Financial Review 6th March 2015

Second-hand cars top the list for costly customer complaints
Bad customer service and faulty products are costing households more than £4 billion every year, and thousands of people have been hit by losses averaging over £600 each, Citizens Advice has warned. People who contacted the charity for help with a consumer problem last year suffered an average financial loss of £250, but one in four faced losses of more than £600. One person faced a cost of up to £33,000 due to problems with a motor home.

Problems with second-hand cars made up the greatest proportion of consumer issues, according to Citizens Advice, followed by home maintenance, energy and telecoms.

Mental and physical fitness drives older workers to carry on
Half of older workers on the verge of retirement would consider working past the state pension age, new research suggests. And one in four of those due to retire this year have already decided to delay doing so and continue in work, according to Prudential.

Most who said they planned to stay in work cited keeping mentally and physically fit as the main reason, but half said it would also improve their finances. The survey showed that phased or delayed retirements that became necessary during the recession are now becoming the norm for many people. Over a fifth of those planning to retire this year said they did not feel ready to stop work, a figure that has remained stable since 2011.

Shares outperformed property over the past 30 years
Share investors have secured the best returns over 30 years, but homeowners beat them during the period of extreme property price inflation since 2000. UK equities have delivered 1,433% growth during the past three decades, or 9.9% a year – but only if people reinvested all the dividends. Those who siphoned off the dividend income would still have seen their money grow by 433%. But they would have made 438% from simply putting it in a cash savings account and reinvesting the interest.

While there is a widespread belief about stellar returns from property, in reality this was only 402% since 1985 – although that time frame is particularly unflattering for the property market. The research underlines the importance of dividends to equity returns, and the value of reinvesting them. Publication coincided with the London FTSE hitting its highest ever level at 6,950 points – 15 years after it last hit a peak at 6,930.

Alleged website fraudsters head to court
Four people involved in the running of alleged copycat government websites that charged users extra fees for arranging passports, free European Health Insurance Cards, through to the filing of tax returns, have been bailed to appear at York Crown Court in March. Offences include conspiracy to defraud and engaging in activities designed to mislead consumers.

Earlier this year, three other individuals involved in separate alleged copycat websites appeared on similar charges. They ran a series of websites, including taxreturngateway. This charged users up to £1,000 for processing their self-assessment return.

Wages set to rise by an average of 1.9%
Consumer confidence has grown to its highest point in at least four years as the pressure from living costs continues to fall. People are spending almost 1% less on essentials than they were a year ago, with falling gas, electricity and petrol costs helping to ease the pressure and allow shoppers to spend elsewhere, according to Lloyds Bank’s spending power report.

People are also set to see their first real value (inflation beating) pay rise this year in almost a decade. Wages are set to rise by 1.9% and with inflation at 0.5% this will be the first time pay has outpaced the cost of living since 2007. However, wage rises seem to have been held back by the increasing number of older workers in employment. The number of over-50s in work has gone up by more than 1.1 million since the end of 2009. This represents 90% of the total rise in the number of people working.

Shrinking shopping budgets see Fairtrade sales decline 3.7%
Fairtrade goods have fallen out of fashion for the first time in the scheme’s history. Sales of products bearing the brand which proves that suppliers received fair payment dipped for the first time in 20 years. Retail sales fell 3.7% last year to £1.67 billion.

Shrinking shopping budgets are blamed for the decline as even middle class consumers were forced to cut back because of sluggish wage growth. Fierce competition between retailers has squeezed more expensive lines such as Fairtrade. Consumers are also buying fewer groceries across the board.

Michael Gidney, chief executive of the Fairtrade Foundation, said aggressive competitive behaviour was undermining the volumes sold on Fairtrade terms. “This will result in real losses to hard-working families and communities in some of the poorest countries in the world,” he commented.

Bogus EU students pocket £3.84m in higher education loans
Millions of pounds have been wasted by giving loans to bogus students from the EU, according to the House of Commons public accounts committee. Some £3.84 million was handed out over the last four years to EU students at private higher education colleges which could not prove they were eligible for funding. Only those who have lived in the UK for three years can receive loans to cover living costs. If they have not been resident in the UK for the previous years but are EU citizens, they are only eligible for loans to cover their tuition fees.

MPs say the total wasted is likely to be much higher, because the Government was “unable to quantify” how much money was given to students who then failed to attend or complete courses. Around a fifth of students receiving funding were not even registered for a qualification, according to the PAC report.

Savings shortfall will stoke pensions crisis
Savings have fallen to a record low as thousands of families fail to put away any money at the end of each month, figures show. High house prices and poor wage growth has led to a dramatic fall in the amount families are saving into pensions, bank accounts and investments.

Ironically, growing confidence in the economy has also reportedly deterred people from saving because they believe their job is secure and their home will grow in value. But experts say that, as a result of what they deem a savings crisis, many people will be left in pension poverty.

This year households will save just 5.4% of their take-home pay, the lowest percentage since records began 18 years ago. This is just half of the proportion saved in 2010 when households put away 11% of their salary after tax, official figures show. By 2019, this will have plunged further to 4.8%, according to forecasts by the Office for Budget Responsibility.

OAP bonds trigger £1.2 billion withdrawal
Banks have seen a sharp fall in cash held in personal deposits as interest starved savers rushed to open pensioner bonds that offer rates of up to 4% for those over 65. Roughly £1.2bn was shifted out of current and savings accounts in January, according to British Bankers’ Association data. This is the biggest cash fall since January 2009, when £2bn was withdrawn. The January total covers just two weeks of pensioner bonds being on sale.

The figure for February could surpass this peak after the Government extended the pensioner bonds offer and more savers deposit money in them. The bonds are available subject to a limit of £10,000 in each bond, which run for one or four years.

OECD gives GB economy the thumbs up
The British economy has got the thumbs-up from the OECD, which urged the Government to stay on the path of austerity to retain its place as one of the fastest growing economies in the developed world. In its latest economic survey of the UK, the OECD said growth would reach 2.6% this year, matching 2014 and making Britain the fastest growing economy in the G7 group of top economies.

“The UK has made tremendous progress exiting from the worst economic crisis of our lifetime,” said secretary general of the OECD Angel Gurría. He described UK job creation as ‘remarkable’ and growth as strong. “But the UK now has to finish the job,” he added.

Betting shop slot machines coin £1.7 billion a year
Betting shop customers who gamble on machines known as fixed-odds betting terminals are losing an estimated £1.7bn a year. The betting terminals, that offer roulette and slot-machine-style games, each make profits of almost £1,000 a week, while many in London and other large cities are said to be pulling in double that.

Ladbroke’s machines are making an average £996 in profit each week; those in Coral’s shops collect £957, while William Hill’s machines are yielding an average £939. About £46bn is gambled annually on the terminals, which includes money fed into the machines and winnings that are gambled back into them.

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