News: Taxman tries to prise £2bn from benefit families

Thousands face hardship after Revenue blunders; stasis in housing market; cardholders break charity record; pensions gloom

Nearly two million families claiming child tax credits have been wrongly overpaid by just under £2bn - leaving many low-income households facing financial hardship as the money is reclaimed.

Nearly two million families claiming child tax credits have been wrongly overpaid by just under £2bn - leaving many low-income households facing financial hardship as the money is reclaimed.

Figures published last week by the Inland Revenue reveal for the first time the true extent of the overpayment. A third of claimants were paid more than they should have been in 2003-04. Of this group, over half were overpaid by more than £500 and a third by more than £1,000.

Citizens Advice, which has helped thousands of families to dispute the Inland Revenue's decision to recover the money, said the delay in resolving the problem was unacceptable.

"Many families are waiting several months for their cases to be looked at," said Katie Lane, a Citizens Advice spokeswoman. "In the meantime, the overpayment is [being] automatically recovered from their ongoing payments. They are struggling to live on a sudden drop in income, and many are falling into debt."

The Paymaster General, Dawn Primarolo, outlined planned improvements to the administration of the tax credit system last week, including fairer procedures for recovering overpayments.

Citizens Advice welcomed this announcement but called for better advice - for example, to ensure that families know they need to report changes in income - and the right to appeal against the recovery of an overpayment on the grounds of official error.

UK buyers head south

House prices are edging ahead at their slowest rate since April 1996, according to new figures from Nationwide building society.

House prices are just 5.5 per cent higher than at this time last year, the lowest annual growth rate for more than nine years.

The price of an average UK home rose by 0.3 per cent in May, and now stands at £157,272.

On a month-on-month basis, the building society's figures showed further signs of a slowdown. In April, prices had risen by 0.9 per cent.

Nationwide said the figures strengthened its view that "the market is cooling gradually". Last month was the tenth in a row to see price growth below 1 per cent.

Meanwhile, the slowdown in the UK's annual house price inflation contrasted sharply with the boom in South Africa, currently the highest-performing property investment hotspot.

According to research from the Property Investor & Homebuyer show, the country's housing market is currently experiencing annual inflation of 25.5 per cent, thanks in part to low interest rates and demand outstripping supply.

Property is relatively cheap by UK standards. New homes overlooking Cape Town's Table Mountain start from as little as £40,000.

The property market in Spain is undergoing the next fastest growth (17 per cent a year) followed by France (14 per cent), the Property Show's research has shown.

Flexible friends

Charitable donations totalling a record £374m were made on our debit and credit cards in the first four months of this year - more than double the same period last year.

The extra millions donated on our plastic are largely due to the vast sums raised by the Central Disasters Emergency Committee after the Boxing Day tsunami and also to Comic Relief's Red Nose Day, according to the banking industry body, the Association for Payment Clearing Services.

Final salary deficits

The size of the black hole in the UK's final salary pensions sector is estimated to be a staggering £130bn, research from the Association of Consulting Actuaries (ACA) shows. This sum represents the amount needed to fully fund current and anticipated future liabilities.

Of final salary schemes that base pension payouts on pay and longevity, 89 per cent were in deficit, the ACA's Pension Trends 2005 survey found. To try to address this imbalance, 27 per cent of companies were now paying "significant lump sums" into the pension funds.

The ACA survey revealed that company contributions have also risen. However, nearly half of companies expect it will take another 11 years to plug their deficits.

Researchers also found more examples of companies closing down traditional final salary pension schemes to cut costs.

"The number of employees covered by any form of occupational scheme is in rapid decline," warned Adrian Waddingham, the chairman of the ACA. "The [government] policy mix must be wrong for this to be happening."

The actuarial body wants the Government to introduce more incentives for companies to provide decent pension schemes.

"We want to see a lower-cost scheme offering a lower benefit [than in standard final salary schemes] - related, for example, to career average earnings," Mr Waddingham said.