The Finance and Leasing Association (FLA), announced it had updated the code of practise for payday loan firms.  Following pressure from consumer groups and the Government the FLA have introduced a new rule that states that a payday loan can only be rolled over 3 times.

However, consumer groups warn this won’t protect lenders and that firmer action needs to be taken to stop customers from running up huge debts.

The rules set by the FLA cover short-term loans, also known as payday loans.  These offer customers small amounts of money to be repaid over a short period of time.  However, charges soon stack up if the borrower is unable to repay the loan in the agreed time. Rolling the loan over results in the customer paying huge interest rates of more than 4000%.

Stella Creasy, Labour MP for Walthamstow, has been campaigning for the government to bring in caps on the cost of short-term loans.  She feels that the LFA’s plans do not go far enough and they are just “tinkering around the edges”.

“What we’ve seen in America is that if you limit roll overs people then pay off the loan and take out another loan straightaway,” she says. “A limit on roll overs will only work if you have a limit on taking out a new loan, say 28 days.”

A spokesperson for the debt advice charity the Consumer Credit Counselling Service, expressed her concern saying that it had seen “quite a large number of people” who had be allowed to roll over loans at least three times.  However, she said that it would prefer to see restrictions on lenders rolling loans over at all, rather than reduce the number of times.

Payday loan companies have been criticised by consumer groups and debt management companies for their lending practices, including charging astronomically high interest rates and using debt collectors when customers cannot repay the loans.

The FLA wants its members to make the terms and cost of borrowing clear to customers before they sign up for loans and to ensure they understand that the loan is a short-term loan which can only be rolled over 3 times.

Head of Consumer Finance at FLA, Fiona Hoyle, said: “A maximum of three roll overs is allowed, but only if the customer has asked for this and a proper credit assessment has been carried out each time. The code sets additional standards for responsible lending and a cap on roll overs is an essential part of this.”

The Office of Fair Trading (OFT) is due to announce its review of the payday loan industry but Ms Creasy fears that lenders are acting now in an attempt to avoid further regulations.

The body which represent a vast majority of payday loan companies, the Consumer Finance Association (CFA), said it was working on an “enhanced code” along with the Department for Business Innovations and Skills.  It hopes to launch this later in the year.

Chief Executive, John Lamidey, stated that introducing a cap on roll overs could lead to customers simply going elsewhere for credit and ending up in more debt.

“It may well be that we will bow to political or activists pressure and come up with a number [to limit roll overs], but I’m not sure we will do so in the best interests of consumers,” he said.

He added: “The FLA’s code, while very comprehensive, only regulates one payday lender. The CFA represents a number of the largest short-term lenders in the UK, so our code will reach significantly more consumers.”

The IFS’ report refers to the latest round of pension negotiations, but does say that the previous decision to change the inflation index link will substantially reduce costs.  

The unions are against the changes, saying that their members will have to work for longer and pay more into their pension funds.

The Government has declared that the latest offer to the unions is the last that they bring to the table. They stressed that the new policy for public sector pensions is fair and will save billions of pounds.

One of the major points of the latest proposal is for the normal pension age for public sector workers to rise in line with the state pension—up to 68 years.

The IFS responded by saying that this move would not save as much money as the Government had thought.

“In general, lower earners in the public sector will actually get a more generous pension as a result of the recently announced reforms,” the IFS said.

“That is, they will be able to retire at age 65 with a higher annual pension than they would receive under current arrangements.

“This results from the move from final salary to career average schemes and the particular changes to accrual and indexation rules,” the IFS added.

The IFS used analysis of the latest proposals to the NHS pension scheme to come to its conclusions within the report.  Using the information to conduct estimates of what would happen with public sector pensions.

The IFS said that the structure of public sector pensions had been improved by the latest changes, but the switch from using the Consumer Prices Index (CPI) to the Retail Prices Index (RPI) in 2010 was more significant for costs.

“The reforms to public service pensions implemented by the last Labour government, and this government’s decision to switch from RPI to CPI indexation of pension benefits, will in the long run reduce the generosity and therefore the cost of these schemes to the taxpayer,” said Carl Emmerson, deputy director of the IFS.

“But the consequence of the long-drawn-out negotiations over the latest reform appears to be little or no long-term saving to the taxpayer or reduction in generosity, on average, of pensions for public service workers.”

However, the report’s findings were rejected by the unions.  General Secretary of the TUC, Brendan Barber, said: “If you take the package as a whole there can be no doubt that many public sector workers may have to pay more, work longer and get a pension that will not keep up with the proper measure of the cost of living,” he said.

On January 25^th the annual interest rate was reduced from 1.75% to 1.5%  

The NS&I admitted that the decision had been taken to make the popular savings account less desirable. The Government had set a target to collect £2 billion from savers, but it has surpassed that and raised £4.8 billion so far this financial year.

The Chief Executive of NS&I, Jane Platt, said that the move was necessary to slow down the influx of savers funds, she added that she expected the figure to have gone down to £4.5 billion by the end of the financial year.

She said: “Since November we have seen an increase in customer deposits,”

“This has been driven by a relatively small number of savers depositing large amounts of money, particularly into our Direct Saver account.

“We have also seen a decrease in the number of customers withdrawing their money from products across our range,” she added.

The recent problems with global finance markets have led to an increase of savers seeing the Direct Savers account as a safe haven for their money.  Many customers had moved funds from other accounts into their NS&I account and had not taken out any existing savings it had in the Direct Saver accounts.

In March 2011, the Direct Saver had a total of 19,874 customers who had an average of £85,000 savings.  This amounted to £1.7 billion.  The sum has increased substantially, although NS&I would not state what the precise figure was.

The reduction in interest rate was well received by the Building Societies Associations (BSA).

The body have complained that the NS&I has an unfair advantage over building societies in attracting savers.  This has led to a shortfall of funds that could be used to attract new mortgage customers.

Adrian Coles of the BSA, said: “It has been obvious that NS&I has been exceeding its target and would have to reduce its interest rates,”

“It has unique advantages because it can offer a 100% state-backed guarantee and building societies have been losing funds to NS&I.”

In September 2011, the NS&I closed its index-linked bond account to new customers.  The account, which protected savers against rising inflation, had only been on offer for a few months but in that time half a million new accounts were opened.

The NS&I has also been reducing its portfolio of other accounts.  In November the decision was made to cease selling its Investment accounts and Easy Access accounts.

The Investment account will be opened to new savers again in May but only by postal application.  All existing Easy Access accounts will be shut down entirely this July.

The Government offers run by the NS&I will always prove popular as they are the only savings accounts that are guaranteed not to go bust.

This year’s retirees face increasing debt problems as the figures are 15% up on the average debts of £33,100 for their counterparts 12 months ago.

Mortgages and credit card bills make up most of the debt that are costing 3260 to service each month – around 19% of their average £1,290 monthly income.

On average, over 55s will take around four years to clear their debts, while 8% reckon they will never be able to afford to repay the cash they owe.

A quarter (25%) reckon they will spend £500 on debt payments.

Men retiring this year are likely to have more debt than women – an average £45,300 compared to £29,400.

Vince Smith-Hughes, Prudential’s retirement income expert, said: “With a manageable repayment programme in place, debts need not become an issue for this year’s retirees – and there is plenty of help available through free charities.

“Retiring with outstanding debts could be a sign of a lack of financial planning. It is important for those still working to save as much as possible as early as possible, and to consult a financial adviser to help them plan for a comfortable retirement.”

The research also shows that over 55s in Wales planning to retire this year are more likely to have debts (21%) compared with those in the East Midlands, who are the least likely (11%).

Meanwhile, a financial report from another financial firm, Aviva, claims family unsecured debt has increased by 48% in the past 12 months to just under £8,000 per household.

At the same time, typical monthly net income for families has risen by just 7% to £2,066, from£1,937 12 months ago.

Aviva claims this shows families are carrying and increasing their debts rather than paying them down.

In a report published today, the charity found that approximately 2 million pensioners were so concerned about their rising energy bills they were going to bed early in an attempt to keep warm rather than put the heating on.  A similar amount had moved into one room so they only needed to heat that room rather than the whole house.    

Age UK’s Mervyn Kohler, said that the report highlighted just how many of the country’s elderly were suffering from fuel pover ty.

“The figures are stark and show that people have been shaken rigid by the enormous rise in prices we saw in the second half of last year, and for individuals living on fairly straitened incomes, that hike in one of the two essential areas – the other being food – has really put the frighteners on our older population.”

A different study last year showed that 25% of households in England and Wales were in fuel poverty after large rises in energy bills and pay freezes. This figure had risen from 20% earlier in the year and proved to be embarrassing for the Government who had pledged to eliminate fuel poverty by 2016.

Age UK’s study was based on an ICM survey of 1,000 people aged 60 and over.  It highlights that many of those affected by fuel poverty are vulnerable elderly people. The findings reveal that 90% of people questioned were worried about their energy bills going up and 43% admitted that they had turned down their heating even when they were cold.

Kohler warned that many elderly people were risking getting ill by turning down their heating over the colder months.

“People who are cutting back on the amount of fuel they are using are jeopardising their health. They are going to end up exacerbating respiratory illnesses; they are going to end up isolating themselves in their own homes, feeling miserable sitting in a cold house without anyone coming round to see them. Because the house is too cold they get depressed.

“In the end they are actually stoking up costs for one or another bit of our National Health Service as a result of starving themselves of fuel.”

The study also shows that many of the elderly have been reducing the amount they spend on food to cover their energy bills, with many feeling they had to choose between heating and eating.

As people live longer due to a better diet and improved healthcare, the basic misconception that underlies retirement is long term care is not free at the point of delivery like the National Health Service.

Long term care comes in two types -

• Nursing care to help individuals live in their homes longer or in a care home

• Health care for individuals who need continuing medical assistance

The first is a paid-for service and the second is free, like any other healthcare.

Paying for long term care is a matter of perception. Many over 55s perceive nursing care as a right and not as something they should pay for, so they fail to save and plan for the eventuality.

The type of care many receive is blurred as well as a mixture of nursing and health care.

The result is everyone else has to pay, but because the number of younger workers contributing tax and national insurance is falling and the number of over 55s is rising, the economy has an imbalance that needs to shift the burden of funding long term care to later life.

In many cases, today’s older generation are in denial, claiming they won’t pay or can’t pay for their care.

It’s unfair to make the younger generation pay – and by younger, it’s typically those approaching their own retirement who are spending their own savings on caring for their older relatives.

The solution is unclear. Composing another financial product designed to pay for the cost of care adds to the unfairness if the contributions are not compulsory.

After all, why should two workers stand beside each other, earn the same and toil as hard as each other, only for one to make a contribution to their long term care in later years while the other gets the same benefit for free?

The British Medical Association (BMA) represents 130,000 doctors and medical students and says that 60% of its members would support industrial action.  If any strikes went ahead they would wreak havoc in hospitals and clinics all over the UK.  

The BMA rejected the cuts to pension pots despite the fact that many hospitals in the UK are seriously over-budget, to a point where the safety of patients cannot be guaranteed.

A government source said: “It seems a bit rich for doctors to be complaining about cuts and patient care when they leave the NHS as millionaires.”

During the last ten years the consultants have seen their pay increase by an average of 54%, less qualified doctors have received an average increase of 30%.  Doctors’ pay has recently been frozen, but a GP earns an average of £110,000 a year.

Doctors also won the right to opt out of weekend and night on-call duty.

Currently doctors have final-pensions pensions that see an average NHS doctor retiring at 60 receiving a pension of £48,000 a year for life, along with a tax-free sum of £143,000 when they retire.  The same pension scheme in the private sector would be worth more than £1.7 million.

A Department of Health spokesperson said the current situation was “unsustainable”.

“Doctors and consultants who are among the highest earners in the NHS have benefited hugely from the current final salary scheme arrangements compared to other staff groups,”

“The reforms to public service pensions will ensure that NHS pensions remain amongst the very best. The Government has made clear that this is our final position on the main elements of scheme design — it is a fair and affordable deal for both staff and the taxpayer.”

The new proposal will see doctors working past 60 to earn the equivalent pension however, those who have less than 10 years to go before retirement will be unaffected by the changes.

The BMA states that the proposal also means that doctors will have to give up some of their pension in exchange for a lump sum payment when they retire.  It went on to say that its members were feeling ‘betrayed’ by the new pension proposals, which could lead to the first wave of industrial action since 1975.

A country-wide survey of BMA members showed that 80% of doctors rejected the new pension proposals and two thirds backed industrial action.

Whilst only 20% questioned said that they would actually go out on strike, the majority backed other actions such as working-to-rule.

A spokesperson for the BMA added: “The strength and scale of feeling among doctors are abundantly clear. They feel let down and betrayed, and for many this is the final straw.”

Both the Royal College of Nursing and the Royal College of Midwives have joined with the BMA and the Royal College of General Practitioners to oppose the new Government plans to reform the NHS.

The consumer prices index rate fell from 4.8% in November and was contributed to the slowdown of prices for food, petrol, gas and clothing.

“The largest downward pressures to the change in CPI annual inflation between November and December came from petrol, gas and clothing,” said the ONS.

The CPI rate is still more than twice the target of 2% which the Government set the Bank of England, but it has started to steadily fall from its high of 5.2% in September 2011.

If the CPI rate continues to decline, as predicted by the Bank of England, then it is likely that there will be no increase in the interest rate for a few years.  The think-tank Cebr has forecast that the interest rate will continue at its lowest rate of all time until 2016.

However, the decrease in inflation rates will lead to the rounds of quantitative easing expected from the Bank to announce at its next monetary policy meeting next month.

The British Retail Consortium (BRC) announced earlier this month that the shop price inflation rate fell from 2% in November to 1.7% in December—the lowest it has been for 16 months.

The rate of inflation for non-food items was also at a two year low. In December it was 0.3% a fall from the 0.8% in November. This decrease was due to price cuts on electrical items, clothing and shoes, with many items cheaper to buy than the previous year.

However, despite the increase in supermarket discounts over December, food prices still rose by 4.2%, slightly up on the 4% figure for November.

This came as a shock to many economists, as many of the big supermarkets had staged prices wars with each other.  Tesco had announced a price cutting campaign of £500 million and Asda guaranteed to its customers that they would be 10% less than other supermarkets.  Sainsbury’s joined in the price war by matching branded products prices.

The trend of falling inflation rates is likely to continue this month, as this will be the first month where the figures are not inflated by the increase in VAT last year.   Recently announced gas and electricity price cuts will also help to reduce inflation rates over the coming months.

The BBC requested the information and discovered that the last use of mystery shoppers to help protect consumers happened back in March 2010, when the FSA Chief Executive Hector Sants, declared that he would be stepping up visits by mystery shoppers.

Consumer groups were surprised by the findings. Sarah Brooks, Director of Financial Services at Consumer Focus said: “It is a little surprising that the FSA hasn’t placed more of an emphasis on mystery shopping, which can be a useful tool in identifying consumer detriment,”

“We accept that mystery shopping may not provide the hard evidence needed for enforcement action. However, it can act like a canary in a mineshaft – an indicator of problems.”

The FSA replied to the allegations by saying that mystery shopping was a tactic used “in the right circumstances”.

When Mr Sants announced in 2010 that the Financial Services Authority would step up its use of mystery shoppers onsite, it came at a time when many consumers were complaining of being mis-sold payment protection insurance on loans and mortgages.

The FSA at the time came under a lot of criticism for not using mystery shoppers more as part of its regular operations strategy.

The use of mystery shoppers is a much used technique by consumer groups in flushing out unscrupulous companies, individuals and practices.

A spokesperson for the FSA was quoted yesterday as saying: “Mystery shopping is just one way the FSA can spot poor practice in the market place. It remains a tactic that we will use in the right circumstances.”

The company said that it had cut its tariffs in response to the fall in wholesale prices, which have dropped 9% since the company put up its prices last November by 15.4% for gas and 4.5% for electricity.  

“We know customers are finding it difficult, particularly during winter. So I am pleased we have been able to make this announcement now and help our customers at a time they use more gas,” said Martin Lawrence, managing director of energy sourcing and customer supply at EDF.

However, the supplier’s electricity prices will remain the same. A spokesperson for EDF said this was because its customers had already been guarded against the full rise in wholesale electricity prices in November.  The wholesale price had risen by 14% between March and September 2011, he said, but the company had only increased electricity prices by 4.5%.

It is expected that the other 5 big energy suppliers; Scottish Power, British Gas, Eon, Npower and Scottish and Southern will follow suit and announce their price reductions soon.

The smaller energy company, Ovo, announced on January 6^th that it was reducing its fuel prices by 5%, with its average customer on the New Energy fixed tariff paying a yearly combined fuel bill of £1,061.

Price comparison website, Energyhelpline, predicted recently that cuts of up to 10% were “just around the corner”, and director Mark Todd added: “This would mean the average annual dual fuel bill falling by as much as £135.”

The energy regulator, Ofgem proposed a radical reform of the market and demanded easier to understand tariffs.  It revealed last October that energy suppliers had increased their profits by a staggering 733% for dual-fuel customers, from £15 to £125 in the time period from June to October 2011.

The findings saw British Gas announce that it would simplify its tariffs.  However, the move meant that customer then found themselves paying more on the cheaper tariffs.