In a move which will be rued by the credit card industry, the Lords have upheld an earlier decision to instruct a number of credit card companies to refund the cost of items which were bought overseas, but either did not turn up or were damaged.  In a move which was instigated by Lloyds TSB and Tesco Personal Finance they challenged the understanding of the Consumer Credit Act in relation to goods purchased outsdie of the UK

Under section 75 of the Consumer Credit Act, the credit card holder is insured for items with a value between £100 and £30,000 in the event of damage or non-delivery.  The action was brought about because of the recent upsurge in internet usage, which has seen a massive rise in the number of products purchased online from overseas traders.  The potential cost to the credit card industry could run into millions if not billions of pounds in the years to come.

The finance companies involved had tried to argue that overseas purchases were out of their jurisdiction and should therefore not be covered by UK regulations.  However, the counter argument that it cost more to buy goods overseas was brought up time and time again, and the fact that consumers should at least be able to expect the same level of cover seen in the UK.

It will be interesting to see how the credit card companies react - Will they increase charges? Will they ban overseas transactions? Or will they just take the ruling on the chin? What ever you think, it seems inevitable that the consumer will be forced to dig deeper at some stage.

As if to rubber stamp what some people were already thinking, a report out today has forecast that house prices in the UK are set to fall by as much as 6% in 2008.  While the forecast fall in prices will probably vary wildly between different areas of the country, the trend seems to be down.  Is 6% a large fall? Will it cause panic?

As many people are already seeing a tightening of their fiscal belts, a fall in property prices might not be such a bad thing in the long run.  It will serve to take some of the froth out of the market, and possible shake-out the short term investors who can often cause havoc with supply and demand.  While the credit crunch seems to have been forgotten by many investors, there is no doubt that at best it will be a drag on the property market for the next few months, although a property crash does not seem to be imminent.

How will the Bank of England respond?

In truth there is probably very little that the Bank of England can do, indeed they may even be relieved to see a possible reduction of the froth from the property market.  Their long term aim is, and always has been, to control the rate of inflation in the UK and unlike many central banks around the world, they have never lost sight of this.

A soft landing for the property market is probably one of the better scenarios that could happen, but things can change so quickly in the finance industry and you never know what is around the corner.

As they say, what goes around come around……

An official ruling last week has caused further confusion in the mortgage endowment market, where many IFAs were hit with compensation claims as client endowments failed to cover the value of their mortgages, as had been “promised”. The Financial Ombudsman has ruled that an IFA who was previously forced to pay out compensation can, in the event that the policy is in surplus at the end of the term, claim back all or part of the compensation paid out.

Not only does this ruling further muddy the water, but it will also cause major logistical problems with IFAs now obliged (for their own benefit) to monitor all final endowment payouts.  Even though this ruling does seem fair on the surface, it does not seem to take into account the pressure and financial strain which many endowment holders felt.  In some ways it seems that IFAs will possibly benefit from a rebound in investment returns (if it happens) even though their advice may well have been technically flawed initially.

Many experts are now expecting a mass of IFAs to take court action to retrieve as much of their compensation payments as possible.  It seems that while many thought the endowment issue was dead and buried, this may not be the case.

It also open the door for a possible reversal of past claims in other areas, where the financial markets may well have bailed out advisers if investment instruments were left to mature. 

If you are looking to buy your loved one an iPhone for Christmas, a phone which is sure to be top of many shopping lists, you will need to ensure your have either a credit card or a debit card when paying.  Why? Apple have taken the amazing decision to refuse cash purchases of the iPhone, as they are insisting upon a way to trace the original owner of any phones which turn up, unlocked,  in other areas of the world.  Is this the start of a new trend?

Thankfully it seems highly unlikely that this is the start of the “cash less society”, more a case of Apple protecting their intellectual property, and safe guarding the release of the iPhone in many other areas of the world.  However, it does prompt the question, do credit card and debit card purchases actually infringe your privacy?

Apple may well have opened up a whole new debate about “big brother” watching you, with the revelation that they would (where required) use you personal address details to question you about any anomalies with your mobile phone.  Is this a move too far? What else can they do with your credit card records? Will there be a major consumer back lash?

While we may see some short term discussions about the issue of privacy, if the truth be told, the credit card companies have been watching our spending patterns for years, with sophisticated software available to forecast your future spending patterns.  Slowly but surely the “unpredictability” of consumer spending patterns is being eroded, and we are being monitored continuously - so what’s new?

While there can be no blaming the authorities who first introduced the Child Trust Fund idea to the UK population, recent figures show a large number of parents have yet to even deposit their Child Trust Fund (CTF) vouchers.  A report released towards the end of last week showed that up to 33% of all CTF vouchers had not been cashed, and as a consequence a number of children look set to miss out on a potential windfall in later life.

What are CTF vouchers?

CTF vouchers were introduced by the Labour government in 2002, and were created to allow bank accounts to be opened in the name a minor.  Those parents who have children born after 1st September 2002 are entitled to a CTF voucher with a value of some £250, which can only be despoited into the childs account.

The scheme is based upon the fact it should also encourage those in a  position, to top-up these accounts (tax free) to ensure that their children, grandchildren, etc have a useful lump sum when they reach the age of 18.  On their 18th birthday the “child” is entitled to take control of the account and spend as they so please.

There have been calls for this type of scheme for many years, and it is a little difficult to understand exactly why so many parents have not taken advantage of the initial CTF vouchers.  The authorities have promised to highlight the plight again, with the aim of bringing the situation back into the limelight and promoting use of the vouchers.

Have you used your CTF vouchers?

While those with children will always want to do the best by their family, it is essential that you do not leave your planning too late.  You need to ensure that you are making use of the most tax efficient forms of investment and saving as soon as possible.  Why? Simple, you do not know what will happen tomorrow………

As much as nobody likes to consider the worst, we do not know what may happen tomorrow, and more importantly how this will effect the children and family we may leave behind.  It is the lack of planning, and a fear of the unexpected, that sees thousands of people give back millions of pounds to the tax man each year, which they could have retained in their family.

From an early age, where money is available and assets need protecting, it is vital that you make full use of any possible protections and tax efficient vehicles that you can.  Whether you look to put your assets into trust, use up your children’s ISA allowances each year, or even start contributing to their “pension” pot from an early age, you need to act as soon as possible.

All of the advice that you will ever require is available on the internet, or from an IFA, as each and every person will have slightly different requirements and a slightly different situation to consider.  Do not fall into the trap of considering how to protect your assets when it is too late, as there are rules and legislation to counter-act blatant “tax avoidance”, but long term planning will always be a major part of the financial industry.

Do not leave it until the last minute, act now and ensure that your finances are able to with stand any shocks or surprises in the future.

As far as crazy questions go this is probably one of the best you have ever seen! Why on earth would you want to think about your pension and your retirement as soon as you have started work? The really crazy thing is that you should be thinking about your retirement the minute that you have any surplus cash, and funds which you can put away.

While for many of us currently in employment, our retirement date has been further pushed back to 65 years of age, it is never too soon to start saving for your pension, and making use of all of the latest tax incentives you can take.  While the retired population of today have a state pension coming in, even though on many occasions it is being reduced year on year in real terms, this is a “luxury” which many of us currently in employment will not have. 

The social services system in the UK is under great strain, and while there are plans afoot to transfer funding to the people who actually need it, there is no doubt that as the population grows both naturally and through immigration, the benefits we take for granted today may not be their tomorrow.  There is also the double whammy of an ever ageing population, which will take more and more out of the state pension and benefits pot.

The UK government have for some time been very vocal in their support of private and company pensions schemes, offering  a whole range of tax incentives for those looking to move away from the state system.  While this is may seem like a give away, it is really an investment into the future, and a way in which they can try to take some of the pressure off the state system. 

However, the governments plans to encourage private and company pensions are in disarray because of :-

· a lack of protection for many company schemes.
· increasing tax revenues from pension investment income.
 
As they say, on one hand they giveth you and on the other they taketh…..

For those who have not come across leveraged buy-outs before, these were very very popular in the 1980s, at a time when stock markets were flying high and takeovers and mergers were all the rage.  Money was also cheap, and lenders were bending over backwards to help corporate raiders with worldwide economies booming.  So how do leveraged buy-outs work?

As the name suggests, raiders who used the leveraged buy-out ideals would take out massive loans against a target companies assets and cash flow projections, paying off the debt as they went along.  While obviously this would have an impact upon short term profitability, with the majority of income going towards paying off what was in many cases millions of dollars worth of debt, there were advantages.  The beauty of these schemes was that for a relatively small initial sum, the raider could borrow many more times that amount using the company’s assets as collateral and maybe even selling off non-core assets.

After the pay back period was over, and the loan had been successfully repaid the corporate raider would have a business which they owned lock stock and barrel, for which they may only have paid a fraction of the value - with the vast loans paid back out of the companies cash flow.  If the theory went perfectly to plan, which it often did, the owner of the business could net hundreds of millions of dollars of assets.

So what went wrong?

As the market was pushing along well, the economy flying high and not a cloud in the sky, up popped the 1987 stock market crash.  Not only were the banks now looking to reign in some of their ill advised loans, interest rates were sneaking higher (adding to the debt burden) and the economy came under pressure (reducing profitability and cash flow).  These were the events which killed the leveraged buy-out market overnight.

While highly successful for many investors in the 1980s, the situation has never been quite the same with leveraged buy-outs.  We have some debt funded buy-outs since then but the banks are more risk averse and there are fewer prime candidates available for leveraged buy-outs.  Are the golden days gone for ever? Who knows……

It has been confirmed today that according to Treasury figures, the UK housing market is heading for a slowdown rather than a crash as many had feared.  This will be much appreciated news to the stock market, as the housing market can often lead the economy in either direction.  So what is happening?

While the signs in the housing market are mixed at the moment, the general trend is one of reduced demand and softening prices. Probably caused by both the recent credit crunch and ongoing concerns about the future of the UK economy, it seems that some house buyers are holding off for the moment.

The trend at the moment has rubber stamped the Bank of England approach which has been criticised by many economists.  It seems that retaining interest rates at current levels has served to squeeze the mortgage market, and the credit crunch recently added to the pressure (with some mortgage rates being pushed higher). Not for the first time it seems that the Bank of England have been proved correct in their focused approach to the long term situation, and have avoided short term policy changes which may come back to haunt some Central banks around the world.

It will be interesting to see if this steady reduction in house prices continues, and at what point (if any) those with substantial paper profits will look to crystallise their positions.  If the property market does not fall back too far, then there is every chance that the UK economy will avoid a marked slowdown, and we may just experience a period of consolidation - which will hopefully take out much of the “froth” in the market.

Have you ever stopped to think about what actually happens to the money which you earn and put into the bank? Does it hold its value? How are you taxed? Is it really keeping pace with inflation?

While the majority of us just place what little we have left over into the bank and see interest accruing, do you really follow the path from earnings to savings? If you take a step back and consider the events in question you may be surprised just how much you are losing before you even start to spend!

The tax situation in this country is depressing in some instances, when you consider that from your initial remuneration you will pay the following :-

• National Insurance
• Income Tax
• Pension Contributions (tax free)

The when you place your money into a bank account you will pay :-

• Tax on your interest 
• Possible monthly bank fees.

Many people believe that there is a large element of double taxation in here, when you consider that you have already paid tax on your remuneration, and then you are charged tax on the interest that you earn.  While currently there are some attractive interest rates available, you are not really benefiting by the amount you may think.  When you take into account inflation and the cost of living, there are actually situations when you income will be falling in relative terms.

So how can you rectify the situation?

There are a number of factors to consider, including :-

• Making full use of tax free vehicles, such as ISAs.
• Placing your money in a high interest account.
• Checking that you are paying the correct rate of tax.

When you actually sit back and consider the amount of money which is taken from you before you even touch your money it is frightening, and what do you get in return?