Weekly Money: round-up of the personal finance stories you may have missed 15-19 December

Misleading broadband ads; High-charging pension funds; Pensioner Bonds; Basic bank accounts; Energy suppliers still wasting our time; the stories we noticed this week.

19 December

Adverts for broadband services from BT, Sky and Talk Talk have been criticised by a charity for not making the real costs clear.

Citizens Advice has today complained about the three ads to Advertising Standards Authority. The charity reckons that promises of free or cut price broadband deals for a set period of time are misleading consumers into contracts that turn out to be more costly.

The adverts appear to offer deals ranging from free to £4.50 a month, but the actual average price per month during the contracts ranged from £19 to £29. One contract, advertised only as “Free for 6 months”, would have cost over £500 over 18 months once installation fees and line rental were factored in.

Gillian Guy, chief executive of Citizens Advice, said: “Attractive offers can lead to bigger broadband costs. People are being lured into more costly contracts because additional charges are hidden in the small print. Often it is impossible for the deals to be free or offered at the cut price because costs for other elements like line rental are yet to be added.

“Consumers need to be presented with the total cost to be able to make meaningful comparisons. The industry needs to improve the way it advertises deals so consumers are clear about what they are paying for. We hope the ASA will take swift action on these adverts.”

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Brits are getting fed up with credit scores that lead to people being turned down for credit. Research by Amigo loans found that three in five UK adults believe the current credit scoring system is inadequate and want banks and lenders to use a more common sense approach to decide if someone should be able to borrow money.

Lenders which rely on the current credit score process means someone could have a decent income and thousands in savings but be turned down for credit because they’re new to the country, have not used credit in the past, have gone overdrawn years ago, or have missed a bill payment once.

18 December

A year-long investigation into pension savers’ money has concluded that some £25.8bn-worth of retirement savings could be hit by high charges.

The Independent Project Board looked into older and higher-charging pension schemes and found that many are potentially exposed to fees which work out an annual management charge of more than 1 per cent.

Pensions Minister Steve Webb said: “This report shows what I'd call the guilty secrets of the pensions industry writ large and the onus is now on the industry to put its house in order.”

He said it was “shocking” that people with smaller pension pots were at risk of the highest charges, with some reaching as much as 3 per cent of the pot.

The IPB estimated that 407,000 savers who have joined schemes in the last three years could be exposed to a charge of more than 1 per cent in the future. Of these, 178,000 could be exposed to charges more than 2 per cent and 22,000 are at risk of charges of more than 3 per cent.

Which? executive director, Richard Lloyd, said: “Billions of pounds of consumers’ hard-earned money are stuck in rip-off pension schemes, and savers shouldn’t have to wait until the end of next year to see reform of this unfair system. The regulators and industry should take urgent action to end unfair exit fees and do more to help consumers switch to better value products. All savers should be able to feel confident that the pensions industry is looking after their interests.”

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This month approximately £11bn could be withdrawn from ATMs through the LINK network in the UK – equal to more than £355m every day during the month, reckons Sainsbury’s Bank. Cash machine usage is expected to peak tomorrow, in terms of number of transactions and total value of cash withdrawn. The Friday before Christmas is traditionally the busiest day of the ATM network.

17 December

Last week the Treasury announced the rates for the new pensioner bonds, announced in March’s Budget, which will be issued by the government-backed National Savings & Investments in January.

The one-year bond will pay 2.8 per cent while the three-year bond 4 per cent. The rates are much better than any other savings accounts currently available on the market.

“The rates are head and shoulders above the nearest competition, paying 51 per cent more than the average top five one year fixed rate, and 61 per cent more than the average top five three year fixed rate,” said Anna Bowes of SavingsChampion.co.uk.

But only those aged 65 and over will be allowed to invest in the bonds. The most you’ll be allowed to save will be £10,000, but you can put that much in in each bond, meaning pensioners can stash £20,000 each in the high-paying accounts.

However, the government has set a £10bn limit on the bonds. Effectively that means if everyone invested the maximum £20,000, only half a million pensioners would be able to use the bonds.

Demand is likely to be high. “There is a danger that these bonds will become over-subscribed and this could mean they are only handed out on a first-come, first-served basis,” warned Rachel Springall of Moneyfacts.co.uk.

If that happens it could leave anyone applying by post missing out as online and telephone applications will beat them to the punch. Online is likely to be the best way to apply, once we know the launch date.

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Britain’s biggest payday lender Wonga has cut its charges ahead of new rules that come into effect in January. It’s introducing a minimum £50 loan and scrapping its £5.50 “transaction fee” to comply with new rules set out by the Financial Conduct Authority. It’s daily interest charge falls from 1 per cent to 0.8 per cent which has the effect of reducing its quoted APR from 5,853 per cent to 1,509 per cent.

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An ad for a get-rich-quick scheme that promised “100% certain” success at winning £50,000 a year has been banned by the Advertising Standards Authority. The ad from Streetwise Publications claimed “George” had discovered how to win £980 a week, £50,000 a year or “as much money as he wants, whenever he likes”. But the ASA ruled the ad was misleading by suggesting “gambling could be a solution to financial concerns, an alternative to employment and a way to achieve financial security”.

16 December

A new style of basic bank account is to be launched through the high street banks next year after a deal was agreed with the Treasury.

Basic accounts were launched around a decade ago to help those who normally don’t qualify for an account. They don’t offer overdrafts or cheque books and are free to the users.

But some hard-up people have been hit by unexpected charges for bounced payments which, at £30 or more, have then put them into financial difficulty. Under the new agreement the fees will be scrapped.

Andrea Leadsom, Economic Secretary to the Treasury said the deal would give “certainty and clarity and end people being effectively locked out of their basic bank accounts due to high fees and charges when their payments failed.”

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More than three million adults are expected to switch off their heating to save money on energy bills, according to research by social landlord Circle Housing. On top of that, one and a half million say that they intend to turn to credit or a payday loan just to cover their energy costs this Christmas.

Helen Wilson of Circle Housing said: “There are a high number of people resorting to drastic measures such as payday lenders or turning their heating off so that they can afford their energy bills. Anybody who is worried should get advice about ways to save on bills and to contact their energy supplier if they are worried about getting in to debt.”

Simple ways to save money include turning the temperature down by only one degree or ensuring appliances are not left on standby.

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AA Insurance has improved its travel insurance by scrapping the upper age limit on single-trip world-wide policies. Janet Connor, managing director of AA Insurance, said: “I worry that older people may travel without cover because they can’t afford or can’t obtain travel insurance, especially if they suffer from some medical complications.”

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Nearly one in ten of us are hoping to find a second job in order to help cover the cost of Christmas. Meanwhile two million people plan to turn their backs on Christmas Day celebrations this year in favour of working to earn extra cash, according to research by Scottish Friendly.

It also suggests that half a million people over the age of 55 are looking for a second job during the festive season. On top of that two out of five people hope to sell personal possessions at car boot sales or online through websites such as eBay to raise the cash to pay for Christmas.

15 December

Energy suppliers are still wasting our time by making us wait when we call them. Researchers from Which? were forced to wait up to half an hour before being connected to customer services.

The consumer group’s report published today reveals that the energy giants are still failing consumers after putting us through years of rising bills and poor service.

And worse of all was Scottish Power, which has been put under notice by the energy regulator to speed up its customer response by January or face a sales ban.

During the investigation Scottish Power customers waited the longest at 30 minutes on average to get through to customer services. That’s in stark contrast to calls to their sales team which answered calls in less than a minute - 49 seconds in fact - on average.

In other words, they’re keen to talk to you if you want to buy something, but not if you have a problem.

Which? executive director, Richard Lloyd, said: “It’s unacceptable that some energy suppliers expect their customers to wait on the phone for so long just to ask a question, give meter readings or complain. Suppliers must act rapidly improve basic standards in customer service and not wait for the outcome of the competition inquiry”

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There’s a growing exodus of people fed up with the high prices and poor service delivered by the Big Six energy companies switching away to independent suppliers.

The independents now account for 10 per cent of the dual-fuel energy market as the Big Six fall from 99 per cent in 2011 to 90 per cent, according to figures published by Cornwall Energy today.

Leading the charge is First Utility which now holds 3.1 per cent of the dual-fuel energy market with 675,000 households signed up.

“Switching can save an average £200 a year and we’ll continue to work with independent suppliers to ensure they can compete on a level playing field with the big six,” said Energy Secretary Ed Davey.

“We’ve worked hard to increase competition and nearly trebled the number of independents since 2010. But I want to go further and see them have a 30 per cent market share by the end of the decade.”