Thursday, 5 August 2021

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 under EU rules called MIFID II which began on 3 January 2018. Now that the transition period is over and the UK has left the ambit of the EU these rules have become part of UK law and the Financial Conduct Authority polices them.

Under these rules 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
My general position is only use a financial planner who you can pay in pounds. Do not 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 were paid year after year. If you cannot afford the fee in pounds then you probably do not need or cannot afford financial advice. 

However, in some very limited circumstances a small percentage charge - say 0.5% or so - can be better value than paying in pounds. But always make sure that:
  • you know each year how much has been taken from you so you can see if it is value for money.
  • you review the service you get every year and if it is poor, find another adviser.
Ideally 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 from VAT for finance and insurance costs £11 billion a year). That was originally an EU law but is very unlikely to change once we have finally left the EU in 2021. 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 unless it is good value and you know what it is and what you get for it never pay a wealth tax to the adviser from your fund. 

Contingent fees
One iniquitous method of charging grew up 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.

Transferring out of a DB scheme into a DC scheme can seem very tempting because you will get a massive amount of money to move away from the guaranteed DB pension. And then if you choose to do so you can cash some or all of that pension in. It is almost always a bad idea. In the past some financial advisers who would deal with this for you (you have to get advice if your pension is worth a transfer value of £30,000 or more) charged on a 'contingent' basis. That meant you only paid them if you took their advice and transfered your fund. Such fees created a conflict of interest between you and the adviser who was only paid if you transfered. The FCA finally saw sense and banned contingent fees from 1 October 2020. 

The difficulties of advising people about pension transfers and the cost of insurance mean that relatively few advisers will handle this business. Esepcially if you do not have a very valuable pension. 

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. Adviser Book is the newest directory. Unlike the others no-one pays to be included. It has the complete list of more than 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. You can also filter by independent and how fees are charged.

2. Unbiased was the first real attempt at a comprehensive database. It says it lists more than 18,000 independent financial advisers. Restricted ones should not be on there. Advisers get a basic listing free but they must pay a subscription to be directly contactable through the website. You will see a list of the 'top 20' near your postcode which unbiased says is based on how near they are to you.

You can use the site to apply my filters. You can also make other choices such as specialisms or qualifications. You can even pick a male or a female adviser.

3. 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 the senior manager who is responbile for them and checks that periodically. It demands images of certificate for qualifcations.

You can filter by speciality, by independent or not, and by qualification. And 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 8000 financial advisers who choose to pay the fees to be included and of those 3000 are full vouched for - you can only click through to the adviser website for those. 

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. But it does not indicate if they are independent.

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. If the answer is anythnig but clea that is a warning flag. Also ask what it will be in pounds (if they haven't told you) and then ask what you get for that fee.

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 Helper site. That is the new name for what used to be called the Money Advice Serivce. Its 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 joining Which? and subscribing to its Which? Money Helpline. That will cost you £10.75 a month.

If you have pension questions then you can still contact the Pensions Advisory Service which has a helpful helpline on 0300 123 1047. The service is now part of Money Helper. It is free and approved by the Government.

Specific advice about the pension freedoms which began in April 2015 can be found at Pension Wise. 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. Again, Pension Wise is now part of  Money Helper.

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. All those terms are meaningless. Some call themselves International Financial Advisers which they abbreviate to IFA trying to give the impression that they are Independent Financial Advisers. They are not and are probably not even regulated. All these people are allowed to operate unregulated as long as they only sell unregulated investments in things like whisky, property, or art. Your money is completely at risk. 

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. Always ask for a Financial Conduct Authority number and check it out on the Financial Services Register. Not all individual regulated advisers are on it. But all regulated firms are so ask the adviser about their firm. Then use the contact details on the FSA Register to check with that firm is the person who claims to work for them does so. 

Sadly - and madly - the register does not say if the adviser is independent or restricted. Sadly - and madly - again, changes to the Register mean that it is not as comprehensive as it was. But never trust someone who is not on it. And be cautious even about those who are.

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
05 August 2021
Vs. 2.66
21332
18798
17906
17725

Thursday, 29 April 2021

FOR WHOSE BENEFIT?

 

 

Millions of people on benefits will get just a few pence a week more in smallest uprating

The week beginning April 12 was a big one for people who are so disabled they need help with their bodily functions from another person by day and by night. They got an extra 60p a week on their Attendance Allowance – less than the price of a 2nd class stamp to write and complain. Their carer will get an extra 35p a week which, for the minimum 35 hours they must do their caring, amounts at best to an extra 1p an hour. In total their weekly stipends will creep up to £89.60 and £67.60 a week. A carer who tries to work their way out of poverty loses all their carer’s allowance the moment their wages rise above £128 a week – 14 hours at minimum wage if they are aged 23 or more.

Other benefits rose by similarly inconsequential amounts. Those on employment and support allowance got 35p a week more, slightly less if they are under 25. People on long-term incapacity benefit because they are, guess what, incapacitated over the long term, were given an extra 55p, barely enough for a pint of semi-skimmed.

Child benefit paid to millions of mothers will rise by just 10p for the oldest child and 5p for each other – less than the cost of a visit to a public toilet.

Even widowed mothers, once in the pantheon of those we should help, will see their allowance rise by just 60p a week to £122.55. They are lucky. More recently bereaved spouses will get zilch. Bereavement Support Payments, which began for deaths from 6 April 2017, are only made for eighteen months so the Government has seen no need to raise them at any of the four Aprils since they were introduced. Many other amounts are also frozen. The benefit cap – the maximum allowed which generally cuts the benefits of people with high rents and several children – remains where it was fixed five years ago at £20,000 a year. The amount of savings which denies entitlement to means-tested benefits is still frozen at £16,000, an amount set fifteen years ago. The Local Housing allowance – the maximum amount of rent that can be paid – has also been frozen for 2021/21. So as rents rise, tenants are poorer.

I am old enough to remember the trouble Gordon Brown got into in 1999 when he announced a rise in the state pension of just 75p a week. That is more than the increase in every working age benefit rate on 12 April this year. But there is no outrage this year, even though Brown’s 75p pension increase was the correct amount according to the same rules. Each April benefits rise in line with the inflation rate the previous September. In 1999 that was 1.1%. In 2020 it was 0.5%. That 75p rise would be worth £1.77 in today’s money.

There have been two changes to that rule. From 2011 the CPI replaced the RPI as the measure of inflation, a change which reduces inflation by almost one percentage point just because of the different arithmetic the two measures use. Indeed, in September 2020 while the CPI was 0.5% the RPI was at the 1999 Brownian level of 1.1%! Five years later austerity kicked in and most working age benefits were frozen from 2016 to 2019. Over that period prices rose 7.4% (CPI) or 10% (RPI).

Even pensioners are not exempt from this parsimony.  Of course, at the moment the old basic state pension and the flat rate new state pension are increased each year by the magic triple lock – forged from the Gordon Brown embarrassment and tempered in the fire of six general elections. Those amounts are raised each year by the highest of the rise in prices or wages or 2.5%. This year with pay increases negative in the autumn and a 0.5% rise in the CPI, the default rate of 2.5% was used. So from April 12th the basic state pension went up to £137.60 a week – a rise of £3.35, almost ten times the increase paid to a carer, and the new state pension is now £179.60, a full £4.40 a week more – equal to the rise in child benefit for a mother with 87 children. But pensioners are not free of the CPI shackle. Only the two headline rates get that triple lock treatment. The extras – SERPS and its enfeebled lookalike state second pension, the old graduated pension, the protected amount paid with some new state pensions above the flat rate, and the extra for deferring your claim which is paid (at different rates) with old and new pensions, all rose by 0.5%. As a result many state pensioners will see an increase in their weekly benefit of less than 2.5%. A rise of less than 2.5% was also given to those who get the means-tested pension credit.

I recite all these facts partly because I am the Mr Gradgrind of financial journalism “Facts alone are wanted in life. Plant nothing else….You can only form the minds of reasoning animals upon Facts…Stick to facts, sir!” (Charles Dickens, Hard Times 1854, Chapter 1). But mainly because they are little known, seldom acknowledged, and rarely understood. As Thomas Cranmer said – read, mark, learn, and inwardly digest.

A version of this blogpost was first published in Money Marketing 

29 April 2021 

vs 1.00 



Monday, 12 April 2021

TARGET 179 - BOOST YOUR NEW STATE PENSION

UPDATED for the 2021/22 tax year. All rates are those paid from 12 April 2021.


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 £179.60 from 12 April 2021.

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 have paid less than 35 years of National Insurance contributions can boost their state pension by paying extra contributions now. This piece does not cover that issue. Try the links at the end.

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 2021/22 that amount is £179.60 week (£9339.20 a year) and is taxable. However, there are around one and a half million people who will reach pension age in the years before 2027 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 £137.60 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 and the amount deducted, you may be able to boost your pension up to the full flat-rate £179.60.

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 58. 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 you pay from 2016/17 to the year before the tax year you reach state pension age will mean that deduction is less.

If you work and earn more than £120 a week you will get contributions credited or paid to your account (you start actually paying for them when you earn above £184 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 £6515 or more. They are called Class 2 and are £3.05 a week (£158.60 a year). Self-employed people can also pay these contributions voluntarily even if their profits are below £6515 - but only for years in which the were genuinely self-employed. Plans to phase out Class 2 contributions have been cancelled for now. 

If you will not pay National Insurance contributions at work or as self-employed or get credits for them then you can pay voluntary contributions, called ‘Class 3’. They will cost you £15.40 a week (£800.80 for a year). For each extra year of contributions your pension will be boosted by £5.13 a week (£266.83 a year) so the payback is rapid – three years for non-taxpayers; less than four if you pay basic rate tax; five for higher rate taxpayers, and less than six for top rate 45% taxpayers. Contributions for earlier years are less: 2020/21 - £795.60, 2019/20 - £780.00 making them even better value for money. If you pay in this year 2021/22 you can only pay the lower rate for two previous tax years. Contributions for 2018/19 and earlier will be at today's rate of £800.80. [For reference earlier rates were 2018/19 - £772, 2017/18 - £740, and 2016/17 - £733.20 but you can no longer pay at these rates.]

The new state pension up to £179.60 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. Recent economic conditions may see the end of that triple lock from April 2023. 

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 to set against the contracted out deduction and the maximum boost that should give to your pension. Your pension cannot be boosted to more than £179.60 a week and it will not ever be less than £137.60 so the maximum boost is £42.00.

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 (2021/22 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
£5.13
2018/19
6 April 1953
5 Jan 1954
6 Oct 1953
5 Jan 1954
2
£10.26

Men and women born


2019/20
from 6 January 1954
to 5 July 1954
3
£15.39
2020/21
from 6 July 1954
to 5 April 1955
4
£20.53
2021/22
from 6 April 1955
to 5 April 1956
5
£25.66
2022/23
from 6 April 1956
to 5 April 1957
6
     £30.79
2023/24
from 6 April 1957
to 5 April 1958
7
     £35.92
2024/25
from 6 April 1958
to 5 April 1959
8
     £41.05
2025/26
and later
from 6 April 1959
to 5 April 1960
and later
9
     £42.00
 (max)


NEXT STEPS
There is no great 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. So you can still pay for the 2016/17 tax year and will be able to do so until the end of the 2022/23 tax year. You cannot pay them in advance. However, 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 2021/22 you may want to act soon to see if you can boost your pension by paying National Insurance contributions for the five years 2016/17, 2017/18, 2018/19, 2019/20, 2020/21. That could give you an extra £25.66 a week on your pension.

You can phone the DWP’s Future Pension Centre on 0800 731 0175 and ask for help - it is still taking calls despite the pandemic. Have your National Insurance number with you. Ask what your ‘starting amount’ is and ask if there is a deduction for being contracted out. If your starting amount is less than £179.60 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.

In the past, 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. 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, but it is a confusing way to put it. 

You may get more sense from the free and excellent Pensions AdvisoryService or call on 0800 011 3797. 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. This website may let you see how you can boost your pension by paying extra National Insurance contributions. It may be operational now or that may still be pending. 

NOTES
1. All the rates in this guide are correct in 2021/22. 

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 2021/22 runs from 6 April 2021 to 5 April 2022.

6. If you have an old company or personal 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.

Men born from 6 October 1953 cannot get them.

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: 4.50
14 April 2021
Previously: Target 155, Target 164, Target 169, Target 175
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Tuesday, 6 April 2021

Banks must act to control fraud epidemic

Banks must act to control fraud epidemic

Don’t think you are too clever to be conned

An epidemic is sweeping the UK. Laying low the old and vulnerable, damaging healthy adults for life and undermining our belief in the systems that are supposed to protect us. It is caused not by a few strands of RNA, but by an intelligent life form. Clever, resourceful and agile, it worms its way into our brains, distorts our perception of reality and makes us pleased to give our money to thieves. 

In 2020, nearly 150,000 individuals had £479m taken from them by this plague. And that is just a small subgroup of the most common form of crime in Britain — fraud. It may be costing us billions of pounds a year. No one knows because much of it is never reported. What could be more embarrassing than admitting you were fooled by thieves into giving them the keys to your safe? Fraud is the crime we are the most likely to experience. It is out of control. And no one seems able to stop it. 

This type of scam begins with a frightening cold call. BT says your router is insecure and you need to pay to secure it. HMRC calls to warn that you are about to be prosecuted for tax evasion if you do not pay a sum into court now. Your bank reveals that your account has been compromised and the money must be moved somewhere safe. They panic you, threaten you, and if you are still sceptical they ask you to check caller ID. When you do it will show the correct number for BT inquiries, HMRC or even the fraud reporting line for your bank. 

These genuine numbers are sent by a technique called number spoofing, which allows the thieves to send any number they choose to the Caller ID system. One top law enforcement officer told me on Money Box recently “do not trust what you see on caller ID”. But people do and then agree to transfer money to the thieves or even give them the keys to do so themselves. Some steps have been taken to bar some numbers from being spoofed but the gov.uk website is a rich source of official numbers for thieves to harvest. Ofcom says there is no general solution to the problem of callers sending a false number. 

Until one is found the thieves will wrap this cloak of credibility around them. It would matter less to customers if they were compensated for being victims of this professional psychological warfare. A recent code was supposed to ensure that blameless victims would have their money reimbursed by the banks. But the latest figures from UK Finance show that for the 139,104 thefts that fell under the code in 2020, only 45 per cent of the £312m stolen was given back to customers — just £141m. That is a lot better than the 19 per cent reimbursed before the code began in May 2019. But evidence from dozens of people who still come to me after losing life changing sums indicates that banks are using the code itself to justify not paying. 

One popular disclaimer is that under paragraph R2(1)(a)(iii) the customer did not heed an “effective warning” about the transaction before they made it. That raises the question — can a warning be effective if it is not heeded? Another is paragraph R2(1)(c)(iii), under which the customer did not have a reasonable basis for believing the person they were paying was legitimate. But would anyone hand over thousands of pounds to someone they did not believe was legitimate? The code was not intended to be a playlist of excuses not to pay. 

Some banks are worse than others. The Payment Systems Regulator revealed last year that two out of eight banks in the code paid customers nothing in 96 per cent of cases. Even the best only reimbursed 59 per cent in full (the average was one in six). The regulator refuses to identify which banks are the worst, keeping that vital information secret from the people who need it: their customers. 

 Contrast this with TSB, the one major high street bank that is not a member of the code. It has its own “fraud refund guarantee” and says it repays in full 99 per cent of customers whose money has been stolen in this way. The regulator is now consulting on similar mandatory rules that would reimburse all customers who were not implicated in the crime. That would concentrate the minds of the banks. They already meet all losses from unauthorised thefts, such as card fraud or remote banking fraud, and these are being controlled, falling by 7 per cent in 2020 according to UK Finance. But losses to authorised payment frauds, where less than half are reimbursed, increased by 5 per cent with total incidents up 22 per cent. If the banks had to repay everyone it might make them more interested in stopping these thefts. 

The uncomfortable truth for the banks is that they are at the heart of these crimes. They allow thieves to open and operate current accounts and then use the faster payment system to receive the money and move it rapidly between accounts until it vanishes. In 2020, 96 per cent of the money stolen this way went through the faster payment system, a total of £398m, up 19 per cent on 2019. 

 I put my hand up here. In my early days on Money Box I championed faster payments. Why does it take three days to move money in the 21st century, we asked. And where is our money for those three days? Answer: earning interest for the banks. By 2008 the banks were shamed into setting up a new infrastructure that moved money at once and, crucially for the crooks, beyond recall. 

Perhaps now is the time to introduce a pause in the system so that when we transfer money to a new payee there is a delay of, say, 24 hours before the payment is made. One of the characteristics of the people whose money is taken is that within at most a few hours the psychological drug that made them credulous enough to co-operate with the crime wears off and they think: “****! I’ve been robbed.” But even after a few seconds it is too late to undo the transfer. 

 Preventing number spoofing, making the banks liable and introducing a pause for new payees would go a very long way towards ending most of these crimes. Meanwhile, there is one impenetrable barrier to them. End the call. No one ever lost money by doing that. And do not think that you are too clever to be caught. No one is. Once you engage, you are hooked. Their silver tongues will wrap around your brain while their digits enter your bank account and fish out all your money. So end the call.

This piece originally appeared in the FT early in April.

Paul Lewis
Version 1.00

Sunday, 14 February 2021

ANYTHING BUT FINE

 

Every day the Government sells the addresses of 23,000 drivers to private parking companies so they can send them a £100 bill for breaking their rules. And it is a bill, not a fine, because these companies have no right to fine anyone for parking their vehicle. Only local authorities or the police can do that. What these firms send is an invoice. Called parking charge notices, they are designed to look like the legal penalty notices issued when you break street parking rules. But they are not. They are simply an invoice for payment.

The parking firms say that when you enter their car parks you agree to a contract under which you pay a fee, park between the lines, and leave within a certain time. If you break these rules, they send you a bill for breaching that contract.

Sometimes the parking charge notice is put under the windscreen wipers. But in many cases the first you know about it is when it arrives in the post.  Many car parks have no barriers or attendants. Cameras at the entrance and exit register your number plate and compare it with the one you give when you buy your ticket. If you are deemed to have broken the rules then the firm pays £2.50 to the Driver and Vehicle Licensing Agency and sends the notice to the address it gives them.

Most people pay up at once because you are bribed to do so. A fee of £100 is reduced to £60 if you pay within 14 days. But that is not a sensible approach.

Of course, it is reasonable for a private landowner to charge people for the convenience of parking on their property. The Supreme Court decided more than five years ago that they may also impose a reasonable penalty if you break the rules laid down. However, if you get a parking penalty on private land do not pay it without reading it very carefully.

Check the Notice

Were you – or your vehicle – there at the times stated? Are the rules set out clearly, not just at the entrance but around the car park where you can see and read them? It is useful to have photographs if you are claiming they are not clear.

Most car parking firms belong to the British Parking Association (BPA) which has a Code of Practice. Has the notice broken any of those rules? For example, you must be given time to read the rules before parking and a grace period of up to 10 minutes after your time runs out before a penalty is charged. Other firms belong to the International Parking Community (IPC) whose Code of Practice also has a grace period in some cases.

If the penalty notice seems correct are there mitigating circumstances? Was the car park very busy so it took a long time to buy your ticket? Did you leave without parking? Did you have a good reason to overstay such as an urgent phone call about a sick relative? Did just half a tyre stray outside the marked parking bay? Did you make a minor error entering your car number? Had your car broken down? Send supporting evidence – with photographs if you can.

On the back of the notice there will be details of how to appeal – normally within 21 or 28 days. However, once 14 days has passed you will lose the discount on your charge. If your appeal is rejected you can go to a further appeal. The BPA uses an independent service called the Parking on Private Land Appeals (POPLA).  Around half of those who appeal to it are successful. IPC uses the Independent Appeals Service (IAS). A firm that does not belong to either of the trade bodies cannot get your address from the DVLA and will find it much harder to enforce the charge.

Take control

A more militant way to challenge a parking notice is to ignore it. In England and Wales the person registered as the vehicle’s ‘keeper’ (usually the owner) is liable for the penalty if the driver does not pay. So, the firm will pay for the keeper’s address from the DVLA and send them the notice. That must be set out in a very precise way and firms often get that wrong which invalidates it. In Scotland and Northern Ireland the keeper does not have to pay. That makes enforcement much harder.

If you do not pay the only way to make you is a civil action in court. That is expensive and time consuming for the firm and it may not bother - though some parking operators are getting militant about going to court themselves! Even if it does take you to court you may win, especially if it has behaved unreasonably. If you lose you will have to pay the full charge and possibly some costs as well, but as long as you pay when the court orders you to do so your credit rating will not be affected. 

Government steps in

Private parking firms may soon have to obey new rules designed to end the “poor practice and behaviour of some parking operators”. The Government has announced its plans for a legally enforceable Code of Practice and a new appeals service to apply in England, Scotland, and Wales. That should happen over the next twelve mnoths or so.

Real fines

If you get a parking fine from a local authority, Transport for London, or the police the rules are different. Fines are easier to enforce but if you feel the ticket is unfair challenge it and then appeal to the independent adjudicator. More than half who do win.

Further information

MoneySavingExpert.com or CitizensAdvice.org.uk search ‘parking tickets’.

parkingcowboys.co.uk has useful information about possible defences.

britishparking.co.uk – the British Parking Association website

theipc.info – the International Parking Community website

popla.co.uk – for appeals against firms that are British Parking Association members.

theias.org – for appeals against firms that are International Parking Community members.



This blogpost is an amended and updated from an article I wrote for Saga Magazine in November 2020.


Paul Lewis

23 March 2021

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Tuesday, 5 January 2021

FLIGHT DELAY COMPENSATION NOW A UK RIGHT

If your flight is delayed by three hours or more or is cancelled you now have a right to compensation of up to £520 per passenger under UK law. The rights to compensation were given to air passengers in 2004 by a European Directive. Now that we have left the EU those rules have been brought into UK law with some amendments. 

The new rules apply to passengers in three circumstances.

1. They are on any flight which departs from a UK airport.

2. They are on a flight which departs from an airport outside the UK if it

    a. lands in the UK and the carrier is based in the UK or the EU.

OR

    b. lands at an airport in the EU and the carrier is based in the UK.

The compensation applies if a flight arrives at least three hours late. The amounts of compensation are

•        £220 per passenger for flights of 1500 kilometres or less

•        £350 per passenger for flights between 1500km and 3500km

•        £520 per passenger for flights over 3500km.

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.

The rules are a bit more complicated than that largely because airlines have tried to find ways to avoid paying and lawyers have taken cases to court to establish what the law really means. 

One key escape airlines like to use is if the delay or cancellation was due to 'extraordinary circumstances'.   

separate blog looks at some of those complexities. Where decisions of the European Courts are referred to these still apply as they were all retained in UK law from 1 January 2021. The primary UK law is the European Directive EC 261/2004 as retained in UK law but it has been amended by the The Air Passenger Rights and Air Travel Organisers’ Licensing(Amendment) (EU Exit) Regulations 2019 SI 2019/278.


Get help
An online claiming tool is provided 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. 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. 

If you feel you need professional help you can use the lawyer Bott & Co which 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

Now that the UK has left the EU and the transition period has ended you should apply under the UK law if you can. However, the EU regulations still give all passengers rights to compensation where flights leave from or arrive at EU airports and you can apply under those rules if your flight is outside the terms of the UK regulations. 

Now that the UK has left the EU a UK government will be able to change these compensaation rules. There is no sign of that happening.  


18 January 2021

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