Wronga

I’ve got a bit of a bee in my bonnet regarding anything that prays on the vulnerable or desperate……and ‘payday loans’ very quickly fit into that box.

Over the past week there has been some concern over a TV advert by Wonga. The issue escalated to such an extent that the advertising watchdog ruled that it “confused the public about the interest rates that applied”.

The commercial featured a conversation between two puppets about the costs of a Wonga short-term loan. The Advertising Standards Authority stated that the advert was “misleading by implying a representative APR of 5853% was irrelevant”.

My issue here is not Wonga……They pray on the vulnerable or desperate and we should expect their adverts to do exactly that……which they do.

My issue is that it took an advertising regulator rather than a financial regulator to stop this……and that was only due to complaints. Why is this not being picked up before it even gets to TV airing? All promotional material from a business card to a TV advertisement has to meet strict regulator criteria in the financial world……surely an APR of 5853% that is being promoted as ‘irrelevant’ would cause some concern with somebody? Surely?

I can’t make a company conform to my moral compass but I should expect it to confirm to a regulatory one?

Silly me……I expected better.

Cautious Optimism Definitely Maybe

George Osborne was given a significant boost yesterday after the International Monetary Fund (independent and impartial – we can trust them) retreated from its previous criticism of the UK’s austerity policies and predicted the UK will grow faster than any other ‘rich’ economy this year.

 

To avoid confusion……‘rich’ is described as the Group of 7 (G7). This is a group consisting of the seven advanced economies……Canada, France, Germany, Italy, Japan, UK and USA. Now, to ensure that there is no confusion between G7 and G8……G8 is the G7 plus Russia. Get it?

 

Anyway, the big deal is that the G7 countries account for around 40% of all money / growth made in the world. And for dramatic effect……that’s 40% from just 7 countries.

 

The IMF’s bi-annual analysis is looking pretty good……an upbeat forecast for the world economy generally and for the UK in particular. Given that it previously predicted growth for the UK at 1.5%, the latest prediction of 2.9% for 2014 is another substantial upgrade to the IMF's assessment of the UK outlook.

 

Lots to be confident about looking forward……we just need the growth figures to be ‘actual’ rather than ‘predicted’ and we will have some substance to support the confidence.

 

I’ll leave the last word to the politicians given that the General Election is just 12 months away……

 

In the blue corner……Chancellor George ‘Gorgeous’ Osborne hailed it as "proof that the economic plan is working".

 

In the red corner…… Shadow Chancellor Ed ‘Grow Some’ Balls accused the government of "complacently trying to claim that everything is going well".

 

Regardless, the IMF says there is plenty to be confident about……so I’m feeling confident. So there!

 

Substance To The Stench

I apply quite a simple rule to all the announcements in any Budget…… ‘what’s in it for them’.

 

Take a decision made by the Chancellor, question what’s in it for that political party, dissect it from a number of angles and then publicise what it really means. Pretty simple……but it seems to work.

 

My initial reaction to the Budget was one of anger and disappointment. I felt it was a party political broadcast aimed at those aged 55 and over as 75% of this demographic will vote in the General Election next year. That was my initial ‘off the cuff’ reaction……unsubstantiated and lacking any merit to back it up.

 

And then I took to the internet in search of substance to support my reaction…….and an HMRC report into ISA investor demographics popped up. It’s a 24 page report but there were two key messages that came out of it (you’re very welcome)……

 

(1) Average ISA Subscription

 

The table below highlights that the average amount invested in an ISA is £3,945. If this is the average amount invested, why increase the limit from £11,880 to £15,000?

 

 

 

(2) Average ISA Savings By Age

 

The table below highlights the average ISA savings value increases dramatically for the over 55’s. Or to put that another way……the increase in the ISA limit is most likely to benefit an over 55 as they will want and use it.

 

 

My initial reaction was……what a complete farce of a Budget. And I stand by that even more. All we should ever want from any Government / Budget is to represent us well, do what is right and do what is needed for our long term prosperity.

 

A blatant attempt at vote winning doesn’t tick any of those boxes.

 

If you are not angry, you should be.

Advice Furor

I am (obviously) a great advocate of people seeking advice when it comes to all matters relating to pensions in the UK. We have one of the most complicated pension systems in the world due to decades of rule meddling and the intertwining of a complicated tax system.

 

One of the up shots of the Budget announcements on pensions was the proposed increase in the options available for those retiring and also amendments to the pre-existing options. All in all, it made the subject of pensions more complicated than ever before.

 

It is now almost impossible to make an informed decision on pensions without seeking advice and for many this is outside of their financial reach.

 

Or is it?

 

The Chancellor announced in the budget that everybody should have the right to access free advice at retirement and launched the 'Advice For All' Scheme, setting aside £20 million to fund the initiative for the next 2 years.

 

Great news, right?

 

Oh come on.....you know the rules by now with this lot......always check the small print!

 

According to the 2011 census, 1.2 million people will retire over the next 2 years......which leaves the new 'Advice For All' Scheme providing £16.67 per person.

 

In a word......pathetic.

 

We all deserve better than this.

 

Election Budget

Today I’m angry……really angry.

 

The Budget didn’t see a caring, compassionate and visionary Government do what was right for the long term good of our great land. Instead it parked the election campaign bus outside of Parliament and flirted to the point of indecency with those they are really bothered about……the voters.

 

I’m angry……really angry.

 

The nature of my job sees me exposed to the frustrated public that are sick of the claustrophobic limitations of pensions at retirement, angered by the confusing and restrictive nature of ISA’s and angered by the banks refusing to give credible interest rates to elderly savers.

 

Yet, in one 60 minute speech where “support for savers is at the centre of this budget” he attacked this by:

 

1.     Removing the need for annuities at retirement and permitted full access to a pension by way of a full lump sum.

 

2.     Simplifying ISA’s and raising their limits.

 

3.     Setting aside £10bn of new fixed rate bonds at higher interest rates for those over 65.

 

So this is all good then right? Well……the ‘fixes’ to these problems were due years ago and this has to be good news with those with money in savings / pensions.

 

But we’re missing a point if we do not revisit the quote above……

 

“Support for savers is at the centre of this budget”.

 

But there was no support for savers……just more options for those that have already saved. ‘Support for savers’ is offering tax breaks to encourage those with little or no savings to save for their long term future.

 

Now I don’t want to say I told you so but I posted ‘Know Your Voters’ in January:

 

http://stevesmithlive.blogspot.co.uk/2014/01/know-your-voters.html

 

Now consider that 75% of the population over the age of 55 will be active voters next year. And remind me which group of people this is……it’s those with Pensions, ISA’s and poor interest rate bank accounts. Isn’t that a coincidence!

 

The quote should have been “support for those that already have savings that are really frustrated by their current position”.

 

So in one 60 minute speech, George Osborne effectively made an election give away in return for votes to those that are most likely to vote. And if that wasn’t enough……the introduction of these new rules will be delayed until as close to the General Election as possible so that it is fresh in voter minds!

 

In addition, there were no incentives to encourage people to save as (pure and simply) this demographic has a low probability of voting!

 

This was the most blatant attempt at vote winning I have ever seen at a Budget. All I want from any Government / Budget is to represent us well, do what is right and do what is needed for our long term prosperity instead of it being an Election Campaign Broadcast.

 

Is this really too much to ask?

 

I’m angry……really angry.

 

Political Aphrodisiac

As a proud Englishman, I have watched from distance Scotland’s quest for independence with intrigue. Whilst I am remaining open-minded on the subject, I keep coming back to the same subject……oil.

 

As the last few decades have shown, oil is a pretty big deal for world governments. It’s like an aphrodisiac for politicians. Billions have been spent on wars that didn’t need fighting leading to thousands of lives that didn’t need to be lost……all because of oil.

 

Here are the hard facts……there are up to 24 billion recoverable barrels of oil remaining in the North Sea with a wholesale value of over £1.5 trillion. Those figures meant nothing to me until I understood that this is more oil tax revenue still to come out of the North Sea than has already been generated. That’s a big deal……a colossal amount.

 

As we edge closer to the referendum date of 18 September 2014, always keep those 3 little letters in mind……as it will dominate many angles and agendas.  Don’t expect anything other than O I L to be at the forefront of aroused politician minds.

 

 

Lowballing Low Point

I discussed the issue of ‘lowballing’ a year ago (see link below) and things have a taken a further twist.

 

http://stevesmithlive.blogspot.co.uk/2013/03/lowballing.html

 

Lowballing was essentially a further banking scandal involving banks fraudulently (shock!) manipulating the interbank Libor lending rate for their own financial gain. This wasn’t policed properly by the regulator, an opportunity was found by the banks to make money illegally and (quelle surprise) money was made.

 

But here’s the twist……a year on and the Bank of England has now launched an internal investigation as it appears that staff “knew of or condoned” the fraudulent activity.

 

The Bank of England are the guardian of the UK’s currency and, as the main bank regulator, are responsible for ensuring the safety and soundness of UK banks. However, London can’t promote itself as a major financial hub (it is the largest foreign exchange trading platform in the world) yet be riddled with corruption that would make a third world country wince.

 

I can (to a point) accept incompetence from the bank regulator but I cannot accept knowingly being dishonest.

 

As we have seen over the past 5 years (and beyond), if you give the banking sector enough rope, it will ultimately hang itself.

 

Is it too much to ask for the regulator to avoid similar behaviour?