims can go back for six years in England and Wales. The six year limit applies in Northern Ireland but it is only five years in Scotland. See section Jurisdiction below.Thomson also tried to get the Supreme Court to revisit that decision. And again the Court refused saying the airline had no arguable case. So all airlines must now allow compensation claims for delays that occurred up to six years ago.

A further case Goel & Trivedi v Ryanair was tried in Manchester in August 2015. Ryanair claims that a provision in its own terms and conditions limits claims to two years which overrides the EU Directive. Ryanair lost the case but is appealing. It is possible that Ryanair and other airlines may try to delay claims for delays between two and six years ago until this case is finally settled. However, in a statement in September 2015 Ryanair said it did allow claims up to six year, though there is a lot of evidence that it does not.

Application
The EU Directive on compensation applies to flights 
  • which leave UK airports (or any EU airport) with any airline 
  • which arrive at a UK (or an EU) airport on an EU carrier. 
All flights from UK airports are covered and so are most flights to UK airports. For example, a Qantas flight from Heathrow to Sydney would be covered; a Quantas flight arriving at Heathrow from Australia would not, but a BA flight from Sydney to Heathrow would be covered. 

The Directive covers cancellation. But the courts have interpreted the law so a delay of at least three hours is considered to be the same as a cancellation and give rights to compensation.

The delay must be at least three hours and that is measured at the arrival airport. So a flight that leaves more than three hours late but makes up the time and arrives 2h59m late would not be covered. The arrival time was recently defined by the European Court of Justice as the moment when at least one of the aircraft doors is opened at the arrival airport.

How much
Compensation for delay is on a sliding scale depending on distance and the length of the delay – a qualifying delay on a UK to Alicante flight for example would pay €400 (£355) per passenger. 

Flight distance
Length of delay
        Compensation*
Up to 1500km
3 hours or more
€ 250
£225
more than 1500km up to 3500km
3 hours or more
€ 400
£355
More than 1500km between two EU states
3 hours or more
€ 400
£355
More than 3500km - one airport outside the EU
{3 hours but less than {4 hours
€ 300
£265
{4 hours or more
€ 600
£535

*Compensation is specified in euros. Sterling amount is approximate and will vary; Sterling amounts are rounded and rates are as at 22 July 2018


In many cases the compensation is more than the fare for the flight. Remember, these amounts are per paying passenger. So for a family of four they are four times as much. 

Compensation applies to the whole journey even if the flight involves a change of aircraft at an airport outside the EU as long as if it was booked as one journey and departs from the EU. This was decided by the European Court of Justice on 31 May 2018


Compensation for cancellation is more complex but similar. If your flight has been cancelled within seven days before the original flight time - for example once you are at the airport - compensation will almost always be paid. If you are not offered an alternative flight it will be paid at similar rates to those above. If you are offered an alternative flight but it arrives two hours later - or departs one hour earlier earlier - than the original flight then similar compensation will be paid. The rules are complex but always claim if a flight is cancelled. Compensation for flights cancelled by the airline with more notice than seven days are different.


These rights are separate to any money or vouchers for a hotel, travel, or food paid by the airline. It has to make those payments as well even where there are extraordinary circumstances which prevent compensation being paid.

Exceptions
Airlines can get out of paying if the delay or cancellation was due to 'extraordinary circumstances'. There is no definition in the law but that can include industrial action outside the airline's own personnel, extreme weather, war, terrorism, sabotage, political or civil unrest, hidden manufacturing defects, and bird strikes. But it can no longer include technical issues such as mechanical defects even if they were unforeseeable. Nor can it include computer system failures as large companies should always be available. In rare circumstances computer failure due to a major hacking attack may be argued to be 'extraordinary'. It probably does not include strikes by the airline's own staff, though that is subject to dispute.

Jurisdiction
Although the EU directive applies throughout the 28 member states of the EU, the Supreme Court ruling only binds courts in England and Wales. Lawyers say it would be 'persuasive' in Scotland and Northern Ireland. But it would not be binding on a case that was brought, for example, against the Stockholm based airline SAS for a flight from Hamburg to Dubrovnik. 

Enforcing your rights
In England and Wales you can use the online service via the Government website.

The court cases to cite are: 


Don't let attempts to circumvent the court rulings put you off. The more difficulties airlines put in the way the fewer people will have the determination to pursue the case and get compensation. So make sure you pursue your claim and go to court if need be.
If an airline offers to pay the compensation in vouchers instead of money you are entitled to refuse and demand money.


The CAA has useful information on its website about flight delays and cancellations and makes it clear that strikes among the airline's staff are not an extraordinary circumstance

If you are delayed the airline is obliged to explain your rights at the time of the delay. In the past many have not and on 21 March 2015 the Civil Aviation Authority took action against Are Lingus and Wizz Air to force them to obey this part of the Directive.


Write to the airline to make the claim. State that you are claiming for delay or cancellation under European Regulation EC 261/2004. Don’t worry if you no longer have boarding passes or ticket details. As long as you can identify which flight you were on the airline will have your details on its manifest. If any airline refuses a claim you may have to go to court to enforce your rights. You can do that in a court in the country where (a) the flight landed or (b) the flight started within the EU or (c) the airline is based.

In Scotland claims have to be made through the Sheriff Court - click here to learn more.
In Northern Ireland use www.nidirect.gov.uk

Be determined
Expect some airlines to be difficult and try to put you off or delay matters. If the airline sends you a document headed Draft list of extraordinary circumstances following the National Enforcement Bodies (NEB) meeting on 12 April 2013 write back to say that list has no legal status, has been overtaken in England and Wales by the Appeal Court and Supreme Court rulings, and that you are relying on the law as set out in Regulation EC 261/2004. 

Ryanair has refused to pay claims where the flight originated in Edinburgh as it is outside the jurisdiction of the Supreme Court. Ryanair also resists claims in some other circumstances. On 18 September 2015 the Civil Aviation Authority began enforcement action against Ryanair.


Get help
A new online claiming tool has been launched by Resolver. It makes no charge for its service. Never use a claim management company. It will take 40% of your compensation and may or may not be good at the job.

The consumer organisation Which? also has a useful guide to claiming compensation yourself.

You can get some advice free from the Civil Aviation Authority at www.caa.co.uk. If an airline has refused your claim the CAA offers an arbitration service. Its decision is not binding on the airline - though they usually follow it - and there have been long delays in the past as the CAA had inadequate staff numbers to handle the volume of cases. 

The EU has its own comprehensive guide to compensation and other help you can get for delayed or cancelled flights.

If you feel you need professional help you can use the lawyer Bott & Co who specialises in compensation for flight delays. It has an online checker to see if you have a claim or not. If it takes a case then it charges 25% plus VAT (so 30%) of any compensation obtained plus a £25 administration fee (including VAT) per passenger. Altogether that will be more than a third of your compensation. There is no charge if you lose.

Brexit
After the UK leaves the EU on 29 March 2019 the rules will continue to apply until 31 December 2020 under what is called the implementation period. During that period any changes to the rules made in Europe or interpreted by the European Court of Justice will also apply. After the implementation period ends then the rules will automatically be incorporated into UK law as 'retained EU law' including all relevant European Court of Justice rulings to that date. However, from 1 January 2021 it will be possible for the Government or Parliament to amend or indeed repeal these rules. 

Even if that happens they will still be in force in the EU and will apply under EU law to flights from the EU to the UK on any airline and to flights from the UK to the EU on an EU based airline. 



You should also note that these plans may change especially if the UK leaves the EU without agreement. 

25 July 2018
vs. 3.10

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