Financial Review 20th February 2015

70,000 jobs being created per month
Institute for Fiscal Studies’ data show private sector employment has risen by almost 2.2 million since early 2010, having fallen by 800,000 through the recession. By contrast, public sector employment rose gradually throughout 2008 and 2009, but has fallen by 430,000 since late 2009.

These figures undermine claims that the private sector could not replace jobs lost in the public sector as a result of government cuts and suggest jobs are being created at a rate of 70,000 a month. Bankers say this, growth in the real value of wages, plus fading memories of the impact of the recession will help the UK economy grow – helped now by lower energy costs.

Ex-bank boss hits out at ‘vishing’ disgrace
Banks have been accused of behaving ‘disgracefully’ by refusing refunds to victims of conmen. The criticism comes from the former head of a major lender, Peter Burt, who was chief executive of Bank of Scotland. He said money stolen through ‘vishing’ should be returned automatically.

Vishing is where fraudsters masquerading as bank staff telephone customers and tell them to transfer money to another account. The victims, often old and vulnerable, are told their cash is at risk from cybercriminals, but soon find it has vanished. The scam is a variant of ‘phishing’ using a voice on the phone instead of emails. Many customers do not get their money back because the transfers were authorised by the bank.

“Somebody needs to bring a law suit against banks that receive money from fraud and refuse to give it back,” said Sir Peter, adding that it was not good enough for banks to hide behind claims that they carried out all reasonable checks.

The British Bankers’ Association stresses that no bank will ever ask for a full PIN or password by phone or email and that staff will not call for a transfer to be authorised.

Self-assessment not necessary for small income tax debts
Those who owe less than £3,000 in tax may be needlessly filling in self-assessment forms, HM Revenue and Customs has said, citing as examples people who owe small amounts of tax from savings income or occasional extra work. Instead of wasting hours poring over statements and invoices and completing forms, the money could have been deducted automatically via their tax code.

The Revenue can recover up to £3,000 through the coding system, with tax debts deducted the following year before a salary or pension is paid. This applies to people with simple tax affairs, an HMRC spokesman said, giving the example of income from savings interest or freelance work.

A higher rate taxpayer could in theory earn as much as £7,500 from other work without needing to complete self-assessment forms.

Online firms face ‘unprecedented’ fraud
Small firms operating online need to be prepared for “unprecedented levels of attempted fraud” this month, say payments experts. Payments business Worldpay claims instances of fraud could rocket by as much as 80% as hackers capitalise on customer data harvested during the Christmas shopping period. Small firms are the biggest target for hackers, accounting for 86% of UK data breaches. Virtually all breaches happen online, the rest at point of sale.

Advice to counter fraud includes regularly changing passwords and ensuring they are unique, installing good firewall and virus programmes, destroying credit card statements and never writing down or storing the security code on cards.

During the average data breach from 2011-14, hackers harvested 284 days’ worth of card details before their activities were discovered.

New pensioners hit by slump in annuity rates
Annuity rates have plummeted to their lowest level in two years, leaving those retiring today up to 12% worse off than those who retired just five months ago. Figures from My Pension Expert show someone with a £100,000 pension pot could be £849 a year poorer than if they had retired in August.

Falling yields on government bonds and a tail-off in demand for annuities are causing rates to fall. From April, savers will be able to take their pensions as cash. Previously, most people used their pension pots to buy an annuity, which pays an income for life, but many are now planning to take their pensions as cash. Those that do take annuities are likely to be healthy people with longer life expectancies – meaning insurers will have to pay out more. As a result, firms are trying to cut costs by reducing the rates they pay across the board.

Global debt increases despite as borrowing outstrips savings
After the explosion of borrowing that triggered the recession of 2007-08, most governments, especially those of developed countries, said they would embark on policies that would lead to debt reduction by both governments and households.

But according to a study by the consultancy McKinsey, global debt has grown by $57 trillion (a trillion being a thousand billion) or 17 percentage points of GDP since 2007. The total now stands at $199 trillion, equivalent to 286% of GDP.

The single biggest contributor to the rise is that government debts have increased by $25tn. Of 47 major global economies, only five – Israel, Egypt, Romania, Saudi Arabia and Argentina – have succeeded in reducing their debts. By contrast a further five have seen massive increases in their indebtedness. The debts of China have risen by 83 percentage points, Portugal’s by 100, Greece’s by 103, Singapore’s by 129 and Ireland’s by 172.

The UK’s indebtedness is not much better. It has increased by 30 percentage points, to 252% of GDP. UK government debts have jumped by 50 percentage points of GDP, while corporate and household debts have decreased by 12 and eight percentage points respectively. Put bluntly, this means the UK’s indebtedness has increased because public sector borrowing has more than offset private sector saving.

Building societies slightly more generous than banks
An official investigation into the savings market last month found that one in four savers were being ripped-off, thanks to banks and building societies paying less in interest than the 0.5% base rate. But now, it seems, banks are even meaner than other providers.

According to research by Savings Champion, building societies are consistently paying better rates to savers than their competitors. Data show that 78% of their accounts paid interest above the base rate, compared with 56% of similar accounts from other providers. The average interest rate paid by building societies was 1.3% compared with 0.95% from others.

In addition, building societies were more generous than the banks in rewarding existing savers. Rates on ‘closed’ easy-access savings accounts were on average 0.06% higher than the rates paid on new accounts. By comparison, banks paid on average 0.05% less on closed accounts than on new accounts.

Couples keep debts and escape funds secret
The key to a happy marriage is supposed to be not keeping secrets from one another. But one in 10 people have a stash of cash kept hidden from their partner in case they want to flee the relationship.

According to a survey, men are more likely to have accumulated these escape funds. 11% of men admitted they had hidden cash away so they could leave, compared with 8% of women. The average amount in these secret accounts was £7,500. Those living in the West Midlands and London were the most likely to say they are sitting on a secret escape fund.

Nearly a fifth of those surveyed admitted to a different financial secret: they said they had hidden their debts from a partner. Of those who were married, 24% said their spouse would be ‘upset, angry or surprised’ if the true state of their finances was revealed.

The average couple has 39 arguments about money every year, and one in eight said their credit rating had been damaged by the actions of a partner, rising to one in five of those aged between 25 and 34.

Car sales get off to a flying start
New car sales in January were up a substantial 6.7% on the same month last year, according to the Society of Motor Manufacturers and Traders. This marks the 35th successive month of growth and is the strongest start to a year since 2007, just before the recession dented sales.

Roughly 2.47 million new vehicles were sold in 2014 – the highest annual figure for 10 years and the fourth-highest ever. Part of the boom has been driven by businesses, with fleet registrations up 18% on last January. The biggest selling models were the Ford Fiesta and Vauxhall Corsa, ahead of the next most popular by a considerable distance. The Ford Focus, Nissan Qashqai and Volkswagen Golf, which make up the rest of the top five, all sold similar numbers.
The SMMT says that it expects the market to remain strong throughout 2015.

Late tax return fines are on the way out
Thousands of people will no longer be hit with £100 fines for failing to complete their income tax returns on time. HM Revenue and Customs has admitted its penalties regime may be too rigid, and is drawing up proposals to end fines for taxpayers who miss the deadline by a day or two.

New rules outlined for public consultation could see people who owe tax charged higher interest rates on their debts to encourage them to pay sooner, instead of being hit with automatic fines. A system of penalty points, similar to motoring offences, could also be introduced so that financial sanctions apply only to people who persistently fail to file their returns.

The plan comes after figures showed 890,000 people missed the 31st January deadline for completing their forms. They now face an escalating scale of penalties, starting with an automatic £100 fine.

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