‘RBS to introduce mobile phone banking’

August 27, 2007 at 12:32 pm

After telephone banking and internet banking came mobile banking. We now can’t go anywhere without being able to see how much money we’re all spending. The Royal Bank of Scotland (RBS) is the latest high-street bank to offer its 13 million customers the new mobile banking service.

Customers who have a debit card will soon be able to register for the service, which is provided for the banks by an independent company called Monilink. With the suitable applications downloaded to their handsets, bank statements can be viewed and, in the near future, money can be transferred. Once you have the software on your phone, it is then encoded to that particular handset and not run through an external server, so a fraudster cannot hack into it.

The average fee is 20p per balance inquiry and 25p for a mini-statement. There is no monthly subscription fee. Paul Greddes, the CEO of RBS Consumer Banking said “Mobile phone banking will give people another easy way to access account information and even greater flexibility with their money”.

RBS are by no means the pioneers of this service. In October 2006, HSBC launched their own mobile phone banking service, and even back in 1999 HSBC got the whole ball rolling by offering weekly texts to their customers updating them on their account details. Proving very successful the ‘m-commerce’ service was then launched, also in partnership with Monilink.

HSBC, along with all the high-street banks, know how anxious their customers could feel about such a service, which is why they are rolling it out very slowly and one step at a time. It is beginning with simple ‘read-only’ services but then working towards the sort of full service that internet banking now offers.

Monilink was forged in 2003 between Montise and Link (UK) and provides this new service for mobile phones. All of the mobile phone networks in the UK can now use Monilnk, and so far, HSBC, First Direct, Alliance and Leicester, RBS and soon Natwest have signed up to offer it.

One area of scepticism with such a service is the security risks. Internet banking has already been the subject of a number of fraud incidents and now mobile phones might be considered to be more of a risk. In 2004, there was a huge security breach with the internet bank Cahoot, which, for a brief time, gave hackers access to any customer’s account. There have also been incidences with ‘clone’ sites that can trick people into typing in their log-in details but to a bogus site.

Up to 15 million people in the UK are now using internet banking in some way. Decent security PC software, careful monitoring of unexpected e-mails from what might be a so-called “bank” and not saving details on a public computer are just some ways one can lower the risk of hackers.

In an age when technological advancements arrive every year, will the cashier at our local branch soon become a thing of the past? Or will people always want to speak to a person rather than a screen or a monitor?

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‘Are YBS and L&G teaming up for your own good?’

August 17, 2007 at 11:21 am

The Offer: “A limited issue 1 year savings bond from Yorkshire Building Society
paying 9.00% gross p.a./AER* fixed until 08 September 2008, which is only available when bought alongside a long term Legal & General investment bond”

Walking down any high street it is likely that you will be greeted by a series of fantastic cash offers promising anything from 5-15% for investors who will enter through the banks “pearly gates”. Remember though that banks are quite literally “in it for the money” and it’s important to consider these propositions carefully. YBS and L&G’s offer does, however, turn out quite promising but deciphering the small print is crucial.

Firstly, 9.0% is not what you will get as an investor, instead as a lower rate tax payer (those of us who earn between £7,455 and £34,600) you will actually receive 7.2%. If you are a high earning individual you will, I’m afraid, further augment the coffers of the treasury and will have to declare additional interest on your tax return. This means you effectively receive 5.4% per annum. These are, however, still good rates and compete well with the market as a whole, a definite positive. With the Bank of England showing a greater reticence to increase the base rate following the latest inflation report, and analysts now reducing the probability of a rate increase, the fact that this rate is fixed is not such a negative.

At the end of the year you will receive the instant access rate. Most of us, while happy to commit new money to this kind of investment, will simply let it slip onto a lower rate. At YBS this isn’t disastrous but their current net rate of 3.6% is definitely a move in the wrong direction. The golden rule with this type of account is to make sure you review it.

The Legal and General element is a riskier Investment but very viable for the long term. L&G have a good choice of funds but you should seek professional advice in choosing funds remembering that the value of this Investment can go down as well as up.

Unlike some providers, all your money will be allocated to Investment and for managing your investments L&G will take around 1.5% a year, dependent upon the fund chosen. The Managed Accumulation fund, the most probable fund an adviser will put you in has outperformed its sector over 5 years but other more specialist funds are not market leaders and what you actually benefit from in terms of the cash element could easily be offset by choosing a fund manager with better performance. See Fund Performance for further information.

Despite this final word of warning this is actually a rather pleasant surprise, must be a new found generosity of those Yorkshire types. Please however remember investment performance is not guaranteed and at least 50% of your money is going to be at risk.

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‘Savings for children’

August 13, 2007 at 10:19 am

It is wise to start thinking about children’s savings when they are still young, as there are a huge range of bank and government incentives that could benefit the child in later years. It’s a fact that the earlier you start saving, the more interest you will accumulate for your child. Not only that, but having his or her own bank account encourages the child to save and manage his or her own money. The savings will be very beneficial in the future, when the child is old enough to be financially independent and will need to think about investing in further education or a new home.

A child’s first savings usually consist of cash deposits made to a children’s bank account opened with a bank or a building society. These accounts often have a maximum age limit which can be as high as 21 and, because they are specially designed for children’s first savings, the interest is substantially higher than on standard accounts. Most accounts also offer incentives. For example, currently HSBC offers incentives such as CD or theme park vouchers, whilst Natwest sends your child their very own “piggy bank” to paint and personalise.

As Christine Ross, Head of Financial Planning at SG Hambros, notes, often parents will choose to save the child benefit they receive (which is currently paid at a rate of £16.50 per week for the first child). If we assume such regular payments and we take interest to be roughly 4.5%, one might be surprised to note that the child will receive almost £24,000 when they are 18. The reward of savings is thus huge, as this will give the child a firm foothold when they are older.

What is particularly good news where child savings are concerned is the new Child Trust Fund which has been in place since 2002. The Child Trust Fund is a savings and investments account for children whereby every child who is born after 2002 is entitled to a £250 government-funded voucher to start their new account.

Though nothing can be withdrawn from the account till the child reaches 18, this is their own money and aims to give them a good start in life and encourage saving. Anyone can add to the account whether they be a parent, friend or relative, and these deposits can be up to £1200 a year. In addition, neither you nor your child will pay tax on income and gains in the account. To make things even more palatable, when the child reaches 7, the government will make a further contribution of £250, with children in lower income families receiving an additional £250.

Although these are very good options for putting aside money for children, some believe that there are better ways besides savings accounts. For example, it is possible to use the avenue of stock market funds, which have been shown to outperform other types of investment. However, such methods of saving money, though they can be more flexible and give better results, can also be risky and volatile especially in the short term. Whichever option you take, are plenty of ways to give your child a headstart in life financially.

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‘Men are losing financial control’

August 10, 2007 at 9:34 am

A new study commissioned by National Savings and Investments (NS&I), has shown that rising sexual equality is having a profound effect on finance management within the household. Women are today far more likely to be the joint, or even sole, breadwinner of the house compared to previous generations. Indeed, NS&I have concluded from the study that, by 2020, there will be a complete shift in power with more women than men having the final say in financial decisions within their family.

The findings come from government figures and interviews carried out by the the think tank Future Foundation, and the changes noted are quite striking. At present, 14% of women earn more than men and, by 2030, this figure is estimated to rise to 40%. Whilst historically, women were far more likely to stay at home and look after the family, nowadays women are becoming more ambitious because of the opportunities afforded them. Indeed, the study found that 27% of today’s young women would prefer to be the main earner in their household when the time comes.

The reasons why women are earning more today are numerous. Not only are women more likely to have careers and delay when they settle down with children, but it has been found that women and doing better in higher education than their male counterparts. For example, this article shows that in the medical profession, newly-qualified women are outnumbering men by almost three to two. As William Nelson, of the Future Foundation, explains: “We are seeing the emergence of a generation of women who are better educated, more ambitious, and more financially confident than any before them. This generation is already more likely to handle day-to-day financial matters than their male partners, and demands to have at least an equal say in the big decisions.”

It is interesting to speculate how this shift in power will affect the decisions made within the average household. Researchers from Loughborough University and the Policy Studies Institute conducted a series of interviews in which they found that the earner of any household is naturally more likely to feel more entitled to the money than their partner and is hence more likely to spend it in the way they see best. They also found that where the breadwinner is the mother, she is is far more likely to spend it on family and children than when the earner is the father. Such results show that financial power-shifts, which are becoming more and more prominent throughout the country, can have a huge financial effect within families. The question is, then, what will these changes mean for the overall dynamic in families?

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‘Bilingual call centre opens for Poles’

August 8, 2007 at 6:55 pm

As any ex-pat will tell you it is always a complicated procedure to open up a bank account in a foreign country. Even if your grasp of the language is good, you may not have all the financial jargon at your finger tips.

Last week Lloyds TSB made it possible for Poles headed for the UK to open up a current account before they leave Poland, by means of one simple phone call to a bilingual centre in Glasgow. The prospective client will be given an account number and an appointment at a branch of the bank to complete the paperwork. There are over 180 Polish speaking bank employees throughout the Lloyds TSB network and brochures in Polish are available in 250 branches.

Caroline Brady, of Lloyds TSB said: “The growing Polish community is very important to us and that is why we are doing our best to provide Poles with a dedicated service even before they arrive in the UK.” Many Poles do not appreciate that the majority of employers in the UK insist on a bank account for pay purposes but as a result of Lloyds TSB advertising campaign in Poland, awareness should be raised. Within only three months of opening a Lloyds TSB account the customer will be eligible for a credit card and overdraft facility, subject to certain conditions.

The new Lloyds Silver account is excellent news for recent arrivals from Poland. They will pay only £2 a month rather than the usual charge of £7.95 and will have access to the Money Transfer Card, an ideal method of sending funds home to Poland. It can be topped up, as many as three times a day and the money transferred can be used by a designated friend or relative in Poland, either for cash withdrawals or for purchases at any Visa outlet. As it is a debit card there is no way in which the card can become overdrawn. Lloyds TSB have ascertained through research, that sending of money home is extremely important to most Poles. Over 40% of those questioned had sent funds back recently and 75% planned to do so again in the near future, with most transferring between £100 and £500 every 4 to 8 weeks, either to help support their family or for their own investment purposes.

With some two million Poles having arrived in the UK since Poland joined the EU in 2004 (a number greater than the population of Warsaw) the Lloyds TSB campaign certainly makes excellent business sense. The bank has already opened 100,000 new accounts in the last twelve months for new arrivals.

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‘Banks should donate money in dormant accounts to charity’

August 8, 2007 at 11:17 am

Following a six month inquiry, the Treasury Select Committee has this week published its report on unclaimed assets in the financial system. The report recommends that funds which are held in “dormant” accounts be put to good use, to help communities rather than creating wealth for financial providers.

The Committee estimates that up to £500 million is lying in accounts which are dormant. Dormancy occurs when the bank or building society loses contact with the customer, something which happens surprisingly often and for a variety of reasons. Most commonly, consumers simply forget to tell their bank they have moved house! After a period of three years without customer-initiated contact, the account is officially classed as dormant. And although consumer bodies and websites such as Motley Fool, encourage customers to contact their banks and reclaim their cash, a huge amount of money remains dormant.

The report suggests that the tracing and reclamation process could be simplified. Currently, the procedure varies according to the institution. Replacing this consumer-unfriendly arrangement with a single search facility would boost the number of people reclaiming funds, and is a recommendation of the report.

As early as 2005, the Government proposed a scheme which would centralise the money in dormant accounts, and create a fund which would put unclaimed assets to good use. A period of 15 years dormancy was suggested, as far fewer claims are made on long-inactive accounts. The scheme would, however, still allow customers to claim back their money. The Committee wants to broaden the scope of these proposals, potentially to include other unclaimed assets such as National Savings and Investments, and even insurance products. Ten years is also preferred as a cut-off point for dormancy.

The current proposals do not compel financial bodies to take part in the scheme. Again, the Treasury Select Committee urges the Government to go further by making participation compulsory. The report is also disappointed with the lack of consultation regarding where the money will be spent. Gordon Brown has said that, once transferred to a central fund, the assets should be used to pay for youth projects. By widening the scope of the scheme, the Committee believes up to £1 billion of unclaimed assets could be released, and suggests that further consideration of the beneficiaries is needed: “We see a clear need for a Social Investment Bank, the establishment of which relies heavily on it receiving significant funding through unclaimed assets.”

The UK is essentially playing catchup though, with the Republic of Ireland having already implemented an unclaimed assets scheme six years ago. Unlike the scheme proposed by Whitehall, the Irish scheme is not voluntary. Banks, building societies and the Irish post office are required to transfer money from dormant accounts to the National Treasury Management Agency (NTMA) by the 30th April each year. In the year 2006/07, financial bodies paid 66 million euros (£45 million) into the Dormant Accounts Fund, and the total amount held in the fund is a substantial 255 million euros (roughly £153 million).

If you think you have money in a dormant account, there are three existing systems for reclaiming your money. You can find guidance on these websites:

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‘HBOS to return lost cash’

August 7, 2007 at 11:45 am

The Halifax bank is attempting to return an estimated £50 million held in dormant accounts to its rightful owners. The bank is writing to over 20,000 people it believes may have forgotten about the money they have sitting in their accounts. They will also launch a national advertising campaign in order to jog the memories of forgetful account holders. The accounts Halifax is targeting have all been untouched for 15 years.

Since tentatively beginning the scheme in conjunction with the Unclaimed Assets Register, the scheme has successfully returned £6m to forgetful account-holders.

So what has prompted this seemingly selfless exercise? Why not sooner? The government has recently introduced plans which would allow it access to unclaimed money in bank accounts. It would use the money to spend on ‘good causes in the community’ – more specific details have not yet emerged. It would seem that banks are even less keen to hand over money to the government than to their customers. When a similar scheme in Ireland was announced, banks managed to trace 60 per cent of lost account holders within 2 years. It seems, therefore, that banks are content to sit on the dormant cash and earn its interest whilst nobody is paying any attention, only trying to reunite it with its owners when the government is trying to get its hands on it.

Some experts estimate that, in total, there is around £14 billion sitting in bank accounts, insurance policies, national savings, pensions and shares that has been forgotten about. This usually occurs when account holders move house and fail to notify the financial institution of their change of address. Problems also arise when banks merge or split up – there is still millions of pounds worth of shares waiting to be claimed from when Halifax merged with Bank of Scotland 10 years ago.

HBOS is so far the only major UK bank to have its own scheme. If you think you may have a dormant account with either Halifax or Bank of Scotland and would like to reclaim any funds contained therein, visit Halifax’s website. If you think you may have funds with other banks, contact the relevant institution with your claim. If you are frustrated in your attempts to deal directly with the bank, contact the British Bankers’ Association, Building Societies Association or The Pension Tracing Service.

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‘Barclays initiates takeover of ABN’

August 7, 2007 at 11:36 am

Despite fierce competition from a rival consortium led by the Royal Bank of Scotland, Barclays today showed it has no intention of letting up in the struggle for ABN Amro by officially launching a 65 billion euro takeover bid.

The move comes after the Dutch bank removed its formal support for Barclays’ higher 67.5 billion euro bid and the aforementioned RBS consortium proposed its own 71.1 billion euro offer in May. Indeed, Barclays’ formal bid is just the latest development in what has proved a protracted struggle over ABN Amro’s future which reached the public eye in late March. The success of Barclays’ proposal still hangs in the balance. The bank itself has refused to back either Barclays or RBS officially, and there is still much to recommend the RBS-led bid, which includes partners Banco Santander of Spain and Fortis of Belgium. The cash part of their own 71.1 billion euro deal was recently raised from 79% to 93% as a way of winning over shareholders, in contrast to Barclays’ previous bids which valued ABN lower and were composed mainly of shares rather than cash.

Nevertheless, Barclays appears confident that it will prevail with its own record-breaking bid. Barclays Chief Executive John Varley was confident, but acknowledged other key factors, stating, “Am I confident about our ability to win the ABN AMRO merger? Yes I am, but I recognize there is a significant dependency on where our stock is trading at the relevant time”. The focus on Barclays’ stock is understandable considering the nature of its offer and, with ABN shareholders only voting on the takeover two months from now, the Dutch bank’s future is still very much in the air. Barclays argues it has guarded against any potential collapse in stock by instigating a £2.4 billion share buyback program, claiming this will boost share prices.

Moreover, according to Barclays, the disparity in the cash offer of RBS and its own largely shares-based offer is purely superficial. With Barclays’ offer, ABN investors will be given 13.15 euros in cash as well as 2.13 Barclays shares for every ABN share. This will swing the matter in Barclays’ favour in the opinion of Barclays’ president Bob Diamond, who commented, “there are a lot of investors who want shares… I think and I expect they will see the opportunity with Barclays to be far superior in terms of forward-looking earnings and unlocking value”.

Diamond’s views were partly justified by Barclays Bank posting strong half-year profits on 2nd August. Pre-tax profits rose 12% to £4.1 billion despite the bank refunding approximately £87 million in settlement payments to customers who argued they had been overcharged for overdraft fees. However, despite the healthy state of Barclays and the persuasive arguments in favour of its bid, with the offer period running from 7th August to 4th October, the light at the end of the tunnel for either Barclays or RBS is still a long way off.

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‘Barclays introduce pre-pay chip and PIN card for use abroad’

August 2, 2007 at 5:33 pm

If you are about to travel abroad and are debating whether to take local currency or travellers’ cheques, the new Barclays pre-pay chip and PIN card may be just what you are looking for. After all, carrying large amounts of cash around is never particularly safe and travellers’ cheques can often prove to be less than convenient.

The card, personalised with the customer’s name, signature and card number, and protected by chip and PIN technology, can be loaded with any amount from £100 to £2500 in sterling, US dollars or Euros. It can be used not only at cash machines (a 2% fee applies) but anywhere else across the globe which accepts VISA. It can be used for any currency but a charge of 2.75% is levied where currency needs to be converted.

Because the card is not linked to a particular bank account, it cannot become overdrawn, allowing travellers peace of mind, not only from the point of view of sticking to a budget but also because if the card is lost, the damage is limited. Customers are also protected by the bank’s fraud guarantee, ensuring that if you are the innocent victim of fraud you will not lose out financially.

Checking your balance and topping up the card whilst travelling is not a problem either. The balance can be verified either at ATMs or by phone, and the card can be topped up at any branch of Barclays by cash, debit or credit card or by phone using a debit or credit card. Parents needing to bale out their Gap year children will find it very useful to be able to pop into the local bank and have the funds made immediately accessible rather than bothering about bank transfers or wiring money to exotic parts of the world!

The card is free to obtain and all you need if you are a customer of Barclays is two forms of ID. If you are not a customer, you will need to see a cashier to fill in a short customer profile.

Currently the only other providers of similar cards in the UK are Virgin, Lloyds TSB and the Post Office, whilst abroad, banks in Canada and Australia offer the same type of service.

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‘UK consumers in denial of their debts’

August 2, 2007 at 5:18 am

Consumer research company Mintel has published the results of a survey showing that British consumers collectively shoulder £100 billion more debt than they acknowledge. In the survey, the average Briton estimated that they had debts of £5,251. Figures from the Bank of England show that the real figure is closer to £10,000, meaning that the average person underestimates their debt by around a half of what it actually is.

The survey also highlighted interesting differences in the way different parts of society use debt, and their attitudes towards it. Households earning less than £15,000 per year tend to use debt to cover day-to-day living expenses such as grocery shopping and utility bills. Those on higher incomes (over £50,000) used debt to increase their assets (e.g. buying a second property or improving their current property) or pay school fees for their children.

Although people on different incomes used debt differently, all income groups showed an equal willingness to spend money they didn’t have. 43 per cent of the total population of the UK have unsecured loans, with many more having a loan secured against a property. Unsecured lending tends to have higher associated charges; it includes credit card spending, personal loans and overdrafts. When these different levels of debt are combined, it can become hard to manage them and fully appreciate exactly what one owes. Some people take out a credit card to pay their overdraft and utility bills, and then take a personal loan when their credit card bill arrives.

Lisa Taylor, from financial information provider Moneyfacts, said: “Many people know they have a problem but often they’re afraid to address it. The high-spend culture encourages you to live for today and worry about the consequences later. Credit cards and loans are easy to get into confusion over because the bills may arrive at different times of the month. So collating it all together requires a certain amount of financial discipline which many people sadly do not have.”

As never before banks and other lenders are willing to provide ever-increasing amounts of credit to borrowers, which has encouraged consumers to spend money they don’t have. Whereas in the past people would have been more inclined to save up for a new purchase, they now make the purchase on credit and worry about paying for it later.

Paul Davies, senior finance analyst at Mintel, commented, “A large minority of households are extremely vulnerable to any deterioration in the prevailing economic conditions. Indeed, a significant weakening in the labour market or a sustained bout of monetary tightening could clearly have a devastating impact on the finances of many consumers, and lead to a sharp rise in the level of bad debts.”

What this means is that if interest rates or unemployment go up (and interest rates have just gone up again, taking them to their highest level in 7 years) there will be less chance that certain sections of society will be able to repay what they have borrowed. The number of bankruptcies will increase and banks will issue profit warnings as they realise how many loans they might have to write off.

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