It’s an ill wind that blows nobody any good, the saying goes, and that certainly applies to the eurozone crisis. A very ill wind is blowing in from Europe, but it is turning out to be good news for the great British holidaymaker. The plummeting value of the single currency means that if you’re heading to the continent this summer, your pounds will travel a lot further than they did last year. Yes, I know that’s small compensation, given the scale of the crisis heading our way, but in these troubled times you have to take everything you can get.

As voters in France and Greece reject austerity, the pound has battled its way to €1.24, its highest level since 2008. That’s well below the €1.44 it traded at before the credit crunch, but it’s a big improvement on the low of €1.04 it hit in January 2009. Sterling, you’ve come a long way, baby. If you’re flying to France, Spain, Italy, Greece or any other popular eurozone holiday destination, you will now get a lot more punch for your pound.

Last July, £1,000 would have bought you just €1,120 (before currency charges). At time of writing, you will get €1,240. That’s an extra €120, nearly 11% more. And Brits abroad won’t just benefit in the eurozone. The pound has rebounded strongly against currencies in Brazil, Turkey, India, South Africa and Mexico, which should put you in the holiday spirit.

Sterling’s recovery may even tempt some Britons to start dreaming of buying a place in the sun again. A two-bedroom apartment on sale for €100,000 in one of the Spanish Costas would have cost you £89,286 last summer. Now you will pay just £80,645. That’s an incredible £8,641 less. You should get it even cheaper by negotiating hard on the price – it’s a buyer’s market. Personally, I wouldn’t rush into any purchase. There’s a chance the euro could fall further, as could Spanish property prices. Either way, take your time. Don’t do anything rash. Take advice.

When buying foreign currency, whether holiday spending money or to buy a property, always shop around to make sure you get the best possible deal. The worse thing you can do is buy currency at the last minute at one of those airport foreign exchange booths. The rates are, quite frankly, lousy. The best rates are typically found online, from various currency transfer services. If you order in advance, they will deliver the money to your home, typically for a £5 postal fee. Many sites offer free delivery for sums over £500. They can also transfer large sums at competitive rates to fund a property purchase.

There’s no point celebrating a stronger pound if you blow the difference by paying over the odds for your foreign currency. Sneaky charges are an ill wind that won’t blow you any good. But to confirm the truth of that old saying, somebody benefits. In this case, it’s the over-charging currency service. Don’t let them profit at your expense. Happy holidays!

As Benjamin Franklin famously said: In this life nothing is certain, except death and taxes. But Benjamin Franklin was wrong. Off the top of my head, I can think of two more certainties.
First, that any journalist writing about tax will quote Benjamin Franklin on death and taxes. And second, people will always moan, gripe and whinge about paying those taxes (possibly even more than they will moan about death, ironically).

Plenty of us will be moaning, griping and whingeing about tax these days, as we are paying a lot more of it. Since the coalition took charge two years ago, it has cut the threshold at which people start paying 40% tax, a move affecting hundreds of thousands, according to new figures from HM Revenue & Customs. An extra 800,000 people now pay higher tax rate, a rise of 27% since 2010. In total, 3.8 million people now pay income tax at 40% (plus National Insurance on top).

People who don’t consider themselves rich now find themselves paying a rich man’s tax rate, and will feel poorer as a result. And it will get worse. In the 2013/14 tax year, an extra 630,000 people find themselves paying 40% tax, when the threshold is cut again, from £42,475 to £41,450. The number of top-rate taxpayers will be nearly 50% higher than when David Cameron became Prime Minister.

This isn’t the only tax hike. From next year, 4.4 million pensioners will be worse off, when age-related tax allowances are frozen and axed. Fuel duty will also rise, VAT loopholes will be closed, child benefit will be cut for higher earners. The only bright spot is that Chancellor George Osborne recently raised the threshold at which people start paying tax to £9,205, leaving millions of working people over £200 better off. He also made life sweeter for 50% income tax taxpayers, by slashing the top rate to 45%.

I’m not one of these people who think tax is evil. I can see it has its uses. Like paying for roads. The NHS. Schools. Pensions. Defence. State benefits for the sick and unemployed. Not to mention bailing out all those nice bankers. But I know not everybody feels this way.

Unfortunately, I don’t have much good news for them. Given the state of the nation’s finances, we can’t expect the tax burden to be eased for years. We won’t just be paying more tax, we will get less for our money as well, as state services are cut in a bid to balance the budget. You can blame it all on the coalition, if you like. Or you can blame it on New Labour. Either way, you still have to pay.

Many people are voting with their feet, and talking about leaving the country. Bizarrely, their number one destination is Spain, whose fiscal problems far outweigh our own. Wherever you go, you simply can’t escape the two great certainties of life.

RD Money
Financial fraud never sleeps
April 27th, 2012

Ever since I started writing about money, I’ve always been astonished by the sheer scale of fraud it attracts. The finance industry draws more than its fair share of crooks and con-artists. The first mis-selling scandal I covered was pensions, in the late 1990s. I have since reported on so many mis-selling scandals that they blur in the memory.

Beefing up the Financial Services Authority was supposed to stem the flow, to little avail. It didn’t stop the payment protection insurance (PPI) scandal, which the big banks fought until the bitter end, before meekly shelling out billions in compensation. And of course, it didn’t prevent the credit crunch.

Over the years, I have written numerous articles warning people against privately-run debt management companies who seek to profit from people with money problems. But even I was shocked to discover how brazen these companies are. They claim to help dig people out of debt by drawing up a payment plan to satisfy their creditors. The catch is, they charge a fat fee for doing so, when you can get exactly the same service from debt charities absolutely free.

Worse, these companies deliberately give the impression that they are linked to these free services, notably National Debtline. The Money Advice Trust, the charity behind National Debtline, has just released examples of the most blatantly misleading online advertising.A common trick is to use official-sounding phrases such as “helpline”, “debtline”, “National Debt Advice Line”, “Government approved debt services” or even “Government debt help”.

Incredibly, these sites don’t even offer advice themselves. They sell on your personal details to another commercial organisation, which will charge a hefty fee for sorting out your problems. Which is the last thing people who already owe money need. If you’re looking for help, make sure you contact a truly free and confidential service such as National Debtline, the Consumer Credit Counselling Service and Citizens Advice.

The Office of Fair Trading is finally cracking down on these misleading adverts, and not before time. To be fair to regulators, they have a constant battle on their hands. The Ministry of Justice has been busily closing down claims management companies that target people chasing compensation for mis-sold PPI. They take a fat cut of any payout, typically 25% plus VAT, even though you can file a claim yourself absolutely free of charge, and with the same chance of success.

The Ministry of Justice has closed down an incredible 734 claims management firms in the last 12 months. Astonishingly, there are still 3,018 firms out there. If there was any industry that looked like a conspiracy against the public, it must be the financial industry. So be on your guard. Stick to names you can trust.

Hang on, wasn’t inflation supposed to be falling this year? Weren’t prices supposed to stop rising? That’s what the Bank of England predicted. And once again, the Bank of England has got it wrong. Bank governor Mervyn King must be the world’s worst forecaster. If he was a bookie or share tipster, he would have gone bust years ago.

Latest figures show that consumer price inflation actually rose slightly in March to 3.5%. Mr King had confidently predicted it would keep falling this year, but was stumped by rising fuel and food prices. Stubborn inflation is bad news all round. It’s bad for you and me, because it erodes our savings and spending power. It’s particularly bad for pensioners living on fixed incomes.

Inflation is bad for the UK economy, because it takes money out of people’s pockets, giving them less to spend on goods and services. And it’s bad for the Bank of England, because it has destroyed its credibility and probably stopped it from carrying out yet more quantitative easing (QE).

Otherwise known as money printing, QE adds to inflationary pressures, by increasing the amount of money in circulation. The Bank may have just lost its only weapon in the battle against the downturn. An incredible 93% of people say they are worried about the effect of inflation on their finances, according to new research from the Post Office. Worryingly, seven out of 10 are turning to their savings or credit cards to fund rising bills, according to other research.

Fighting back against inflation isn’t easy, as savers will know. A basic rate 20% taxpayer needs to find a savings account paying 6.5% to beat inflation, while a 40% taxpayer needs at least 8.67%. You don’t need me to tell you those rates are simply unavailable. Nevertheless, shopping around for a market-leading savings account will mitigate some of the pain.

Using a price comparison site to switch to a cheaper utility supplier could save you more than £200 a year. When comparing rates, online tariffs tend to be the cheapest. Dual-fuel contracts, where you get both your gas and electricity from the same supplier, can also save you money.

And you can cut the cost of your weekly supermarket shop by visiting website Mysupermarket.com, which allows you to compare prices at the big supermarkets for the same shopping basket.

Food and energy aren’t the only things getting more pricey, mortgage costs are rising too. At an average cost of £3,485 a year, your mortgage may be your biggest expense, Halifax says. And it may get even more expensive, if lenders continue to hike their standard variable rates (SVRs). If you’re sitting on a pricey SVR, you might make big savings by remortgaging. Consider speaking to a specialist mortgage broker to find the best deal.

The Bank of England can’t do much about inflation, but with a little effort, maybe you can.

If you thought black boxes were only for jet aircraft, think again. One day, you may have a black box in your car. Some of you may have one already. The black box measures how fast you drive, how sharply you accelerate, how you take corners, and even the time of day you get behind the wheel. No wonder some call it the spy-in-your-car.

Telematics technology, as it is called, sounds like science fiction, but is already everyday fact. Thousands of drivers are installing it in their cars in the hope that it will prove they are safe drivers, and cut their motor insurance premiums. There is growing evidence that it can prevent accidents and save lives as well.

If you’ve recently passed your driving test, buying motor insurance is a nightmare. Young men can easily pay more than £2,000 a year, because they have more accidents, and those accidents tend to be more expensive. The average motor claim for an 18-year old costs a mighty £4,400, compared to £1,400 for a 30-year old. This is tough on the majority of safe and sensible young motorists, who pay the same sky-high premiums as testosterone-fuelled boyracers.

Telematics gives young men the opportunity to prove they have road skills and maturity beyond their years, and get cheaper insurance premiums. It may soon appeal to young female drivers as well. They have traditionally paid less for insurance than their male peers, because they have fewer accidents. But that will change from 21 December, when the EU bans insurers from basing premiums on gender. Young women could see their insurance premiums rise 20% overnight, according to the Association of British Insurers. Telematics could be the solution.

That little black box may also cut insurance costs for older motorists, low mileage drivers, or anybody who avoids driving when accidents are more likely, such as the rush hour and late on Friday and Saturday nights.
The safer you drive, the less you pay. You can even view your motoring performance online, and use the results to improve your road habits. Installing the box costs around £250, although most insurers build this into your insurance quote. As the technology becomes more popular, the price is likely to fall.

That little black box has other advantages. If your motor is stolen, it can help the police trace it quickly. Better still, it is making the roads safer, cutting young driver accident risk by anything up to 40%.
More than half of all drivers plan to embrace telematics ‘pay-as-you-drive’ technology in the next five years, according to research from one telematics insurer. Among the over-55s, the figure rises to two-thirds.

If you’re a heavy-footed speed merchant who regularly ferries their friends home from the pub and nightclubs at weekends, telematics isn’t for you. The rest of us may spy an opportunity to cut our motor insurance bills.

On Monday, stock markets boomed. On Tuesday, they crashed. On Wednesday, they rebounded. Or was it the other way round? It’s hard to keep track. On Monday, new data suggested the UK had slipped back into recession. On Tuesday, a fresh set of figures suggested the economy was growing strongly. They can’t both be correct, can they?

Welcome to the baffling world of financial data. New sets of figures emerge every day, many of them downright contradictory. Financial analysts lurch from cheery optimism to deathly gloom with each new dataset. So do politicians, newspaper columnists and financial markets.

On Monday, we discovered the housing market fell 0.5% over the past year, according to one mortgage lender. On Wednesday, another lender told us it had actually risen 2.2%. Last week, the euro was saved. This week, it’s doomed. Tomorrow is anybody’s guess. As if that wasn’t confusing enough, scores of analysts follow each new set of figures with their highly-conflicting views on where the market is heading next.

No wonder the economy is in a mess. The problem is that people make big decisions based on this contradictory data. They use it to decide how to invest billions of pounds, or whether to invest it at all.

On a personal level, people may use it to decide whether it is safe to buy a house, invest in a pension, or vote in an election. But how do you come to an informed decision when the information is so misleading? The truth is, you can’t, and you will drive yourself mad trying. There is always one more piece of information on its way, and that will probably conflict with any decision you have just made.

Much of the data won’t apply to you anyway. Take national house price figures. They are distorted by booming central London, making them meaningless if you’re buying a home in the suburbs of Wolverhampton. And just because stock markets are booming today, doesn’t mean they will be booming tomorrow. In fact, it could mean quite the opposite.

On Tuesday, markets celebrated new US growth figures by soaring 2% in an afternoon. On Wednesday, they fell 2% after new figures suggested the eurozone was returning to recession. That’s no way to run an economy.

If you got a big financial decision to make, such as buying a house or using your ISA allowance, don’t be swayed by the latest set of data. There will be another set along in a minute, and it will say exactly the opposite.
What matters is whether it’s right for you. So if you find an affordable house in the right area, don’t be put off by the next set of house price figures. Similarly, if you’re taking out a stocks and shares Isa, forget what markets may do tomorrow. Ignore the short-term noise. It’s the long-term that matters.

Spring is in the air, the bank holidays are coming and it’s the time of year when our thoughts turn to… DIY. More than half of homeowners are planning DIY projects over the next few months, according to new research. We’re almost as obsessed with doing up our homes as we were in the property boom, but this time for a different reason.

Before the crunch, many people did up their homes in the hope of selling them at a fat profit. Several of my friends turned DIY into a career, doing up property after property. Very soon, they were far richer than I will ever be. In those crazy days, you couldn’t turn on the telly without being bombarded by wall-to-wall property makeover shows. The banking crisis changed all that. The house price crash never quite happened (there’s still time!), but it did stop people making easy money from doing up homes and selling them on.

Now people are doing other homes for the opposite reason. They can’t afford to move, either because they can’t sell their home or get a mortgage, and are making the best of what they have. DIY won’t boost the value of your home as much as It did even a year ago, according to the annual HSBC Home Improvement Survey of estate agents. In fact, you could easily end up losing money.

A loft conversion is still the best way to improve a property’s value, adding £15,665 on average. But this is sharply down on last year, when it would typically add £20,876. The typical loft conversion costs between £20,000 and £30,000, so you will actually end up making quite a hefty loss.

Extending a room will add £15,665 to your property’s value, down from £16,069 last year. A new kitchen will boost your home by £4,577 on average, down nearly 20% on last year. It depends on where you live, of course. In London, a new kitchen will typically up your home’s value by £9,125, but just £4,300 in the North-East and a mere £2,333 in Scotland. Only one piece of building work has become more profitable in the last year. Adding a conservatory. That typically adds £9,420 to your property’s value, a rise of 14%.

The stagnant housing market is partly to blame. And as more of us extend our properties rather than move home, a loft conversion is no longer the novelty it was. The cost of materials has also been rising, eating into profit margins. Plus of course this is a buyer’s market, at least outside London, which squeezes prices down.

Don’t let me stop you. The bank holidays are coming, so get out your drills and hammers. Just plan your job carefully. Successful home improvements can still add value to your property, but a DIY disaster could do the reverse. That would cost you more than a lost bank holiday weekend.

When do you expect to draw your state pension? At 60? 65? Or 67? Brace yourself. Following Chancellor George Osborne’s recent Budget, you could be looking at 71, 73 or even – gulp – 75.

Sounds incredible, doesn’t it? But retiring in your 70s could one day be the norm. The age will keep rising, and could one day even hit 80. Who wants to work forever? Some of us will soon have no choice.

The state pension age is already rising from 60 to 65 for women by 2020, and to 67 for everybody by 2026. This latest move will make those ages seem positively youthful. I hope you enjoy your job.

Mr Osborne announced that the age at which we can draw the state pension will now increase in line with longevity. The longer we all live, the later we all retire. It’s a radical move. Life expectancy has been rising steadily for years, and that could break the public finances. Around 10 million Britons alive today are expected to live until 100. You could be one of them. And the truth is, the state can’t afford to keep paying you a pension for that long. There is a price for living longer. We have to work longer as well.

In 1991, a male retiring at age 65 could expect to live for another 14.1 years. Today, he can anticipate another 18.1 years. That’s a four-year improvement in longevity just 20 years. If that is replicated over the 20 years to 2031, the state pension age will rise to 69, according to one calculation. It could be even worse. Another calculation suggests someone who is currently 37 won’t be able to draw their state pension until they are 70, while somebody who is 21 must wait until age 75. Children born this year could wait until 80.

Maybe it won’t come to that. There’s no guarantee life expectancy will keep on rising so rapidly. But I wouldn’t bet against it, especially if modern medicine finally cracks cancer. Almost every developed country in the world is facing the same demographic crisis. Most haven’t even begun to face up to it. Countries such as Germany, Italy, Japan and China are in an even worse state than us, thanks to tumbling birthrates.

Working longer isn’t the end of the world. Many people like to stay active. They enjoy a sociable workplace. But it won’t be so tempting if you do physical work. Or stand up in a shop all day. Just because you live longer doesn’t mean you are fit and healthy. Your back goes. You get tired more easily. You lose track of technological change. And we all lose our marbles in the end. A lot of us will end up claiming sickness benefits long before we draw our pension.

If you want to retain some control over your retirement, there’s only one thing you can do. Start saving now. If you’re wholly dependent on the state pension, you might have to work until you drop.

The Bank of England has held base rates at 0.5% for three years, so why are more than one million homeowners suddenly facing a hike in their mortgage repayments? A couple of major high street banks have recently raised their standard variable rate (SVRs), and several smaller lenders have crept in their footsteps. More will surely follow.

This will leave many homeowners paying hundreds of pounds extra on their mortgage every year, particularly those with larger loans. It could prove the final straw for some cash-strapped households. So is this yet another case of greedy banks ripping off their loyal customers?

To a large degree, yes. Lenders feel they were pressured into slashing their SVRs far lower than they would have liked during the banking crisis, and have finally screwed up the courage to reverse that. The need the money to repair the massive holes in their balance sheets (and no doubt top up their bonuses), and loyal borrowers are paying the price.

Not that any bank would admit this. They claim it’s all down to the increased cost of raising funds on the wholesale markets. There is some truth in that. The cost of funding new mortgages has risen sharply. But something else has risen sharply as well. The gap between base rate and the average mortgage is now the highest since records began 17 years ago. That makes it hard for the banks to defend themselves against claims of profiteering.

These rate hikes show the danger of sitting on your lender’s SVR. Many people assume SVRs will only rise when base rates rise, but most banks and building societies are free to increase them at will. Tracker rates are more secure, because lenders pledge to shift their rates only when base rates move. Anybody on a fixed rate is also spared the current spate of rate hikes.

Unfortunately, many borrowers are trapped on their lender’s SVR because they can’t get a mortgage elsewhere, say, because they have a poor credit record or are in negative equity. Some smaller building societies charge SVRs as high as 5% or 6%, that’s 10 or 12 times base rate. If your lender hasn’t increased its SVR, brace yourself, it is probably working out its options now. They know any move will generate plenty of bad PR, but may decide that is a price worth paying.

If you have spare equity in your property, consider hunting around for a low-cost tracker, or protecting yourself with a five-year fixed rate. There are some great long-term fixes around at the moment. You should also consider taking advice from an independent mortgage broker to find the best deal for you. On the plus side, mortgage rates are still low by historical standards. But with base rate likely to stay at 0.5% for some time, there is no excuse for hiking them now.

Millions of the poorest pensioners are missing out on an astonishing £5.5 billion a year because they fail to claim state benefits that are due to them, according to government figures. Many don’t realise they’re eligible to claim, others are confused by our complex benefits system, while some are simply too proud to accept state support.

Could you or a close relative be one of them? If so, you should claim what is rightfully yours. Some 1.6 million pensioners, as many as one in three, are failing to claim an astonishing £2.8 billion worth of pension credit. This is a means-tested top-up to the basic state pension for retired people living on low incomes. You may qualify if you are single and your income is less than £137.35 a week, or in a couple with joint weekly income below £209.70 (these figures rise annually). Your income will be topped up to these minimum levels

There is a second part to pension credit. This is called the “savings credit” and rewards people who have made some savings for their retirement, despite living on a low income. It is worth up to £20.52 a week for single people or £27.09 a week for couples. You may qualify for the savings credit if your total income is up to £188 a week if you are single, or £277 a week if you have a partner. Contact The Pension Service on 0800 99 1234 or visit www.thepensionservice.gov.uk for more information.

Millions of older people also fail to claim council tax credit and housing benefit. Council tax credit is a means-tested benefit for homeowners and tenants on low incomes. Housing benefit can pay some or even all of your rent if you are on a low income and live in rented accommodation. How much you get depends on your age, income, state benefits, family size, disabilities and savings. If you have more than £16,000 in savings, you won’t normally qualify for either benefit.

You can claim council tax and housing benefit at the same time as you claim pension credit. For more advice, call The Pension Service. Attendance Allowance is another oft-squandered benefit. This is a tax-free weekly payment for people aged 65 or over who need help with personal care because of disability. It is paid at two rates, depending on your disability. The lower rate is £49.30 and the higher rate is £73.60. Attendance Allowance isn’t means tested, and your entitlement isn’t usually affected by any savings or income you may have.

A successful claim may even increase the amount of pension credit, council tax benefit and housing benefit you can get. To check your eligibility, either phone the Benefit Enquiry Line on 0800 88 22 00 or download a claim form from the DWP website at www.dwp.gov.uk/eservice.

With money tight these days, it is worth checking what you are due. There are 5.5 billion reasons to do so.