Tuesday, 10 April, 2001, 14:55 GMT 15:55 UK Money Box – Saturday 7 April 2001
THIS TRANSCRIPT IS ISSUED ON THE UNDERSTANDING THAT IT IS TAKEN FROM A LIVE PROGRAMME AS IT WAS BROADCAST. THE NATURE OF LIVE BROADCASTING MEANS THAT NEITHER THE BBC NOR THE PARTICIPANTS IN THE PROGRAMME CAN GUARANTEE THE ACCURACY OF THE INFORMATION PRINTED HERE.
Tape Transcript by JANE TEMPLE
MONEY BOX
Presenter: Paul Lewis
TRANSMISSION 7th APRIL 2001 1200-1230 RADIO 4
War Pensioner Benefits Cuts
Barclays Bank Branch Closures
Stakeholder Pensions
Changing Foreign Currency
Minimum Income Guarantee
ANNOUNCER : Now it's four minutes past twelve and time for MONEY BOX with Paul Lewis.
LEWIS Hello. In today's programme war pensioners face hardship as one council slashes help with their housing costs. Money Box is told other councils may follow suite. A year after Barclays closed 171 branches we look at the consequences for local people:
MAN Less people pass the door – less trade through the door, less money in the till. I suppose I've lost 10-15% of overall trade.
LEWIS How small firms are trying to cope with the new stakeholder pensions. The disappearing dollars if you're with the Woolwich and major changes in benefits start on Monday. All that in Money Box today. First though the Royal British Legion is warning that concessions on rent and council tax which help thousands of war pensioners and widows could be under threat after the London Borough of Harrow decided to stop the rebates from May. War pensioners in the borough will lose on average nearly £1700 a year each. At the moment the council takes no account of their war pensions when it works out entitlement to help with rent and council tax. Almost every council in Britain does the same but councillors in Harrow North London have decided to withdraw this help leading to large rises in the rent and council tax for the 53 war widows and pensioners in the borough. Dorothy's husband was killed in l944 and she told me her reaction to the council's plans:
DOROTHY I felt very angry because I feel that a lot of these people that are sitting behind the desks, I maybe wrong, but I feel that most of them probably weren't even born during the war so they don't know what we suffered and how we had to struggle. They haven't a clue what us older war widows went through.
LEWIS Tell me about your husband, about what happened?
DOROTHY He was transferred from the Somerset light infantry to the Blackwatch and sent over to Italy. I didn't even get the official telegram that everybody else got -I got just got a little bit of paper saying we regret to inform you your husband was killed on the 9th July.
LEWIS And were you alone ever since then?
DOROTHY I've been on my own ever since yes, yes. My – my daughter died last year unfortunately so I'm on my own completely now, there you are. No that's what makes me so angry about this see because I feel that they don't realise what we had to go through.
LEWIS If they go ahead with it how much difference will it make to you each week?
DOROTHY If it means paying the rent it's £50 – 58.79 is it? And then of course all the community tax as well.
LEWIS So that's £58.79 a week plus the council tax? Will you be able to afford that?
DOROTHY I shouldn't think so. Well if I did it would mean going without food and what have you cos there's nothing left – there will be nothing left.
LEWIS But Harrow council says it had no choice. Keith Toms is deputy leader at the Labour controlled council. He has voted twice to cut the benefits paid to Dorothy and the 52 other war widows and war pensioners:
TOMS It's not an economy that we look at with a great deal of pleasure, but on the other hand when you come to consider that there are 53 people that are in receipt of £88,000 from the borough then you know this might mean that we can employ 4 school teachers or 4 social workers so we really have had to look at the budget very hard this time. You can put up your list of priorities and say what you think, but we've had to make some harsh decisions.
LEWIS No I appreciate that but you seem to have picked on one of the poorest groups and one of the worst groups to pick to take away £58 a week in the case of Dorothy and an average of £1660 a year from 53 people. Why pick on 53 of the poorest people who suffered in the last war rather than other areas where you could save money?
TOMS Well the actual grant is not means tested – well can you say to me what should we do? – abolish meals on wheels? cut clothing grants to children going to school? Those are the decisions we've had to make. They are hard decisions.
LEWIS But of 353 councils in England and Wales only 6 penalise war pensioners like what you're planning to do, and all of them are Labour councils?
TOMS Well in that case we are in a position where we've had to make some decisions. We need to get to the stage where I believe it shouldn't be left at the discretion of local authorities – however small that number is. We need to have a national agreement on this. We will be approaching our MPs and we will be lobbying as hard as we can along with the British Legion to make sure there is some consistency nationally.
LEWIS Harrow councillors will have one more chance to vote on this decision at the full council meeting on May 1st. If they go ahead with the cuts the Royal British Legion is warning that other councils may follow suite, reversing a trend of recent years which has seen this concession become almost universal. Tom House, the Legion's head of pensions, says this is not just about the war pensioners in Harrow:
HOUSE 53 people are 53 people who have given either their spouses up to their country to defend it or indeed they've lost their health because of it. If we let down these 53 people it will snowball and we would have let down thousands. I think this is the thin end of the wedge, and I believe that if we let this go then other councils will follow suit and we've let everybody down who served us and defended this country from the last war onwards.
LEWIS Do you have any sympathy with the council? – they're facing a big rise in the council tax anyway – they have to save money. I think they're saving around five and a half million pounds. This is part of those savings. Do you have any sympathy with the – the difficulties they have?
HOUSE Would they be sitting there making those decisions if it wasn't for the people that were sent out during the last war to save our country as it is now? – the answer is no.
LEWIS Tom House from the Royal British Legion and as I said the final decision on that will be made by Harrow on May 1st. Now it's exactly a year today since Barclays Bank caused an outcry when it closed 171 branches in small towns and villages across the country. There were claims that communities would be destroyed, customers wouldn't be able to manage and businesses would go bust. 12 months on Money Box's Martin Stott has been to one of the communities made bankless by Barclays to find out how life's changed:
STOTT I'm standing outside the old Barclays Bank in Stotfold, about 15 miles south of Bedford. 12 months on the sign in the window warning people of this bank's closure still remains to taunt angry locals like Isabel Collier who spent a week on this pavement last year leading a doomed campaign to save the branch:
COLLIER Well I think we got nearly 1300 signatures in a week. I have to admit most people do use the machine – that was what they were coming for but a lot of people were inside the bank.
BRIAN That's a map of Stotfold – the large area in here is for 640 houses
STOTT Isabel's husband Brian is chairman of Stotfold town council. This is quite a sizeable community – it's home to Motorola's UK head office. There are a couple of schools, 4 take-aways and 7 pubs. 8,000 people live here and Brian Collier says housing developments approved by the council will increase that by half as much again in 5 years. He believes that in withdrawing Barclays has snubbed a good business opportunity and he claims his worst fears about the damage the bank's closure would have on other businesses have proved true too.
BRIAN An electrical shop has closed down, a toy shop has closed, a newsagents has closed down and immediately prior to that a greengrocers closed as well.
STOTT It's hard to say for sure just how much the bank's departure impacted on the businesses that are no more in Stotfold, but Ian Boscul who owns the fish and chip shop next door to Barclays has certainly suffered:
BOSCUL Apart from the sheer inconvenience now of having to go out and do my banking in what would normally be my dinner break, it's also affected my business that less people pass the door, less trade through the door, less money in the till. I suppose I've lost 10-15% of overall trade.
STOTT Since Barclays closed the local post office has stepped up its facilities and now cashes and banks cheques, but not for business accounts. Alan Farquharson runs a small industrial engraving firm. Like Ian Boscul he now has to bank in Letchworth, 4 miles away:
FARQUHARSON 2 months after they went we lost our car – it was stolen, so we now have to go up on the bus which is over a 2 hour round trip – £2.40 a time and the bus is full of people going up to the bank.
STOTT And it's not just the inconvenience and security risks that these people are complaining about. The community's found an unexpected additional problem: a money circulation crisis. Behind me is the supermarket which offers a popular cash back service for shoppers – many of whom then pop across the road to Jill Shepherd's knitting and craft shop.
SHEPHERD From a shopkeeper's point of view we have a great deal of trouble because we get £20 notes more often than we want to because there's a great shortage of £5 notes and quite often £10 notes because various pensions, cash back and everything is paid in the high notes. So we have a change problem too.
STOTT Barclays was the last of 3 major banks to close in this town, but the building still remains, unused and housing a busy temporary cash machine. Locals say it's regularly empty but at least it's there – until Barclays decides to dispose of the building for good. The hope people in Stotfold are clinging to now is that the building will be reopened as a new community bank run by a neutral agent providing a counter service on behalf of all the banks. Ian Boscul says it's just what communities like Stotfold need.
BOSCUL Well I think it would be excellent. I'm sure there's a lot of people in particular the small businesses in Stotfold would welcome it – even if it's not next door, at least it's within the same town and you're only away from your business for just a few minutes to attend to things rather than this – this trek across the country to do what you need to do.
LEWIS Ian Boscul ending Martin Stott's picture of life in Stotfold, one year after Barclays. And as we heard they're still hoping a community bank might be the answer. Well Money Box's Chris Acourt is with me. Chris, could community banks be the answer to these bankless areas?
ACOURT Well some hope is still alive on that Paul. It could just happen. Of the 171 branches Barclays closed a year ago the bank told me this week that it still owns 49 of the now empty buildings. Some could be used for community banks. Barclays withdrew some properties from auction with that thought in mind. Community banks becoming a reality depends largely though on whether the whole banking industry gives the idea the thumbs up. An announcement is due soon and if the response is positive then campaigners want around 20 pilot projects to be set up all around the country, including one in Stotfold.
LEWIS Thanks Chris. One to keep our eye on. Now the new stakeholder pensions started on Friday, and in 6 months time almost every business with 5 or more staff will have to offer one to them. But many small employers are finding the process a bit daunting. Rob Higginson is typical of the bosses who've contacted Money Box – he runs Soils Limited, an environmental engineering consultancy with 14 employees. He knows the regulations mean he has to do something, but he doesn't know exactly what, when or how. So I took financial advisor Alistair Conway from Conway Clarke to meet Rob Higginson at his Epsom office.
CONWAY Rob, nice to meet you – Alistair Conway from Clarke Conway.
HIGGINSON Rob Higginson – Soils Ltd – shall we try and find an office and
CONWAY Maybe I can answer some of those questions you had
HIGGINSON Okay – okay. Basically what is a stakeholder pension?
CONWAY A very simple low cost pension facility
HIGGINSON What as an employer do I have to do?
CONWAY You need to offer access to that scheme via the pay roll system at work. You haven't got to pay anything into the scheme.
HIGGINSON We don't have to make a contribution but we can make a contribution?
CONWAY If you want to, that will be welcomed I've no doubt by your employees, but there's no obligation under the legislation for you to do so.
HIGGINSON What will be involved in making pay roll deductions?
CONWAY It really is a case of deducting a net payment off net salaries for employees and passing on a cheque to an insurance company.
HIGGINSON So is the pension owned as it were by the employee or by the employer – is it a company scheme or is it an employee's?
CONWAY It's very much a collection of individual employee contracts. You are acting as a collection point for contributions from the employees to pass on to the insurer providing the scheme.
HIGGINSON Okay what sort of time scales are involved?
CONWAY Need to be set up from April 6th onwards and your latest completion date is the 8th October, but I think the key thing here is to make this a positive exercise not a negative exercise. You as an employer setting something up pro-actively rather than looking as though you're rushing to meet the deadline for legislation which is in October.
HIGGINSON What if some of my employees actually have existing pension schemes?
CONWAY Employees will have a need to seek advice about whether or not they'd be better off staying with the arrangements they've already got or setting up their own stakeholder plan independent of your company or joining the company scheme. Now they'll either have to get that advice off an independent advisor separate from you or you as an employer might decide to offer that service to your employees. That's up to you.
HIGGINSON What if my employees decide they don't want to partake in a stakeholder pension?
CONWAY They are free to choose to join it or not. All you must do is provide access, provide the facility.
LEWIS I've been listening into this conversation between you two and one of the things that strikes me is that what you haven't asked Rob is how you choose a scheme. Have you given any thought to that?
HIGGINSON Not as such. As they're fixed charges I guess – are there better schemes? – worse schemes or whatever?
CONWAY Well I think historically if you'd gone through this exercise one of the biggest parts of the debate would have been about comparing charges between contracts. I think that differential is going to be much smaller in future and it's going to be about picking schemes that are well administered by the insurance company who's providing it and about companies who've got good fund performance.
HIGGINSON I thought charges were fixed. I thought it was 1% – I seem to recall
CONWAY The upper 1% limit is fixed as a maximum, but it's clear that some insurers are choosing to go in at a lower level than the 1% or some are discounting as the funds get bigger.
LEWIS What about costs? – I mean there are fixed management charges but you're going to make a charge to Rob to sort all this out for him. He is going to face expenses initially?
CONWAY Yes he's either got to decide that he bears the cost of that himself by doing the homework himself or he comes to somebody who is independent who will go around the market. We would normally charge a fee for doing an initial consultation and research of the market and then stages of fees for doing presentations to the staff, individual one to one meetings, and if Rob as an employer wants to pay for advising the employees on choices that they've got in relation to existing plans they've got, again that's something we can indicate costs to him for.
HIGGINSON What sort of scale are we looking at? – what sort of fees are we?
CONWAY Typically for a company of 20/25 staff we're finding the fees run somewhere between £1500 and £2000 for that initial set up and advice process.
LEWIS Is that a price you'd be willing to pay or would you rather do all the work yourself?
HIGGINSON I think for a smallish business £1500 represents quite a large expenditure to getting what appears to be precious little?
CONWAY As with everything people have got to make a judgement of whether they feel any fee charged by any professional justifies the cost saving to them of not spending their time going around the market. Personally if I went into a field which I wasn't familiar with, I would want the reassurance of knowing that I'd gone to somebody who spends all their time working in that area to provide me with a final recommendation and certainly a lot of employers we've spoken to quite like the idea of the responsibility of the choice of the provider resting with somebody else other than them.
LEWIS That was Alistair Conway of Clarke Conway and we'll be seeing how Rob Higginson gets on with stakeholder pensions over the next few months and there are plenty of links and contacts about stakeholders on our website – details of that later. How would you feel if you'd paid a cheque into your bank and half of it disappeared in charges? Well that's what happened to one Money Box listener when he got a cheque from the USA and Chris Acourt's got more details – Chris:
ACOURT Yes Paul, this is how one man lost over half of the value of a cheque which he paid into a British bank – the Woolwich. Dr. Lindsay Bashford told us he was astonished when he paid in a cheque written out for $175 American dollars – worth around £120 and received an American Express cheque in return worth just £58. He'd been charged over £60 for the conversion from US to UK currency.
BASHFORD They have collected their £7.50 charge but they had also paid on our behalf a foreign bank charge of £52.75 and so together it came to more than half of the value of the cheque
ACOURT What we found is that the Woolwich is unique in having an arrangement with American Express to convert customer's dollars cheques to Sterling. There's a minimum £7.50 charge but American Express also passes on the fees that the American bank issuing the cheque makes as part of the conversion process. Woolwich customers end up paying for the lot, though the Woolwich itself doesn't take a cut.
LEWIS Well Chris the high charges were a shock for this listener but surely Woolwich could have warned him how much it might cost?
ACOURT Well both Woolwich and American Express told us that they can never predict what the American banks will charge each time – in this case it was the First National Bank of Maryland.
LEWIS And could Lindsay Bashford have saved money by joining a different bank if he needs to pay in more dollar cheques for examples – Barclays maybe?
ACOURT Yes, Barclays which now owns the Woolwich would charge a £9, but banks charges and policies do vary a great deal. The cheapest for converting Dr. Bashford's value of cheque we found to be HSBC with a flat fee charge of £6 for its customers – Lloyds would have charged its customers £8 but also passes on the charges made by the cheque issuing banks, so it's another place to tread very carefully if you don't want to end up paying dearly for the cheque conversion service and results from our charges survey are on the website and with our audience line.
LEWIS Details of those later, but Chris is Woolwich changing its policies?
ACOURT The bank says it's now looking into whether it can adopt the same charges and procedures as Barclays but it isn't happening yet. Money Box has got a result for Dr. Bashford though – the Woolwich told us it will refund the £60 he lost because it accepts it wasn't – he wasn't made fully aware of just how high the charges might be. So naturally we've passed on the good news:
BASHFORD I'm pleased about that but I think they probably really should draw their attention to customers – that there's the possibility of when they cash a foreign cheque through their mechanism of very much larger charges.
LEWIS Yes not so much the wonder of Woolwich as the wonder of Money Box I think there Chris. Anyway thanks for that. From Monday at least 100,000 people over 60 will be able to get a boost in their income from the government if they apply for it. The government's minimum income guarantee is being improved with higher weekly amounts and much easier rules on savings. To explain the changes let's talk to Sarah Sulley a welfare rights expert with Birmingham City Council. Sarah these are big changes. Just explain exactly what they are?
SULLEY The system itself is much simplified. There's only going to be one rate in essence whereas there were three before. What it means is that people can have a much higher income level and still be entitled to the minimum income guarantee top up and also the savings limits have been increased dramatically.
LEWIS So what sort of income can you get help up to?
SULLEY If you've got any income – if you're a single person and your income is below £92.15 a week then you can get a top up to that figure and if you're a couple the figure is £140.55.
LEWIS So these are way above the basic retirement pension aren't they?
SULLEY That's the very important point. We found when minimum income guarantee was introduced that many people were confused and expected to get this as their state retirement pension. It is something that they have to apply to – to get.
LEWIS And we also know don't we that around half a million pensioners who could claim this don't do so. Now there's another £100,000 maybe more who can get it. Why aren't they applying?
SULLEY There are lots of reasons. In Birmingham we run particular campaigns to try and encourage people to claim these benefits. We know we've got around 18,000 before these changes and another 4,000 as a result of the changes. We see various things being brought to us – most important perhaps is the stigma that people still associate with claiming a means tested benefit.
LEWIS And how do people do it? – is it a difficult process?
SULLEY The form isn't exactly easy. There are lots of places that you can go to get help. But basically it's a question of filling in the form, giving details of what income you already have, providing the evidence for that income and then waiting to see if you qualify. Really the easiest way to discover whether you're entitled to a top up in this way is to make the claim.
LEWIS And of course these exchanges also extend entitlement to help with your rent and help with your council tax don't they?
SULLEY That's very, very important. You only have to have a few pence coming into you through this minimum income guarantee scheme to get full help with your rent and council tax. And then also for things like funeral expenses payments should you need them later.
LEWIS Now I know a lot of other changes start on Monday. Briefly, what are they?
SULLEY They're have been quite dramatic increases in such things as carer's premium. There's the introduction of the new bereavement premium which won't actually come on stream till next year because bereavement allowance will come in before that. They're quite complicated so I would advise anybody to get help to work their way through the system.
LEWIS Sarah Sulley thanks very much for talking to us from Birmingham. And we will be covering all the benefit changes that start next week on our phone-in MONEY BOX LIVE on Monday as well as benefits for older people there are changes for disabled people, young people, as Sarah said for carers and for families. So whatever your concern you can e-mail questions now to moneybox@bbc.co.uk or of course call us on the day on Monday. Now it's emerged this weekend some people are receiving income tax demands when they've already paid – Chris you've got more on this:
ACOURT What's happened is that a fortnight ago the Inland Revenue carried out a sweep of people who haven't settled last year's tax – that was the tax due to be paid on 31st January this year. The Revenue produced warning letters for them dated 23rd March but unfortunately it didn't send the letters out immediately and therefore people who paid up since then have been getting the warnings and demands in the post this week.
LEWIS That must have upset them a bit?
ACOURT Yes and caused some havoc at the tax offices – people who've already paid have swamped the Inland Revenue phone lines with enquiries and often couldn't get through but the Revenue says the lines are now sorted and open today until 10 p.m. so the number to call if you're affected is 0645 000 444 That's the self assessment help line. They should be able to tell you if you still owe tax or not.
LEWIS Thanks Chris and there's also been another interest rate cut hasn't there? – the Bank of England reduced base rates by a quarter percent to 5.5% – how's that affecting mortgages and savings?
ACOURT Most people on variable rate mortgages will see a cut in their monthly payments either immediately or quite soon. The biggest mortgage lender Halifax cut its standard rate by a quarter of one percent on Thursday. Nationwide will do so from the 1st May. Abbey National though is not passing on the full cut but keeping a bit back for itself. It reduces mortgages by .24 of a percent from next Tuesday.
LEWIS And savings very briefly?
ACOURT Not much change yet although all savers and people relying on income from savings will find that they suffer eventually – lower rates.
LEWIS Thanks Chris. That's all we have time for today. If you'd like more information about any of the items on today's programme call the BBC Action Line – 0800 044 044 Calls are free: 0800 044 044 Or of course look at our website: www.bbc.co.uk/moneybox. MONEY BOX LIVE on benefit changes is on Monday. There's more personal finance on Working Lunch throughout the week – BBC-2 at 12.30. I'm back with MONEY BOX at the same time next week. Today the producer was Paul O'Keeffe and I'm Paul Lewis.
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