Q. If my outward flight has been cancelled am I entitled to a full refund or will my return be a no show? And what happens if I am already on holiday, and my return flight has been cancelled?

A. If your flight is cancelled, or delayed for more than five hours then there are rules in place right across the European Union to ensure that you are looked after at the airport and this should include the provision of refreshments, meals and hotel accommodation. If you didn’t go to the airport because you thought your flight might be cancelled then you should have the choice of either another flight or a refund. This protection should apply to both parts of your journey, unless you have two single tickets with different airlines and you miss the return because your outbound flight was cancelled. The position here is a bit less clear. It is worth mentioning that this situation is fluid and at the time of writing some airlines are calling for a relaxation of the rules requiring them to provide prolonged assistance to passengers because of what they consider to be an unreasonable financial burned it is placing on them for an event that they argue is outwith their control.

Q. We booked a holiday which was advertised on the internet with the company SUN4U departing 15/04/2010, the money for the whole holiday was paid to SUN4U which included the flight and accommodation The flight was with Ryanair but it was cancelled due to volcanic ash. Ryanair have agreed to refund the cost of the flights.
 The company SUN4U are refusing to refund any money for the accommodation, firstly saying it wasn’t a package holiday now saying it’s an ”act of God”.
Could you advise where we stand with this?

A. I haven’t had a chance to speak to SUN4U about this case but I have had a look at their Website and it seems as if they offer a variety of purchase options, some of which they class as ‘Package Holidays’, and some of which they don’t, even although as you say, you paid for your flight and accommodation direct to the company.

You may not be covered if you have ‘created’ your own holiday by booking a flight and accommodation seemingly from one company but effectively from two providers. You can be sure you’re covered only if the agent issues a receipt or booking confirmation that refers to ATOL protection and has an ATOL number so you might want to go back and have a look at your booking agreement to see what it says.

Q. With travel and holiday plans at unprecedented levels of disruption, what is Consumer Direct Scotland concentrating on? Yes, tips for Xmas shopping. Nationally, Consumer Direct and Consumer Direct Scotland have taken millions of pounds worth of funding from Trading Standards yet it is the local authority staff who are expected to deal with the huge numbers of consumers in need of advice.

A.I know this may have been a slightly tongue in cheek email but it is, I think, worthy of an answer. I can understand why someone would have a concern that Consumer Direct is seemingly ignoring one of the biggest stories around for the last couple of weeks. But it is also true to say that every Newspaper, TV station, Radio Show and most websites are full of information and advice about what help and rights are available for travellers affected by the recent volcanic eruption. I think it is to the credit of Consumer Direct that they have decided to maintain their focus on the campaign they have recently started to help people to plan for Christmas in advance. Too many organisations start to offer their Christmas advice a week or two before the day itself, when it is far too late to plan anything effectively.

Many of the complaint letters I see are wordy, lengthy, cheeky and arrogant. Not the ones sent to me, you understand, but the forwarded copies of the ones that have gone to the companies concerned. While there is always a temptation to show what we know and record every aspect of a transaction in minute detail, I have always found that the letters that generate the best, and quickest, response are concise and polite. Simply detail what you bought, where you bought it and why there is a problem. Set a deadline by which you should receive a reply, and outline what you will do next if no reply is forthcoming. Keep an accurate record of any telephone conversations you have had, noting dates and times as well as names of anyone you speak with. Use these details in your letter of you think it will help.

Always write to the most senior person you can. Call the company concerned and ask Switchboard for the name of the Chairman or MD and address your letter there. And always follow up within the timescale that you set at outset.

Happy complaining!

1. Look for a 0% balance transfer deal and transfer existing cards until the deal runs out. Repeat this for as long as you can! Check to see whether the interest free deal applies to new purchases as well as the balance youhave transferred.

1. If you can’tget a 0% deal then check out the APR on the card you use. The higher the APR the more interest you will pay on any outstanding balance. Lok for the card that offers the lowest possible APR, rememberering to also check out what penalties are likely to be added for any late payments.

1. Remember that Store Cards and Credit Cards are different. Store cards can only be used within the group that issues them while Credit Cards can be used much more widely. Store cards can be very expenseive so only use them if you qualify for some special deal or if you can afford to pay off the balance before Interest starts to kick in.

1. Don’t use your Credit Card to take a cash advance from a hole in the wall machine. The interest rate is likely to be be even higher than if you use it to purchase goods.

1. Check out the interest free periond between buying goods and interest starting to become due and try to clear your balance before that happens.

1. Use your credit card for any purchase over £100. That way the credit card company is reponsible for the quality of the product as well as the retialer and any peroblems can be taken back to them for resolution.

1. Don’t build up a wallet or purse full of Credit Cards. Pick one that offers good value and stick with it. It’s much easier to budget this way.

1. If your credit card company writes to you to tell you they have increased your credit limit then you are allowed to write back to say that you are happy with the limit you already have. It’s not a licence to let you go out and spend a fortune that you don’t have.

1. Pay more then the minimum payment every month otherwise your balance will never go down. Just because your credit limit is £3000 doesn’t mean that you have to maintain a balalnce at that level.

1.  Set up a direct debit to make your regulalr monthly payments to your credit card. That way you will never get hit for late payment charges. If you want to make extra payments then you can still do so at other times.

Insurance

Before you buy holiday insurance check what cover you have with Bank Accounts, Credit Cards and Home Insurance. There’s no point paying twice. If you do need separate travel insurance buy it at the same time as you book your holiday. That way you are covered in case of cancellation for illness. And make sure you disclose any pre-existing conditions at the same time as you apply for your insurance, otherwise you could find that any claim you have to make later on is rejected for non-disclosure. And remember to check the excesses that you have to pay in the event of a claim. Some policies will charge toy for each person on the holiday as well as applying an excess to each leg of your travel if you have to take more than one flight for example. Make sure your cash and any valuables are covered.

Cheap Flights

Don’t spoil the benefit of cheap airlines by having to fork out extra money when you arrive at the airport to check in. Check out the small print when booking on line and remember to pay for extras like bags in the hold and speedy boarding before you get to the airport or it could cost you a whole lot more. And remember to book your golf clubs or other sports equipment or musical instruments in advance as well.

Travellers Cheques

Travellers cheques are safer than cash. You can but them before you leave the UK and as long as you keep a note of the numbers you can have them replaced if they are lost or stolen.  As with any cash you are exchanging remember that commission free doesn’t always make sense. You need to check the exchange rate as well as the commission you are paying

Holiday problems

Report any problems you have while you are still in the resort. Take photos and record as much detail as possible if your holiday differs from the one you thought you bought! And if food and accommodation are not up to scratch then report it to your tour rep as soon as you can – making sure you keep  a note of who you spoke to and when.  Remember if you pay for your holiday with your credit card you may be able to claim against the card company if things go wrong. And if you do have to complain when you get home (and we’ll cover this in more detail next time) remember to set out exactly what you expect the company to do for you – don’t just write to them and tell them that you want ‘compensation’!

Holiday money

Cash is still the easiest way to pay abroad but don’t carry any more than is covered by your holiday insurance. If you use credit or debit cards remember to check any extra fees that are added for overseas transactions. And remember that when you get back home some transactions may take time to appear on your statement so keep a note of what you spend.

I want to cover two specific areas that lots of you have been writing in about. Firstly why have a pension in the first place and secondly what should you do with old pensions that relate to previous jobs?

The why question is simple really. If you don’t have a pension at work, and you don’t set up your own then you will only have the Basic State Pension to fall back on – assuming you qualify for that – and that’s currently under £100 per week. So if you’re happy with that, don’t read any further!

If not then you need a pension. Actually you don’t. What you need is money when you retire. It’s just that for the majority of us the best way to provide that money tax efficiently is by paying into your employer’s pension or setting up your own.

If you know you’re going to win the lottery on your 60^th birthday or that your parents will leave you a couple of million when they die then again you can stop reading now!

Pensions are no more than tax efficient savings schemes. You pay money in now, you qualify for certain tax reliefs on that investment, the money is allowed to grow in a fairly tax efficient fund and when you take the money back at retirement some of it is tax free! It’s a no-brainer really, but it has to be planned and it should be planned along with the rest of your finances to make sure that you have money available at the times in your life when you are likely to need it.

The second point that lots of you have been asking about is what to do with the old pensions you have from previous jobs. And the answer is to get them all together and ask someone who knows whether there is a benefit in consolidating them all into one investment, or whether they can all be rolled into your existing occupational pension if you have one.

It will cost you money to do this but it is likely to mean that you will have a much more streamlined pension strategy going forward and that all of your pensions will work more effectively to produce a better benefit for you at retirement.

“It’s no go the picture palace, it’s no go the stadium,
It’s no go the country cot with a pot of pink geraniums.
It’s no go the Government grants, it’s no go the elections

I’ve been doing some work for a variety of BBC programmes recently about pensions and retirement and it’s clear from some of the phone calls and emails we’ve been getting from viewers and listeners that there is still a lot of confusion out there. There are still lots of you who think that Louis MacNeice’s words are true and that your pension will automatically come to you when you retire. Unfortunately that’s not the case any more, if it ever was and I thought that it might be useful to pull some of the information together here to help you understand the different pensions that are available and how they can help you plan for retirement.  It’s not exhaustive and at times it might seem overly simplified but hopefully this blog will help you understand what you need to do if you’re not already doing it and what you may need to change if you think you are!

As well as not being exhaustive, and a bit simplistic, most people find pensions a real turn-off, partly because they get a lot of bad press and partly because we don’t need them until we’re older and so we tend to put off thinking about them as long as possible. But please read on because they are important and as soon as you grasp how to make them work for you, the easier it is to plan effectively.

The State Pension

The Basic State Pension is available to everyone who has paid enough National Insurance contributions during their working life. The definition of ‘enough’ is long and dependent on a range of factors and is described in more detail than I can go into here on the Pension Service website at www.thepensionservice.gov.uk

The Basic State Pension is currently £95.25 for tax year 2009/10 but may be supplemented by Pension Credit depending on circumstances, and again described in detail on the Pension Service Website. If you are unsure whether you will qualify for a full State Pension then you can complete from BR19 and ask the Service for an estimate of your entitlement at retirement.

If you are an employee you may be entitled to additional benefit from the Second State Pension (previously known as SERPS). It may be that you have chosen to ‘contract out’ of the Second State Pension in which case your National Insurance contributions that would have paid for this benefit will be diverted to your own arrangement. If you are currently contracted out it may be worth looking at going back into the Second State Scheme.

Occupational Pensions

There are two main types of Occupational Pensions, although many employers are now restricting access to the more expensive final salary Scheme in favour of Money Purchase Schemes that allow them to control cost more easily.

Final Salary Schemes

With this type of scheme your pension in retirement is based on the length of service you have and your final salary. With the best of these schemes someone with forty years service could expect a pension of two thirds of their final salary although you may have the option of taking some of this pension as a tax free lump sum when you retire, thereby reducing the annual pension you will receive thereafter to around half of your final salary.

Some final salary schemes are still free - your employer will pay all of the cost of your benefits, but this is rare nowadays. Most are funded by a mix of employer and employee contributions. Public sector schemes are a good example of this with employees usually paying around 6% of salary and the employer paying the balance. Most of these schemes will also provide valuable life assurance benefits, with up to fours years’ salary being paid out on death. 

Money Purchase Schemes

These schemes operate in a similar way to personal pensions. You, or your employer, or a combination of both, will pay money into a pension and the final value will depend on the investment growth achieved by the money that is being invested. So there is no guarantee on the level of income you can expect to receive at retirement.

Investments are varied and carry different risk– you can leave your pension money sitting in a deposit account, you can use your entire fund to buy shares in one company or you can go out and buy a commercial property that you can then rent back to your business. You need to take advice before deciding which type of investment is most appropriate for you. See more on personal pensions below

Personal Pensions

If you are self employed, or don’t have an occupational pension then any money you want at retirement will have to come from your own savings, and the main savings vehicle that people use for retirement planning tends to be a personal pension, largely because it is a tax efficient savings scheme that allows you to put aside some of this year’s income to use at some point in the future. 

You put aside money every month, or every year, and that money is invested on your behalf – usually in a mix of Stock Market Funds, but importantly in these days of Stock Market volatility it could also be in Cash, Fixed Interest or Property depending on the way your pension is set up and how much investment risk you are prepared to take. When you get to retirement age you can either purchase an annuity (i.e. an income for life) or use the value of your fund to provide an income within certain limits. Up to 25% of the value of your fund can usually be taken as a tax-free lump sum.

Any investments you make into a personal pension are eligible for tax relief at your highest rate of tax, subject to limits. So if you are a basic rate taxpayer each £100 will only cost you £80. This reduces to £60 if you pay tax at the top rate of 40% (but see below for details of proposed changes to tax relief).

Self Invested Personal Pensions

Self Invested Personal Pensions (usually known as SIPPs) are fairly new arrangements that allow anyone, self employed or employed, who is not a member of an occupational pension scheme, to take greater control over their retirement planning than traditional pensions allow. These Schemes can be run independently of traditional insurers, and if set up in this way the costs involved are all laid out in the open rather than in a confusing array of ‘initial charges, bid/offer spreads, and other nebulous costs that only insurance company Actuaries understand.

SIPPS allow you to invest your Pension Fund in a wider range of investments than traditional personal pensions, including the shares of single companies, and there are now a number of SIPP providers who operate an inexpensive on-line service for those investors who are only ever likely to use this type of pension to invest directly in the Stock Market. A scheme set up in this way could be used to mirror an existing equity portfolio, or you could take a completely different approach with your pension money depending on when you felt that you would be likely to draw on the benefits.

Although these share-only SIPPS are popular it is the ability to invest in commercial property that has really made them attractive in recent years. SIPPS are able to purchase property that can then be leased back to the member’s company, allowing the business property to grow in a tax efficient fund. It is possible to ‘gear’ your pension fund by borrowing to help with the property purchase, and for any borrowings to be repaid via the commercial rent that  would be paid to the pension scheme by the company.

Pension Changes Proposed in this Year’s Budget

Alistair Darling used his Budget last month to introduce the prospect of reduced tax relief on pension contributions for high rate taxpayers earning over £150,000 a year. While the rules are not yet clear, and a period of consultation is due to commence soon, other taxpayers need to realise that this could be the thin end of the wedge, and the start of a journey that could mean the end of all higher rate relief on pensions, with relief at some point in the future only available at the 20% rate of tax.

If that is the case then it would make sense for anyone currently paying higher rate tax, or on the margins of it, to look  at the best way of planning to take advantage of a tax relief that might not be around in four or five years.

Anyway to Guarantees and Warranties. I had to buy a new printer recently and was surprised when I was told that I would have to buy a special extended warranty because “If your printer breaks down after 12 months you’ll have to send it back to the Manufacturer.”

I politely told the sales assistant that if it broke down I would bring it straight back to the shop that I bought it in. “Oh no you can’t do that. It’s not our responsibility after 12 months. It will have to go back to the Manufacturer.”

It was at that point that I had to speak to the Manager and explain that he should not allow his staff to give consumers incorrect and confusing information. To be fair he did apologise but I have not been back to that particular shop to find out if any training has subsequently been carried out.

It’s hardly surprising if we get confused as consumers when shop staff give us such incorrect information. There has long been confusion over warranties, extended warranties and guarantees so let’s set the record straight.

Most goods that you buy will come with at least a 12-month manufacturer’s guarantee. This is in addition to the statutory rights that you have under the Sale of Goods Act that allow you to take faulty goods back to the retailer that sold them to you in the first place. So effectively you can choose whether to complain to the retailer or the manufacturer if something goes wrong - but the retailer is not allowed to tell you that it is nothing to do with them, because it is! Your contract is with the retailer and they have a liability to deal with any problems for you - in some case for up to 6 years from the date of purchase.

Also you should note that if your goods break down in the first six months after you have purchased them the default position is that they were faulty at the point of sale unless the retailer can prove otherwise. On that basis you should be entitled to repair or replacement immediately.

And just because the manufacturer’s guarantee runs out after 12 months doesn’t mean that you don’t have any protection if your television breaks down after 18 months. You would expect a television to last for more than 18 months and it is, therefore, unreasonable for it to break down after that period of time so my starting point would again be the shop that sold me the TV.  But you may at this stage get involved in a debate about how long the parts should have lasted and whether you are expected to pay part of the cost of any repairs and this is where extended warranties can be useful. But only if you have done your homework and worked out the cost involved and made sure that you are not covered elsewhere.

Remember that the goods will come with at least a 12-month manufacturer’s guarantee and nowadays many goods already come with longer guarantees. It may also be the case that the goods you buy are covered by the credit card that you used or by an insurance policy that you already have elsewhere so check all of these things before splashing out on an extended warranty that you may not need.

Think carefully as well about the value for money offered by an extended warranty. It is likely to be expensive compared with the amount you would normally pay out in repair costs or be able to gain free through using your statutory rights.

Poor Bob Adams from River City is really up against it these days. Not only is he infamous for his sartorial inelegance but it looks as though his money sense has deserted him recently as well as his dress sense. He has borrowed money from a variety of sources and doesn’t seem to understand the amount he will have to pay back in interest. On top of that he thinks that a win on the horses is the best way to generate some money to help him out of his mess.

Borrowing money is a fact of life for most of us these days, and for most of the time it is perfectly manageable. It’s only when a change in circumstance brings about a reduction in income, or an increase in stress, that debt can become a problem.  And it can be for all kinds of reasons - losing a job, illness, separating from your partner or even a new baby. The important thing to remember is not to panic because there are many ways to get back in control.  Debt can hit any of us at any time and it is nothing to be ashamed of.

So here are some tips and hints to help Bob, and anyone else who is a bit unsure of the best way to deal with money worries:

Talk to Someone!

You shouldn’t have to deal with your money worries on your own. Too often we want to bury our heads in the sand, worried what our friends and family will say if they find out we are in debt.  They probably have the same worries as you. They might have dealt with them and be able to offer you useful, free advice so don’t try to carry the weight of the world on your shoulders.

What should you do if you can’t keep up with your repayments?

The important thing to remember is that lenders will usually want to help – but you have to let them know you have a problem. Tell them before you get behind with your repayments. Lenders will be generally be sympathetic to your own situation, provided that you tell them honestly what your financial circumstances are and you work with them in trying to reach a repayment agreement, and provided that you tell them before you get behind rather than when six months have passed. They don’t like being ignored and the sooner you approach them to tell them there may be a problem the more flexibility they will have when trying to help find a solution.

What are the rules for dealing with your debts?

·        Don’t panic or ignore the problem

·        Don’t borrow money to pay off your debts. 

·        Don’t take out a loan secured on your house without seeking independent advice first

·        Seek FREE independent money advice – Citizens Advice or Money Advice Scotland can both help

·        Check whether your payments are covered by insurance

·        Check you are claiming all the benefits and tax credits you can

·        Work out a Personal Budget and send it to your creditors

·        Get in touch with creditors straight away

·        Tackle your priority debts first

·        Work out reasonable offers of payment that you can afford

·        Contact everyone you owe money to.  If you make arrangements to pay some creditors but not others, you could run into difficulties again.

·        Don’t be fooled by adverts in the National Press offering to reduce your payments from £600 per month to £150. They may be able to do this but only if you agree to pay off your debt over a much longer period of time.

I’ve seen an advert for a Debt Management Company, can they help me?

There is a common belief that Debt Management Companies will take over your debt for you – they don’t.  They are likely to speak to lenders on your behalf but they will probably charge a fee for doing this. You should speak directly to your lender instead of going to one of these Debt Management Companies. They may well be able to reduce your monthly repayment, but only because they will be increasing the length of time that you will have to make repayments.

How will debt affect my credit rating?

Information about your loans is passed to Credit Reference Agencies each month, providing notice of your repayment history to potential new lenders.  Your ability to obtain new credit facilities may be affected in the future.  You can check what information Credit Reference Agencies have about you by writing to the following, or by applying for a credit reference on-line.

·        Equifax Plc - www.equifax.co.uk

·        Experian Ltd - www.experian.co.uk

Credit Card Tips

1. Look for a 0% balance transfer deal and transfer existing cards until the deal runs out. Repeat this for as long as you can! Check to see whether the interest free deal applies to new purchases as well as the balance you have transferred.

2. If you can’t get a 0% deal then check out the APR on the card you use. The higher the APR the more interest you will pay on any outstanding balance. Look for the card that offers the lowest possible APR, remembering to also check out what penalties are likely to be added for any late payments.

3. Remember that Store Cards and Credit Cards are different. Store cards can only be used within the group that issues them while Credit Cards can be used much more widely. Store cards can be very expenseive so only use them if you qualify for some special deal or if you can afford to pay off the balance before Interest starts to kick in.

4. Don’t use your Credit Card to take a cash advance from a hole in the wall machine. The interest rate is likely to be be even higher than if you use it to purchase goods.

5. Check out the interest free period between buying goods and interest starting to become due and try to clear your balance before that happens.

6. Use your credit card for any purchase over £100. That way the credit card company is reponsible for the quality of the product as well as the retailer and any problems can be taken back to them for resolution.

7. Don’t build up a wallet or purse full of Credit Cards. Pick one that offers good value and stick with it. It’s much easier to budget this way.

8. If your credit card company writes to you to tell you they have increased your credit limit then you are allowed to write back to say that you are happy with the limit you already have. It’s not a licence to let you go out and spend a fortune that you don’t have.

9. Pay more then the minimum payment every month otherwise your balance will never go down. Just because your credit limit is £3000 doesn’t mean that you have to maintain a balalnce at that level.

10. Set up a direct debit to make your regular monthly payments to your credit card. That way you will never get hit for late payment charges. If you want to make extra payments then you can still do so at other times.

For more on Bob’s money worries, and for more money advice go to  www.bbc.co.uk/raw

The banks have been introducing a whole new raft of current accounts over the last couple of weeks but you need to be extra careful before being tempted to sign up to  a new account that seems to be offering a lot of freebies - especially free money! It’s an old saying, but it’s worth repeating. There is no such thing as a free lunch. Follow that with another oldie but goldie to reinforce the point. If it looks too good to be true it probably is.

If the Bank looks like it is offering you free money it will no doubt have plans to get it back from you over the lifetime of your new account, either in charges for the way you run your account or by paying you a derisory rate of interest on money you leave in your account. It looks as though some of these new accounts are going to charge up to £5 per day for going overdrawn - even if it by prior agreement! Others will charge a flat monthly fee and lure customers with the offer of ‘free’ insurance, which is surely not free but instead is costing £15 per month!

All well and good if you actually need the insurance but in many cases it will be to provide cover that you may already have, and be paying for, elsewhere! So if you are tempted by one of these offers have a good look at the terms and conditions and make sure that you are not buying something that you already have, or worse still don’t really need.

If the Banks lose their case over charges with the OFT then we are likely to see more of these accounts with a flat monthly charge being introduced. What we are seeing just now is likely to be the thin edge of the wedge and the likelihood is that we will all be paying for our Banking services sooner rather than later. Falling interest rates are having an impact on bank profits and the first place they will turn in an attempt to recoup that money is its customers.

So take advantage of free accounts while you still can. Don’t pay needlessly for ’services’ that you don’t really want, and make sure that if you are going  to dip into the red you let your bank know beforehand to save paying the ridiculous fees that are imposed.

PS. We will come back to Warranties and 12-month guarantees next week.

I’ll be looking at how you can take goods back without a receipt and how to formally ‘reject’ faulty goods, as well as the best way to complain and what to do if your complaints fall on deaf ears.

But to kick off let’s start with the old one about who you need to take faulty goods back to. How often have you gone back to a shop only to be told “Sorry, can’t help you. You need to take that back to the manufacturer. ”

Then when you do, you’re told. “Sorry, can’t help you, you need to take it back to wherever you bought it!”

For the record your contract is with the shop you bought the goods from in the first place and if they tell you any different you don’t have to put up with it. Tell them that under the Sale of Goods Act the goods you bought need to be ‘of satisfactory quality’ and ‘fit for purpose’. If they are not then you are entitled to a replacement or your money back. And you are entitled to expect the retailer to sort it out for you since they sold the goods to you in the first place. Be polite, be firm but stand your ground and tell them that they need to sort it for you.

We’ll look in more detail at some of these terms in a later blog but basically if you buy a watch you expect it to tell you the time, and if you are told that a shirt is ‘pure cotton’ you don’t expect to see a label on it that says ‘cotton and polyester mix’! 

And if you’re told that “we can’t help you because you bought the TV more than 12 months ago and so the warranty has expired and it’s not our responsibility any more,” then remember that that’s simply not true and we’ll look at that one in more detail next time