Money Hunny

 

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ISAs becoming more popular after tax-free limit increases

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With Savings accounts options on the increase, from ISAs to fixed rate bonds, Britons are becoming more savvy with their funds.

The Individual Savings Account (ISA) limit was increased again to £10,680 at the beginning of the new tax year, following last years increase from £7,200 to £10,200.

The most recent rise to the tax-free allowance was put in to keep the limit in line with inflation.

Savers can now deposit up to half of the amount into a cash ISA each year with the option of using the remaining £5,340 for investment ISAs, which allow investors to receive 100% of anything they earn without having to pay income tax against their returns.

Alternatively, anyone that is willing to add an element of risk to their investment in exchange for the potential to earn higher returns might be interested to learn that individuals can invest the full allowance into stocks and shares.

At the start of every tax year (6 April) savers get their limit restarted, which means if they fail to use up their allowance from the previous tax year, it will be lost.

Once your funds have the ISA wrapper applied, they will continue to provide tax free returns for as long as you leave them in an ISA.

In most cases, ISAs can be transferred to new providers, so it is important to stay on top of your account to ensure you are always earning the best ISA rates. Most accounts offer an introductory bonus rate which expires after 12 months, so be sure to switch accounts once this happens.

For more useful finance tips visit the Money Hunny Blog

UK Shoppers to spend £50 billion on Christmas 

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The UK is headed for a bumper Christmas spend this year, despite disruption caused by heavy snow earlier in the month.

Recent figures from Barclays suggest a record £48.9 billion will be spent over the Christmas period – 8% higher on last year.

It has been suggested that the quieter high streets seen earlier in the month that came as a result of snow and ice will simply result in even busier crowds in the last remaining shopping days on the run-up to Christmas.

December 23rd is predicted to be the busiest day for debit and credit card spending, with estimations exceeding £1 billion.

Meanwhile, ATM use is expected to peak on Christmas eve, with withdrawal rates amounting to around £88 million at a rate of more than £24,000 a second as shoppers raid there savings accounts for any last minute purchases.

In total, around £30 billion will be spent throughout December, and despite the snowy weather seen earlier this month, the majority of Christmas spending is expected to take place on the high street, with online purchases accounting for just over a quarter of all debit card spending.

High spending levels are set to continue in the final days of 2010 as people go in search of an early bargain during the extra bank holiday. Other savvy shoppers are likely to be making any big purchases before the year is out to avoid the VAT rise which will apply from early January.

London will see the busiest crowds this month,  with the likes of Oxford Street and Westfield taking more than £5 billion in sales throughout December alone.

Dan Wass, Director of Current Accounts at Barclays said: “The early snow falls this month meant that the start of December was a little quieter on the high street than expected.  This is likely to put even greater pressure on retailers as we draw to the end of the Christmas countdown, with customers being forced to do their shopping at the last minute.

We urge customers to stay safe in busy areas and encourage them to use their debit cards rather than carrying large amounts of cash.  Nearly all shops, restaurants, bars and online companies accept debit cards so it is the easiest way to get your Christmas spending done quickly and securely. We would remind customers to take care of their card and their PIN, especially when using their PIN in crowded places.

Budgeting is also essential - customers can use Barclays mobile banking to keep track of their balance whilst they are out shopping.  They can also sign up to weekly text alerts for a mini-statement of their bank account.”

Holidaymakers get xmas bonus as Pound rises against Euro

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According to travel money expert International Currency Exchange (ICE), people looking to go abroad this year for a Christmas break should think about making a visit to the Eurozone.
Whether you fancy skiing or a festive shopping trip to the Christmas markets, you should expect to get around 30 Euros on every £500 you exchange thanks to a 5.8% rise in the value of the Pound against the Euro since December last year.

The Euro is one of the few foreign currencies that has dropped in value year on year against the pound, which has risen above the likes of popular winter sun destinations such as Mexico, Thailand and Australia both in value and sales volumes.

However, even with the cultural delights of Europe on Britain’s doorstep, our love of long haul holidays has failed to be tainted by the poor performance of the Pound.

ICE saw a 30% increase in the sales of Australian Dollars compared to October, which has admittedly been influenced by cricket fans heading to Australia to see the Ashes. Figures have show that the Aussie Dollar is now the third most ordered currency from ICE, despite an 11% increase against the pound.

According to ICE, the Pound also fell against the Mexican Peso by almost 12% year on year and despite strong sales of the Thai Baht for this ever popular winter destination – which is currently 4th in the ICE currency chart, Brits are getting 16% less for their pounds compared to last year.

Joanna Williams, Head of Marketing for ICE said: “Many Brits can’t wait to get away at Christmas and New Year, in fact in a snap survey of our customers 62% said they were planning a trip abroad during the holiday season.

Fortunately this appetite for winter sun and ski holidays doesn’t seem to be diminished by the less favourable exchange rates we are seeing compared to last year.  It just makes it all the more important for travellers to plan ahead and shop around for competitive exchange rates online and in specialist foreign exchange bureaux.”


Decision time as Interest rates remain low

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Spend or save?

This is the dilemma that many consumers face when rates are low.

The deputy governor of the Bank of England says that low interest rates on savings accounts should encourage savers to go out and spend their money in order to help kick-start the economy.

Charlie Bean, a member of the committee that determine the Bank rate, advised savers to "eat into" the capital they have built up throughout periods of low rates - now being as good a time as any, as the Bank rate has been at a record low of 0.5% since March 2009.

He commented to Channel 4 news: "What we are trying to do by our policy is encourage more spending, ideally we would like to see that in the form of more business spending".

"But part of the mechanism that might encourage that is having more household spending so in the short term we want to see households not saving more but spending more."

He added that savers benefited from significantly higher rates in the past and could now eat into some of their capital while rates remain low.

But is this good advice? Take a look at two opposing views.

Spend Spend Spend:

Vicky Redwood, senior UK economist at Capital Economics, says:

"Charlie Bean has been criticised for suggesting that consumers may need to dip into their savings in order to spend more.

"But that is exactly what lower interest rates and looser monetary policy is designed to encourage. Lower interest rates reduce the returns on saving and hence increase the incentive to spend - with higher consumer spending then boosting overall economic activity.

"Indeed, data released this week by the Office for National Statistics showed that without a sharp drop in household saving in the second quarter, the drop in households' incomes would have fed directly through to a sharp drop in their spending - and potentially prompted the economy to slip back into recession.

"Of course, in the longer-run, households need to save more and borrow less - as I am sure Charlie Bean would agree.

"But right now, with the recovery faltering, what the economy needs is for people to get out and spend."

Save Save Save:

Brian Johnson, insolvency partner at HW Fisher chartered accountants, says:

"You can see the Bank's logic, as more people spending will act as a stimulus to the economy.

"However, by urging people to spend the Bank of England is asking the British public to take a real leap of faith, especially when faced with considerable uncertainty in the form of public sector cuts and fiscal tightening.

"The British public will also be baffled by the mixed messages it is receiving. On the one hand we have the government saying that our country needs to massively cut its debt, and as soon as possible, on the other hand we have the Bank of England telling us to spend, spend, spend.

"Charlie Bean's message also completely contradicts what people have been urged to do over the past few years, namely pay down their debts and prepare themselves for the age of austerity.

"A paradox of thrift it may be but for the Bank of England to openly encourage the public to spend in such an uncertain climate is a dangerous strategy that may well backfire."

While rates may not be as high as they were in the boom times before the credit crunch, savers are still able to get some reasonable rates on some savings accounts, Isas and fixed rate bonds.

Alternatively, those looking to secure higher returns may wish to consider stocks & shares ISAs, allowing them to invest in shares but without having to pay income tax on their returns.

ISA allowance to increase in April 2011

Savers will be happy to learn that the Individual Savings Accounts (Isa) allowance will be rising next year.

The rise is expected to see the Isa limit go up from the current level of £10,200 per year to £10,670, which will come into force at the beginning of the next financial year (April 2011)

The news comes after this years increase from £7,600 to £10,200 which was announced in last years budget and came into force from October 2009 for all saver aged 50 and above, and everyone else at the beginning of this tax year.

Savers can only save half of the total Isa limit in cash Isas with the remainder available for stocks and shares isas, or the full amount into stocks and shares isas.

There are currently over 20 million savers in the UK with a tax-free Isa.

Stocks and shares Isas have become increasingly popular with savers seeking a higher return on their savings, especially as many savings accounts are offering measly rates after the base rate has remained low. This is despite the risks involved when dealing in these types of investments.

"With rising taxes, savers and investors really should make sure they put as much as they can in their Isa each year," said Rob Fisher, of Fidelity Investment Managers.

"Over 42% of the UK population are still not taking up their Isa allowance. Isas are an all year round use-it-or-lose it tax perk and a perfect way to avoid giving hard-earned money straight back to the taxman."

Tax-free savings accounts were first introduced to UK savers 11 years ago as an incentive to encourage saving.

Stocks and shares Isas overtake cash counterparts

According to figures released from the government, the total value of stocks and share Isas invested by UK consumers has exceeded the value of the cash Isa deposits.

The provisional figures for 2009-10 showed that the total number of funds held in stocks and shares Isas was worth £178bn, while the total held as deposits in cash Isas stood at £172bn.

The number of stocks and shares ISA accounts also increased from 2,960 to 3,017 in the 12 months to 5 April, marking a 53% increase in the value of stocks and share Isas which reflects last year's rise in stock markets.

The total value of funds held in cash Isas, which currently pay an average rate of just 0.69%, rose by 9%.

Throughout the last financial year, cash Isas offered even lower returns for investors, with rates at an average of just under 0.5%.

Most good cash Isas on today's savings market offer bonus rates to attract new custom. However, after the introductory period ends the rates fall significantly, leaving many accounts paying measly returns. Those that want to keep their savings in high rate accounts high need to stay on top of their Isas and be ready to transfer their ISA funds elsewhere once the bonus rates expire.

Around one in 3 of UK's adults currently have a cash Isa.

As the Isa season approached this financial year, savers were given a boost to the amount of money they can invest into Isas, with the allowance boosted from £7,200 to £10,200, of which half can be saved in cash and half, or the total amount in stocks and shares.

With the Bank of England base remaining at it's record low, many banks are unable to offer rates that compare to those available before the downturn, so savers are having to look elsewhere for decent returns.

Stocks & shares Isas offer the potential to provide much higher returns than their cash counterparts, but they come at a risk, as you would expect from stocks and shares trading, so investors must be prepared to take a gamble.

However, those that sleep easier at night knowing that their funds are safe and provide a guarantee  may be interested in locking their savings away in a fixed rate Isa.

Much like fixed rate bonds, these ISAs require savers to lock their funds away for a fixed period of time, offering a better interest rate in return.


Five consumer laws that pay to know

Here are a handful of laws that you may find extremely useful when buying products and services, especially during these turbulent times. You may or may not  have noticed it, but consumers are fighting a war against the firms they have to deal with after falling victim to mindless companies, whether it be due to faulty products that need replacing, or out-right poor service.

Sale Of Goods Act

Think twice before upgrading your cover to a five-year extended warranty.


The Scenario: Your 42” HD-Ready plasma TV, the totemic centre of your life, fails to switch on after just 366 days since you first met in the electric store. The firm you bought it from tells you that as you failed to extend your warranty, there is nothing they can do for you, and suggests you purchase the latest model together with the 5-year guarantee.

Tears begin to fill your eyes, dropping onto your lifeless grey screen as you ponder what to do next.

But as long as your tears didn’t cause your TV to smoke, hold that thought, because lucky for you the TV salesman didn’t know what he was talking about!

Here’s why. The Sale of Goods Act states that your TV must be fit for purpose upon purchase.

Dr Christian Twigg-Flesner, a consumer law expert at the University of Hull, says: “It must be as described. It must be of satisfactory quality, sufficiently durable, free from any defects”.

Before you get too excited, you need to make sure you didn’t ignore any of the warnings provided in the manufacturer’s handbook. This can be obvious things, for example you didn’t install it in your bathroom, or attempt to fix it by removing the back in desperation to try to fix the problem. If this is the case then you’re unlikely to have a leg to stand on.

However, if, in the short time you spent together, you treated your television with respect and despite this it still broke down, it could suggest that there was in fact a fault with it when you bought it, which would not meet the above regulation.

In this position, your legal rights will differ depending on the amount of time that has passed since you bought the TV. You could have a case for faulty items for any period of time up to 6 years. Here’s how it works. From the date of purchase, up until four to five weeks (depending on the retailers policy), you have the “right of rejection” – which basically means that if your TV/MP3 Player/Mobile Phone, stops working within this time, you can demand a refund.

Up to six months after the purchase date you are still entitled to get your TV replaced or repair, and if the retailer contests your request, it is up to them to acquire sufficient proof that it was you that was to blame, therefore avoiding responsibility. After this time, you can still get the retailer to replace or repair faulty goods, but in this case it is your responsibility to prove that you were indeed not at fault.

Many will be surprised to hear the next part. Goods are covered by the Sale of Goods Act for up to six years from the purchase date, but you need to be able to argue your corned, as you need to convince the retailer that your item was not “sufficiently durable”.

Government guidelines state that: “Goods are of satisfactory quality if they reach the standard that a reasonable person would regard as satisfactory, taking into account the price and any description.”

Something that should be pointed out is that if you go to the TV repair man and spend £50 in an attempt to diagnose an inherent fault, only to find out that your dog mistook your TV for the tree in your back garden and you failed to notice the damp spot where your TV once stood, then you will end up footing the bill, so be warned.

Another good piece of advice is to remember that your relationship in the Sale of Goods Act is through the retailer rather than the manufacturer.

Dr Twigg-Flesner points out that “The retailer likes shepherding you off to the manufacturer”.

Looking on the bright side of extended warranties, they can offer ongoing services such as technical support, providing useful information, from setting up your appliance, to getting the best use from it. But I wouldn’t necessarily recommend adding one when buying a new electric toothbrush.

The Sale Of Goods Act applies throughout the UK, but has several minor differences in Scotland.

Consumer Credit Act

Most credit card providers offer guarantees on purchases as standard when made using the card.


The Scenario: After lots of searching and emptying your savings accounts, you’ve finally found your dream computer. You’re extremely happy as surprisingly it was much cheaper than you could find anywhere else, so excitedly you complete the payment of £300 using your credit card. The date of delivery arrives, but after eagerly awaiting the delivery man, you don’t hear a peep. Gutted. After switching on the radio, you hear the news reader report that cheapestcomputers’r'us has gone bust. It turns out that £300 was too good to be true and the company had been going further and further into the red.

You call up the company to find out what’s going on and a displeased operator is rather unhelpful. You are told that won’t be receiving your computer, nor will you be expecting a £300 refund as all remaining money was passed to the liquidators to pay all of the creditors.

Head in hands, you break down into tears. No computer and £300 down. Gutted.

But hold onto your dignity, because the good news for you is that you don’t need to attempt to follow up further correspondence with cheapestcomputers’r'us as there’s another avenue you have yet to explore.

As you paid for the computer using your credit card, It is very likely that you can make use of section 75 of the Consumer Credit Act to retrieve your £300 refund. This regulation is used exclusively for credit cards and states that your provider will guarantee you for any purchases made using the card for items costing between £100 and £30,000.

So in terms of a refund, you may as well have purchased the computer from your credit card provider.

Supply Of Goods And Services Act

Think of services as goods.

The Scenario: Your car fails to start, so begrudgingly you take it to your local garage. The mechanic pops the bonnet and immediately lets out a lasting sigh – the kind of sigh that tells you things could get expensive. After handing over your hard earned cash you’re pleased to be back on the road, but the next morning, to your despair, you experience the same problem. After calling the garage you are horrified to find out that the garage refuses to fix the problem without leaving you further out of pocket.

Thank goodness you knew that services are covered in the same way as goods. It is in fact up to the garage to provide a service that is carried out with reasonable care and skill.

To sum up, you can demand to have the issue put right, either by the garage that failed to solve the problem in the first place, or charge the first garage to pay for another mechanic to sort it.

This applies throughout England, Wales and Northern Ireland, but has some small differences in Scotland.

Denied Boarding Regulations

Airliners can’t get away with messing with your schedule.


The Scenario: You book a flight to the south of France using low cost airliner ‘nickel-and-dime airline’. After arriving at the airport you are told that the flight has been cancelled, and you are not offered any compensation.

What you should know: The European Union recently brought in new regulations that have angered some sectors of the airline industry.

If upon arriving at the airport, you are able to meet the boarding criteria, for example checking-in on-time with a valid ticket, but you were denied entry onto a flight – or the flight is cancelled, fight your corner, because you have rights!

To begin with, you are entitled to refund within seven days, or another return flight to your destination.

You are also entitled to be at least fed and watered. The EU’s regulations state that “refreshments, meals, hotel accommodation, transport between the airport and place of accommodation, two free telephone calls, telex or fax messages, or e-mails” must be provided, with different levels of ‘care’ depending on how much you have been put out.

As well as the above, if your flight is cancelled and you were due to fly 1,500km+, you can claim compensation of 250 euros, and 400 euros for flights within the European Union of 1,500km or more. All other flights between 1,500 – 3,500km can also provide 400 euros compensation.

However, if you were informed of the cancellation at least two weeks before departure, then you cannot claim compensation. This also applies if you are told less than two weeks before, but the airliner arranges another flight causing you only minor delays.

Delays of five hours hours or more entitle customers to get a refund, although this probably won’t help you in your travels.

But unfortunately the legislation back the side of the airliner in some cases. In “extraordinary circumstances”, compensation does not have to be given.

The problem comes when airlines over-use the “extraordinary circumstances” reason for just about anything, from “shortages in crew” to “technical faults”. But worry not, as this shouldn’t be going on for much longer.

Dr Twigg-Flesner said: “The European Court of Justice has cracked down. Technical problems are not extraordinary circumstances.”

This is an EU regulation, so applies across the whole of the European Union.

Tags: credit cards, finance, money, refund, savings accounts, shopping

Norther Rock no longer proving 100% savings gaurantee

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Northern Rock has revealed plans to lift the 100% savings gaurantee on all acccounts