Financial Review 3rd June 2016

Insurer Axa quits smoking as an industry for investment
Axa, one of the world’s biggest insurers, will stop investing in the tobacco industry and sell investments worth more than £1.3 billion. It said investing in the sector made no sense given that smoking killed around six million people a year.

The move by Axa is an attempt to support government efforts to reduce the number of people who smoke. Tobacco companies recently lost a High Court challenge to plain packaging for cigarettes sold in the UK. A major health insurer, Axa said its role was increasingly about prevention rather than cure.The Axa Group will sell all its shares in tobacco companies, along with tobacco industry bond holdings, but that is just 0.6% of its holdings.

Cheque use declines but they are still not checking out
More than 500 million cheques were written in 2015, overturning expectations that the payment method is disappearing. Payments UK, which represents the industry, said that was a 13% decline on the previous year, but that cheques are still valued as a means of payment.

Cheques had been due to be phased out by 2018, until a change of heart was forced on the banks, which promised to keep processing them for as long as necessary. Some, such as Barclays, have now introduced ‘cheque imaging’, allowing consumers to take a photograph of a cheque and send it to the bank via their smartphone.

The use of cheques peaked in 1990, when there were more than four billion transactions a year. Last year 546m cheques were written, an average of about 10 cheques per adult per year. Cheque use is higher in the 65 and over age group. They are also still popular as a way of paying tradespeople and charities, as well as for family gifts.

Contactless payments gain favour among the over sixties
People over the age of 60 are the fastest growing group of people taking to contactless card payments, according to Barclaycard. Spending via contactless within the older age group has more than doubled in the last year, it said.

Total spending on contactless cards hit £1.5bn for the first time in March. The Barclaycard data suggest the number of older people using ‘touch and go’ payments rose 116% over the past 12 months. In the past this group had not been enthusiastic about the new payment method, but they are now catching up with other age groups.There is increasing demand for contactless payments from retailers. Discount stores were the sector with the biggest increase, followed by petrol stations and pubs.

Inflation falls, but rise predicted later
The UK inflation rate fell in April for the first time since September. The Office for National Statistics (ONS) said the rate, as measured by the Consumer Prices Index, fell to 0.3%. The main causes were falls in the prices of air fares, vehicles, clothing and social housing rents. The Bank of England said it expects inflation to increase in the second half of the year.

The alternative inflation measure, the Retail Prices Index, which is used to index some rents and pensions, also fell from an annual rate of 1.6% in March to 1.3%. Core inflation, which strips out energy, food, alcohol and tobacco, fell to 1.2% against forecasts for 1.4%.

Cap needed to limit excess overdraft fees
Banks should cap unarranged overdraft fees and warn customers before they go overdrawn, the competition watchdog has said. The Competition and Markets Authority (CMA) says this and other measures could save bank customers £1bn over five years.

Many banks already cap overdraft fees – Barclays charges a maximum of £35 a month, while Halifax charges a maximum of £100. The average unauthorised overdraft fee – when the bank has not agreed to a customer going over-drawn – is £57.50 a month.

The CMA said banks made £1.2bn from such charges in 2014. Its report also highlighted weak competition in the market, saying 60% of customers have stayed with the same bank for over 10 years, and 90% of business customers get their loans from banks where they have their own current account.

Co-op plans to bring back members’ divi
The Co-operative has unveiled plans to bring back an annual payout for its millions of members. It suspended the dividend in 2014 when it posted huge losses. Now, as part of a major refresh, which also involves reviving its 1960’s blue clover logo, the Co-op will reintroduce the members’ dividend by 2018. Before then, it will hand back £100m a year in other benefits to its 8m members.

“Our intention is to return to paying a dividend, but we also want to make the rewards for members who trade with the Co-op more meaningful and community focused,” said chief executive Richard Pennycook. The Co-op has 3,750 outlets, including food stores and funeral homes, and annual sales of about £10bn.

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