Millions Suffer as Council Supports Benefit Cuts

The Citizens Advice Bureau feel recent local authority benefit cuts are causing poverty, hardship and in some cases, financial ruin. This is the latest round of information offered by Simple Financial Solutions, a well-established debt advice company.

Nearly two and a half million people have been subjected to a substantial cut in their council tax support, in the attempt to reduce the annual benefits bill by half a billion pounds. The unemployed, the young and those on a low income face are those most affected, because the government has intervened to ensure the benefit cuts don’t affect pensioners.

A recent Freedom of information request revealed that people most affected included 112,000 carers, 3,600 war widows and 409,000 disabled individuals.

People who fail to pay their council tax will be receiving a court summons and defaulters can be imprisoned if the arrears remain unpaid. So, effectively, we are criminalising the poor. Local records show that home evictions and bailiff visits owing to unpaid council tax are on the rise, and many are turning to the Citizens Advice Bureau and other debt advisers for advice.

However, the Joseph Rowntree Foundation has recently funded some research that was carried out by the New Policy Institute. The results show the local authorities who have charged higher “minimum” council tax payments and made the largest cuts are experiencing falling collection rates and incurring bigger arrears and court costs.

Many front line charities and services, including the Citizens Advice Bureau are struggling to meet demand for help and advice in the fallout from recent benefit cuts.

The Citizens Advice Bureau recognizes the economy looks brighter, but Gillian Guy (chief executive CAB) feels many people are still failing to meet their financial commitments. Three in five people are concerned about rising bills and many are reigning in their spending, so Gillian feel she is justified in saying people are still struggling to pay basic bills.

One out of every five people who contact the Citizens Advice Bureau is concerned about council tax debt and this appears to be the uppermost debt problem at this moment in time. In the wake of the recession, more are turning toward short-term, high cost credit to pay household bills.

A percentage of local authorities are unwilling to pass cuts to the local community and these authorities are viewed as unfeeling and uncooperative. Cheltenham Borough Council is one such authority, but this council is intent on finding other ways of bridging the financial gap.

John Rawson, a local councillor felt it was self-defeating to cut benefits to the poorest in the community. He said money would be wasted chasing small debts and it was impossible to get blood from a stone.

The debt Advice Company, Simple Financial Solutions and voluntary staff at the Citizens Advice Bureau say the problem is worsening. The benefits cuts were implemented eighteen months ago, but people are still struggling to live on less money.

Recent media reports state the economy is recovering, but the Citizens Advice Bureau state millions of households are still feeling the pinch. People are finding it difficult to afford food and to pay energy bills because wages are not rising in line with inflation. Meanwhile, local authorities and the government continue to exert pressure by cutting key benefits like child benefit and council tax.

Many people who are deep in debt feel there is no way out and the threat of court of a possible prison sentence due to non-payment of council tax makes the situation worse.

Is your Life Insurance In Trust?

Generally speaking we take life cover for a purpose, it’s not just something we wake up in the morning and decide that we need to buy it for no reason. We have a mortgage we would like to pay off, we have dependent children we would like to financially support or we have funeral expenses we would like avoid being left to our family in the untimely event of us shuffling off our mortal coil.

Its not too difficult to understand the reason(s) why we part with our hard earned cash to fund life protection however what can come as a bit of a shock is what actually happens in the event of a claim and this is something that may alarm even the most savvy.

Lets take Mr and Mrs A, who are married and have a joint life policy taken out to pay off their £100,000 joint mortgage. Mr A dies prematurely on Monday. What happens to the life policy? Is it paid directly to Mrs as they are married and/or it’s a joint policy? Not automatically, No. Is it paid directly to the mortgage lender as the policy is to repay the debt on death? Again the answer is no.

The circumstances are a little different depending on the presence of a will. If the clients in question have no will (ie Mr has died intestate) the £100,000 will be paid into the “deceased estate”. The process of releasing the funds to Mrs from the estate is called probate in England or confirmation in Scotland. This can take any were from 12-18 months and can cost 3-7% of the value of the estate in fees.

If, however, the clients do have a will the process of executry can still take up to 6 months for the insurance to be paid as per the instructions on the will. Again there will normally be a fee for this from the solicitors — below 2% is fairly uncommon to give you an indication.

Now consider your own situation for a moment, if you have life insurance could you (or your partner for that matter) afford to pay all the bills INCLUDING the mortgage for the 6 months that it takes for your will to be executed? If the answer is at best a maybe then its something you really should address. A trust is a legal document that allows you to select who you would want your insurance to be paid to (generally done at the commencement of your policy) in the event of your death. This is not set in stone and is normally by way of a discretionary document which can be changed as and when circumstances dictate. There is no probate/confirmation, the pay out attracts no exectury costs, it avoids inheritance (if applicable) and is ring fenced from any creditors/family you wish not to benefit from the pay out.

So why then would someone not have Life insurance written in trust?

The question then is how to put life insurance in trust? The answer would be discuss this with a financial advisor to make sure the correct trust is implemented.

*Trusts are not regulated by the FCA and are not suitable in every single situation.

Energy Companies Owed Money By One In Five Households, Says Leading Trust Deed Provider

Around five million households are currently in debt with their energy providers, says leading Trust Deed provider

A study of 2000 people by the energy comparison site uSwitch shows consumers in the UK owe around £637 million to their energy providers, which has increased by around 6% since the same time last year. One in five survey respondents said they owed a debt to an energy supplier.

Interestingly, the average amount owed to suppliers has dropped by 6.5% or £8 compared to last year, due in part to price cuts but also the unseasonably warm weather last March and April. However, the average yearly energy bill still stands at £1,400.

Ann Robinson, director of consumer policy at uSwitch, said: “The soaring number of households in debt to energy suppliers is a clear indication of the pressure people are coming under just to meet the cost of their basic bills.”

Despite knowing they needed to clear their bill arrears, 20% of those in debt claimed to be “turning a blind eye’ in the hope the lower summer bills would mean the debt would decrease over time. A further 20% intend to pay off the arrears with a lump sum and 45% by increasing their direct debits.

Among the many energy saving tips uSwitch recommend to keep energy bills under control, paying by direct debit and taking regular meter readings are two which can help households make the most of their energy usage. In addition, making their homes more energy efficient through incentives such as the Green Deal could also be an important part of saving money.

A spokesperson for Trust Deed Provider, said: “It’s been one very long winter and this is reflected in how much people owe to their energy providers. By now people would be turning down their thermostats and putting away their winter clothes, but the prolonged snow has meant heating systems have stayed turned up for at least six weeks past when they normally would. This time last year we had been basking in our gardens in a heat wave – now we’re shivering in our homes in furry slippers and jumpers.”

However, recent reports of mis-selling by energy companies has shown that the most energy conscious households could still be at risk of paying more than they should be. Ofgem recently fined the country’s largest energy company SSE for “prolonged and extensive” mis-selling after it found “failures at every stage of the sales process.”

“Despite taking every precaution to get a better deal, the actions of SSE show that sometimes the energy suppliers will put profits ahead of people,” said Trust Deed Scotland’s spokesperson. “Ofgem found that SSE had made misleading statements and supplied misleading and inaccurate information, including making people believe they would save money when they knew they wouldn’t. Instead of having lower bills, some customers that switched were put onto even more expensive contracts by salesman wanting to hit their targets.”

“With that kind of blatant mis-selling, it’s no surprise that people end up in debt.”

Personal Tax Planning And Income Tax

The amount of taxes that you will need to pay can be significantly affected by income tax planning, and you can often enjoy a lower tax bill if you plan carefully. Other types of tax, such as inheritance tax and capital gains tax can also make a difference to the amount that you have to pay.

The following information can potentially make a big difference to what you owe, and you should research these issues when looking at your business  taxes, regardless of the size of your business.

There are two main areas where you can expect to enjoy significant tax savings:

It always pays to take advantage of any tax advantages that your employer might provide to you, such as an incentive scheme for employees. Determining what the value of these benefits is you should be an important part of your income tax planning. There can often be a large tax charge when it comes to company cars, and it’s important to plan for income tax in these areas.

Tax relief for contributions to pension plans, either form those made by you or your employer, should also be taken into account when planning for income tax. One of the most valuable benefits that your employer can give you is a final salary occupational pension plan.

Maintaining comprehensive and easy to access records, as well as planning to do next year’s tax return are both an important part of basic income tax planning. A self assessment tax return has to be filed by those who are considered to be high earning, company directors and anyone self employed, as well as by anyone whose tax situation is complex.

Income Tax Savings Planning

Eliminating or at least reducing income tax or capital gains tax by transferring your savings to your spouse is just one of the things to focus on to save when planning income tax. Another effective way to save is by using an ISA.

A pension contribution on behalf of child, or an investment in a venture capital trust that qualifies for the Enterprise Investment Scheme are other ways for high income individuals to save.

Property Taxes

Capital gains tax is not assessed on your home, although if you buy a home you will probably pay both stamp duty and council tax. However, if own a second home as an investment, or you make money from the rental of the home, you may have to pay capital gains tax. You should also take into account your likelihood of having to pay capital gains tax. Taxes can be complex when it comes to property, meaning that thorough income tax planning is essential.

Credit Licenses Refused As The OFT Drives Up Industry Standards

The Office of Fair Trading (OFT) has ramped up its efforts to drive up standards in the financial sector by refusing to grant credit licenses to three debt management companies, says IVA broker

Credit licenses are awarded to companies that operate a consumer-based credit business and have shown they are fit to do so. The three companies that were refused licenses – Lancashire-based Welcome Solutions Limited, Manchester-based Debt Connect (UK) Limited, and Cornwall-based trader Rowena Koning – are among the first to be rejected for licenses by the OFT as part of its ongoing drive to improve the debt management sector’s standards.

Welcome and Debt Connect were considered to have engaged in unfair or improper business practices, which included falsely claiming or implying that debt advice was free and impartial, publishing misleading or false testimonials, providing inaccurate and misleading information and not having proper practices and procedures in place. At the same time as refusing to renew the license of Debt Connect, it also revoked the associated license of claims Management Company Connected Claims Limited.

Part of providing a debt management consumer credit service is having the necessary skills, knowledge and experience to do so, and in this respect all three companies fell short of what the OFT requires. In particular, Rowena Koning was considered to have too little training and experience, which would make her heavily reliant on third party support when it comes to compliance matters.

Since 2010 the OFT has either refused to renew or grant 100 licenses in the debt management sector, and David Fisher, OFT Director of Consumer Credit, said: “The OFT will not hesitate to refuse licenses to those who cannot establish that they are fit to operate a debt management business and we will revoke existing licenses when necessary. Our goal is to ensure that people in financial difficulty who pay for debt advice can be confident that they are dealing with businesses that are competent to give them good advice.”

A spokesperson for IVA broker IVAOnline said: “Driving up the standards in the debt management sector has been a priority for the OFT since 2010. Debt management companies that persistently flout the Consumer Credit Act (1974) will be targeted to prevent them from imposing unfair or improper business practices on consumers and this can only be a good thing. People in debt are often desperate and very vulnerable, and companies that prey on them thinking they are easy to manipulate have no business being in business. They are certainly not helping consumers. They’re only helping themselves.”

Both Welcome and Debt Connect (UK) can now appeal against the OFT’s decision within 28 days if they wish, although until the appeal is concluded they will still be allowed to continue trading. If they do not wish to appeal their licenses will be revoked. An appeal has already been made by Mrs Koning and has been dismissed by the First-Tier Tribunal (Consumer Credit).

PPI Claims Process Now Under Stricter Control, Says Claims Management Firm

Unscrupulous claims firms hoping to make a quick buck at the expense of customers are now facing strict new rules to prevent them from doing so, says claims management firm

Any claims management company in England or Wales wishing to represent a customer in a claims process must obtain written permission in the form of a contract before they do so. Currently, a firm could go ahead with a claim on the basis of a verbal agreement following a cold call or text without having to make the customer fully aware of their fees. Only later when a large amount of money is snatched following a successful claim does the customer realise the extent of the fees, in some cases up to 30% of the amount recovered from the lender.

The new measures, which will be brought in during the summer, will stop this by forcing claims firms (such as those involved with personal injury or PPI) to put their fees in writing as part of a contract with terms and conditions, and then obtain a customer’s consent with a signature.

The Ministry of Justice has cracked down on unscrupulous firms cold-calling customers without permission, stripping some 260 companies of their licenses. Many claims firms use cold-calling to find business on the back of TV, newspaper and internet advertising, encouraging people to make claims for personal injury or other losses. PPI mis-selling claims have been a particularly lucrative area for many unscrupulous companies, with tens of thousands of people making claims that has resulted in the UK banks having to put aside £15bn to compensate customers.

Richard Lloyd, executive director of consumer group Which?, said: “Although these new rules are a step in the right direction, we think the government should be much bolder in cleaning up the claims industry. Upfront fees should be banned and those in charge of claims firms properly held to account for bad behaviour, with hefty fines imposed, licences revoked and individuals barred from running CMCs if they are found guilty of breaking the rules.”

The changes are not the only ones being made by the Ministry in an attempt to make the industry more professional. Consumers with a complaint can now go to the Legal Ombudsman to have their case heard and obtain help finding a resolution and compensation if it’s justified.

A spokesperson for claims management firm said: “Efforts to make the industry more professional have been underway for the better part of a year now, and the Ministry has been making great strides in rooting out the unscrupulous companies. Those that have had their licences revoked make up around a tenth of the industry, and those that remain must now ensure the way they do business with their customers is fair and ethical.”

A Financial Health Service For Scotland

The long awaited ‘Financial Health Service’ for Scotland recently took a further step towards becoming a reality in April 2015 when the legislation was laid before parliament on 21 and 22 August. Independence referendum aside, the Accountant in Bankruptcy (AiB) has been pushing ahead with the Scottish Government’s plans for personal insolvency reform. This area of law has always been fully devolved to Edinburgh; hence, the Scottish Government has used its’ powers to make significant changes to personal insolvency since April 2008. This new Bankruptcy and Debt Advice Scotland (BADAS) Act is the last piece of the jigsaw, meaning that come April 2015 we should have a personal insolvency regime fit for the 21st century. Continue reading “A Financial Health Service For Scotland”