Tenth of young adults shun cash, says UK Finance

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A tenth of young adults shun cash and rely instead on cards and digital payments for their day-to-day spending, figures suggest.

More than one in 10 people aged between 25 and 34 used notes and coins no more than once a month last year, according to UK Finance.

The trade body for financial providers said nearly three million people rarely used cash.

But, across all age groups, cash remains the most popular way to pay.

The figures show that 6% of the UK’s adult population used cash no more than once a month last year, but this increased to more than 10% for 25 to 34-year-olds. The proportion drops to 2% for 55 to 64-year-olds.

At the opposite end of the scale, 5% of the UK adult population (2.7 million people) relied almost entirely on cash to make their day-to-day payments during 2016, UK Finance said.

This was relatively evenly spread across different age groups. However, people with lower household incomes were far more likely to rely mainly on cash compared with their more affluent counterparts.

More than half of all consumers who relied predominantly on cash during 2016 had total household incomes of less than £15,000 per year.

Cash accounted for 44% of all payments made by consumers across the UK last year.


Households due £285 rebate on fuel bills, says Citizens Advice

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Every household in the UK should get a one-off rebate of £285 on its fuel bills as a result of excess industry profits, Citizens Advice has said.

Over eight years, it claimed firms that transport gas and electricity – so-called energy networks – have made £7.5bn in “unjustified” profits.

It blamed the regulator, Ofgem, which sets industry price controls, for “errors in judgement”.

Ofgem disputed the claim and said it had already helped to lower fuel bills.

Citizens Advice said that network firms had enjoyed a multi-billion pound windfall at the expense of consumers.

As an example, Citizens Advice said National Grid had made an operating profit of more than £4bn in 2015/16.

However the company’s annual accounts show that around a quarter of that profit was made in the US or on other activities.

Complaints

“Decisions made by Ofgem have allowed gas and electricity network companies to make sky-high profits that we’ve found are not justified by their performance,” said Gillian Guy, head of Citizens Advice.

“Through their energy bills, it is consumers who have to pay the £7.5bn price for the regulator’s errors of judgment. We think it is right that energy network companies return this money to consumers through a rebate.”

Ofgem sets the charges that network companies like National Grid, SSE and Cadent – which distributes gas – can levy in any eight-year period.

That is because they are monopoly operators.

But in the current period, lasting from 2013 to 2021, Citizens Advice says Ofgem has been too favourable to the companies’ interests.

It claims that Ofgem:

  • overestimated the risks for investors in the networks, costing consumers £3bn
  • assumed interest rates would be higher than they turned out to be, costing consumers £3.4bn
  • rewarded companies that inflated cost estimates for projects, costing consumers £1.1bn
Cheaper costs

However, Ofgem said a number of the assumptions used by Citizens Advice were too high, and rejected the idea of a rebate.

“We do think they raise some valid points, but we don’t agree with their modelling or their figures,” said Jonathan Brearley, Ofgem’s senior partner for networks.

On Wednesday Ofgem also announced a consultation on how it should set price controls after 2021.

“We will take some of the issues into account when we examine future price controls,” Mr Brearley added.

He told the BBC that those controls are likely to be much tougher on the companies involved, providing downward pressure on bills.

At the moment, around a quarter of the average fuel bill is taken up by transmission charges.

The Energy Networks Association – which represents the operators – also said it did not agree with the modelling used by Citizens Advice.

It said a similar claim filed by British Gas had already been rejected by the Competition and Markets Authority (CMA).

 


Pensioners sold wrong annuities to get thousands in redress

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Tens of thousands of pensioners who were sold the wrong type of annuity with two of the UK’s biggest insurance companies are to receive compensation.

Some estimates say that up to 200,000 pensioners – some of whom are unwell – could typically receive £2,000 each. Prudential and Standard Life have agreed to review hundreds of thousands of policies, which go back to July 2008. Standard Life has set aside £175m to cover the compensation programme. Analysts have said that Prudential is likely to have to pay at least £200m.It follows an investigation from the Financial Conduct Authority (FCA), which concluded that between 39 and 48% of those sold annuities by both companies were provided with “insufficient information”.

Many of those people may have qualified for so-called enhanced annuities. Enhanced annuities pay consumers a higher income, on the basis that they are in ill health and are likely to live for a shorter period than average. Those who bought standard annuities instead would have lost up to £240 a year in pension income, according to FCA estimates.

‘Shop around’

In October 2016, the FCA estimated that 90,000 may have been sold the wrong annuities, but industry experts believe the final figure will now be higher. Some of those sold the policies are likely to be in their 70s and not in good health. Nevertheless, Prudential said it would take two years for them to go through all the cases. Standard Life said that most cases should be settled by the end of 2018. “It is deeply disappointing that it has taken this long,” said Tom McPhail, head of retirement at Hargreaves Lansdown.

The policies in question were “non-advised”, meaning the customers took no independent advice and did not shop around for an alternative provider. Earlier this week, the FCA said that 58% of those who buy an annuity – or income for life – did so from their existing provider. “The way to avoid this situation arising in the future is for customers to shop around on the open market,” said Mr McPhail. “Worryingly, FCA data published only yesterday shows that over half of investors retiring today are still buying their retirement income arrangement from their existing pension provider, which begs the question as to whether the problem has actually been fixed.”


Trump orders review that could relax Dodd-Frank bank rules

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US President Donald Trump has taken his first step to try to scale back US financial services regulations.

He signed an executive order to review the 2010 Dodd-Frank financial regulations, which some people on Wall Street say are overly-restrictive. The law was brought in after the 2008-09 financial crisis with the aim of avoiding another financial meltdown. “Dodd-Frank is a disaster,” Mr Trump said earlier this week. He added: “We’re going to be doing a big number on Dodd-Frank.” Mr Trump made it a campaign pledge to repeal and replace the Dodd-Frank act, which also created the Consumer Financial Protection Bureau (CFPB). This US government agency seeks to make sure banks, lenders, and other financial companies treat US consumers fairly. Dodd-Frank, named after the Congressmen who campaigned for the legislation, was introduced to rein in banks’ risky practices by banks and other financial companies. Democrat congressman Jim Himes told the BBC: “Dodd-Frank of course was the legislative response to the economic carnage that came about because of the financial meltdown of late 2008. “Much of the legislation… is designed to get at those things which went horribly wrong, that is to say, problems in the mortgage market” he said.

Good move, bad move

But Trump administration officials have said Dodd-Frank did not achieve what it set out to do, and argue that is an example of government being overly-controlling. News that a review was imminent sent banking shares higher on Wall Street and on the main stock markets in Europe. Goldman Sachs and JP Morgan Chase rose 4% and 3% respectively. “The banks are going to be able to price products more efficiently and more effectively to consumers,” Gary Cohn, an adviser to Mr Trump and a former Goldman Sachs executive, told the Wall Street Journal. Market analyst Jasper Lawler at the London Capital Group said that “unwinding some of Dodd-Frank is a good thing because it will enable smaller community banks to compete, offering competition to consumers.” But he said that scrapping the whole of Dodd-Frank “puts the entire system at risk of a repeat of 2008”. And Sweden’s minister for financial stability Per Bolund told the country’s TT news agency that a repeal would be “dangerous, harmful and extremely unfortunate”.


EU mobile phone roaming cost-cuts ‘a step closer’

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The ending of European Union roaming charges for people using mobile phones abroad moved closer after a provisional deal in the European Parliament.

The plan to cap wholesale charges that telecoms operators pay each other is the final piece of a long-running plan to end roaming fees so people can use phones abroad at no additional cost. It decides how much operators must pay for using other companies’ networks.

The full European Parliament and EU member states must confirm the deal. Consumers pay roaming charges whenever they connect to an operator based abroad. The charges are in addition to the cost of the call itself, and for short calls they can make up a large proportion of the overall fee. The new caps have to be low enough for operators to be able to offer fee-free roaming to customers without putting up domestic prices, but high enough so they can recover their costs. There should also be enough money in the system for continuing maintenance and upgrading of networks.

‘Roam like at home’

“This decision is the final step in a process that started 10 years ago,” said Dr Emmanuel Mallia, the Maltese Minister for Competitiveness and Digital, Maritime and Services Economy. “From next summer, wherever they are travelling in Europe, citizens will be able to make calls, send texts, surf and stay connected. Roam like at home is now a reality.” Under the agreement, the wholesale charge for data will drop from the current cap of 50 euros (£43) per gigabyte (gb) to 7.7 euros (£6.60) per gb on 15 June. The price will drop again on 1 January every year until January 2022 when it will be 2.5 euros (£2) per gb.

Calls will fall from 0.05 euros (4p) per minute to 0.032 euros (3p) on 15 June, and text messages will go down from 0.02 euros (2p) to 0.01 euros (1p) per message. The charges will be reviewed every two years and new caps proposed if necessary. The first report is due out at the end of 2019.


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