Financial Review 7th March

Poor pension advice given, says report
Eight in 10 people are being ripped off when they retire, by Britain’s insurance giants, according to a report from the Financial Conduct Authority. It claims people are collectively losing hundreds of millions a year in poor pension payouts. Many take out a pension without realising their husband or wife will not receive a penny from it if they die first.

The report criticises poor advice, pressure selling and the fact that people are not being encouraged to shop around when it comes to converting their pension pot into an annuity income.
Around 420,000 people cash in their pension pot every year with an insurer, who promises to pay them an annuity every month. Most people accept the first offer they receive – largely because they are unaware that they have the right to seek other offers. But by taking the first option from the company with which they have built up their pension fund they typically end up with a deal 20% below what they could get.

Once the annuity decision is made there is no going back, and insurance companies have been criticised for the pressure they exert to persuade people to sign up.
The best advice is to take truly independent advice. A pension does not have to be converted into an annuity until the person reaches the age of 75. Before that it is their choice when and how to do so, and what proportion of the pension pot, up to 25%, they want to take as a tax-free lump sum.

Bankruptcy not now a life sentence
Thanks to a change in the law, and the introduction of new measures such as IVAs (insolvency voluntary arrangements) with creditors, bankruptcy is no longer the life sentence it once was. However, the EU is trying to banish the term completely, to be replaced with the more politically correct and less judgemental term ‘debt adjustment’. This idea is being considered as part of wider reforms to harmonise financial arrangements across the EU, including making it less troublesome to open bank accounts in different countries and easier to escape from debt and be given a second chance.

A study for the European parliament has suggested that the “use of stigmatising labels” should end and the pejorative term ‘bankruptcy’ should be replaced with the more neutral term ‘debt adjustment’.

Ironically, the word bankruptcy has European roots. It is believed to derive from the Italian ‘banca rotta’, meaning broken bench, inspired by the ancient custom of breaking a money-changer’s bench to signify his insolvency.

House price rise is largest since 2007
Property website Rightmove says asking prices for houses have risen by the largest margin seen since November 2007, to £251,964 in England and Wales, almost 7% higher than a year ago. This means sellers are asking £16,000 more for their home than those who listed a year ago. It was also a rise of 3.3% compared with January, although Rightmove says that with more sellers due to come onto the market in the coming months, this will calm prices in some areas.

Every region saw year-on-year growth in asking prices, from an 11% increase in London, which took average prices to £541,313, to a very different and more modest 0.1% uplift in the North-East, pushing typical prices there to £142,372.

Candy crush saga firm to float
It is one of the most addictive computer games ever invented, and now the Italian entrepreneur behind the phone and tablet game Candy Crush Saga stands to make £300m when his firm floats. King, which designs mobile phone games and apps, has applied to list on the New York Stock Exchange, with analysts saying it could be worth £3bn. Chief executive Riccardo Zacconi holds around 10% of the stock and he could sell his entire holding after 180 days.

The company, which has its head office in London but its main technical development office in Stockholm and its intellectual property registered in tax haven Malta, makes around 10% of its sales in the UK. Its flagship game Candy Crush was the most downloaded game last year. It has been downloaded more than 500m times since 2012.
After making a loss of £418m in 2011, King made pre-tax profits of £7m in 2012 and £428m last year. Despite optimistic forecasts, some analysts have warned the King company is too dependent on the one game, which accounts for 78% of sales.

Unofficial site ‘is not misleading’
A copycat website that charges for a service that is free if obtained through the official channels is not misleading, the advertising watchdog has ruled. The website,, was investigated by the Advertising Standards Authority following a complaint that it implied it was an official service.

The site is just one of a number that have built up around convincing people into paying fees to unofficial sites they assume are government affiliated. Not only do many of the copycat websites look official but people are being encouraged to use them because key internet search engines, such as Google, allow them to pay to appear at the top of search lists for key words such as ‘passport renewal’. While they feature disclaimers stating that they are not affiliated with the official government site, these are often missed.

The national insurance website is owned by WHO4, which also runs, a website that had people thinking they were filing their returns through the official channel, only to realise the payment they had made – anything from £150 to £1,000 – was a so-called processing fee. But the ASA ruled that the national insurance site was not misleading, because disclaimers made clear it was not affiliated to the government sites.

The best advice remains to avoid any site that does not in the URL or address. This signifies an official government site and no-one else can use that term.

Bridge not a sport, rules tribunal
To its legions of fans, contract bridge can be every bit as gruelling and competitive as football or cricket – but a tribunal has ruled that it is a game and not a sport.

The English Bridge Union had argued that its members should not have to pay VAT on competition entry fees because they were taking part in a pursuit recognised as a sport by the International Olympic Committee, the Charity Commission and several other European countries. It claimed playing bridge regularly promotes physical and mental health, and studies have shown that it might reduce the risk of developing Alzheimer’s Disease. However, the tax tribunal rejected the claim, concluding that contract bridge does not involve a significant amount of physical activity.

Birth numbers fall
The recession baby-boom may be coming to an end after new figures revealed that the number of pregnancies has fallen to the lowest level in five years. During the economic downturn Britain’s population grew faster than any other in Europe, fuelled by the biggest surge in births for 40 years. The high birth rate was attributed to immigration and a new generation of recession babies, with couples choosing to have a second or third child rather than both return to work which was hard to find.

However, the Office for National Statistics says that in 2012 the number of pregnancies in England and Wales fell in every age group except the over-35s. Dr Jonathan Cave, a population expert at -Warwick University, said the figures reflected the fact that if people are returning to work they will shift their productive efforts away from having children.

Overseas aid – are recipients worthy?
Government ministers have been urged to stop wasting the UK’s aid budget on wealthy countries. High on the criticism list of the Development Secretary, Justine Greening, are climate change schemes for rich countries, which she says could undermine public support for overseas aid.

She has criticised the Liberal Democrat-led Department for Energy and Climate Change
for pursuing these schemes and funding poorly run projects in countries that do not need help from British taxpayers. She says the UK target of 0.7% of GDP going on foreign aid – by far the highest in Europe – will only be accepted by the public if the funds go to the world’s poorest countries. This follows calls from some Conservative MPs for a share of the protected £8 billion overseas aid budget to be diverted for flood aid in Britain.

Ms Greening says she has stripped funds from rapidly growing countries and has shut down programmes that misspent funds. By contrast, she says, the Energy Department gave £15 million to cattle ranchers in Colombia, the world’s 30th richest country, to help cut flatulence in cows. It has also funded projects in Turkey and Chile, which are enjoying rapid economic growth. However, her department has been criticised for using some of its budget for EU-funded initiatives, which have seen funds go to countries and projects that would not pass tests applied for UK-funded projects.

Bank branches are shutting up shop
One in four bank branches will disappear from the High Street within the next five years, a report has revealed. As a result hundreds of market towns and suburbs will become banking deserts, forcing customers to travel miles to their nearest branch.

The Campaign for Community Banking Services predicts that the UK’s 9,500-strong branch network will plummet to 7,000 by the end of 2018. The rate of closures is expected to peak at just under 1,000 a year, while 600 towns and villages could lose their last remaining bank branch.

Banks are keen to push their customers online because once the technology has been developed it is a cheaper way of doing business. Those in rural communities – and the poor – are less likely to use internet banking, probably in rural situations because of poor broadband and mobile phone access.

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