According to the Competition Commission, there are still doorstep loan sharks patrolling estates and charging up to 1,000% interest per year for loans. The average is apparently, 177% per year! At last the Competition Commission plans to cull them.

Apparently around 2 million Britons are falling prey to these sharks. Many are those on the lowest incomes and with household budgets stretched to the limit. But no matter what their circumstances, interest at rates averaging 177% is nothing short of criminal.

The Commission is planning to force the so-called home credit industry to clean up its act by forcing the lenders to clearly spell out for their clients, what the money or credit really costs them. And if lenders don’t introduce more reasonable interest rates, the Commission is planning to set a maximum rate, enforced by law.

Their hope is that faced with the clenched fist of law, the industry will act reasonably.

The home credit industry is dominated by five large companies such as Provident Financial. But there are thought to be around 500 other lenders in the market. They specialise in providing credit to people who the mainline lenders have turned away. Repayments are collected weekly or fortnightly on the doorstep from the customers’ homes.

We appreciate that this means that the lenders will experience significant levels of bad debt and the collection cost are high, but in our view, loans and credit on these terms will only serve to push their clients deeper into the financial quagmire.

Financial Provident is the biggest lender in the home credit with more than half of the market. I wonder if they consider their credit card with a 70% interest ticket, to be good value? On the surface of it they do, as their spokesman said, “Customers are not being overcharged for their home credit loans, nor is the home credit sector making excessive profits”.

The Competition Commission want customers to be given clear information on the full cost of the loans. They hope that once they appreciate the cost, they’ll think more than twice. They’re also hoping to encourage more price competition amongst the existing players in the market.

The Commissions provisional proposals are due out later this summer. We say to the Commissions’ chairman, Peter Freeman, make sure you’re not a moment late!

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From June 1st 2007, if you want to sell your house you’ll have to prepare a Home Information Pack (HIP) first. That’s the law.

At that point it will be illegal for you to put your home on the market without one. If you don’t, you’re facing a £200 fine!

The Government claim the HIP’s will reduce gazumping and reduce the number of sales that fall through. But the National Association of Estate Agents disagree. They think the new Packs will simply shift the existing problems from the middle of the selling process to the beginning. Other commentators believe that HIPs will do nothing to reduce gazumping or indeed, the tricks employed by some of the less reputable estate agents.

Our view is that if the packs help to identify a problem before everyone starts instructing solicitors and incurring cost, then surely that’s for the better? Better to have problems out in the open at the start than stumble upon them half way through the selling process.

Within the Packs the Government proposes that sellers will have to include the following information:
· A draft sale contract
· Search results from the Land Registry
· Replies to the normal initial enquiries made on behalf of buyers
· Copies of any planning, listed building and building regulations consents and approvals
· And for new properties, copies of warranties and guarantees
The Pack will also contain two items provided by buyers now:
· Replies to searches made of the Local Authority
· A Home Condition Report based on a professional survey of the property including an energy efficiency assessment
In addition, for leasehold properties:
· A copy of the lease
· Most recent service charge accounts and receipts
· Building insurance policy details and payment receipts
· And regulations made by the management company or landlord
Later this year the Government will publish the exact details of what will have to be included within the HIP. They believe that the Pack is likely to cost sellers around £825 including VAT to prepare, but they claim that these are not additional costs.

The points raised by the Government are:
· The HIP will transfer responsibility for obtaining local searches and a home condition report from the buyer to the seller. But since most sellers are also buyers, these costs would usually be balanced by corresponding savings and benefits. We agree.

· The Government also say that they expect that most sellers won’t have to pay up front for the pack. We doubt this. Someone is going to have to pay and we doubt whether solicitors or estate agents will fund the up-front cost. But nevertheless the Government argue that HIP’s shouldn’t act as a brake on properties coming to the market. We say it will certainly dissuade all but the committed seller – those simply wanting to test the market will surely back off. In practice this will be a good thing, but it will reduce the amount of property up for sale.

· The Government believes that market forces will keep prices low for consumers and those who are pricing Home Condition Reports and Home Information Packs at a premium will lose out to those who don’t. We are not so confident about this. It very much depends on how estate agents and solicitors adapt the pricing of their fees. We think we’re likely to see some very creative pricing especially from estate agents! It’s certainly going to pay to shop around for a good deal.

· Another factor is that at least £350 million is wasted each year on the 30% of sales that fall through. The Government hope that the Home Information Packs will greatly reduce number of failed transactions and avoid these wasted costs. We don’t think you can argue against that!
We just hope that all these changes to the process of buying and selling houses doesn’t result in a bureaucratic nightmare. Over 7,000 inspectors will be needed to carry out the new Home Condition Reports and getting them all trained, qualified and registered may yet prove to be that fly in the ointment!

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Over the last five years, the cost of moving home has risen sharply at more than twice the rate of house price inflation. The main culprit has been stamp duty.

Today, a move from an average semi-detached house priced at £174,744, to an average detached house costing £293,248, will cost around £12,500. Five years ago the same would have cost just over £4,500. These costs include fees for solicitor’s, the Land Registry, local authority searches, estate agents and stamp duty.

This means that moving costs have increased by 176% whilst house prices themselves have risen by 70%. This cost surge has been greatly influenced by the fact that the average price for a detached house has now burst through the £250,000 barrier, the level above which stamp duty jumps from 1% to 3%.

Having said that, competition amongst estate agents and solicitors has put a dampener on some costs although you will have noticed that within the costing we have not included any mortgage redemption fees or removal costs.

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Over the last five years, the cost of moving home has risen sharply at more than twice the rate of house price inflation. The main culprit has been stamp duty.

Today, a move from an average semi-detached house priced at £174,744, to an average detached house costing £293,248, will cost around £12,500. Five years ago the same would have cost just over £4,500. These costs include fees for solicitor’s, the Land Registry, local authority searches, estate agents and stamp duty.

This means that moving costs have increased by 176% whilst house prices themselves have risen by 70%. This cost surge has been greatly influenced by the fact that the average price for a detached house has now burst through the £250,000 barrier, the level above which stamp duty jumps from 1% to 3%.

Having said that, competition amongst estate agents and solicitors has put a dampener on some costs although you will have noticed that within the costing we have not included any mortgage redemption fees or removal costs.

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According to the Alliance and Leicester Building Society, a quarter of all married couples are finding it difficult to jump onto the housing ladder. They simply can’t afford the extra cost of moving from renting to home owning.

Indeed, only 13% of married renters and 6% of single people renting are in the position of being able to afford a home of their own.

The position is worst for those in their 20’s. They are the least able to become homeowners with just over half renting and a further 23% living at home with their parents.

Stephen Leonard, a Director at the Alliance and Leicester, is quoted as saying, ”Living at home with parents provides many with a great opportunity to save towards a deposit on their first home. Over the last nine months our research shows a trend towards more men in their twenties staying at home with their parents than moving out”.

There’s no doubt that things are not going to get any easier. Over the last twelve months, average house prices have risen by 5.4% and the average house price stands at £184,924. Detached house prices are the highest averaging £285,697 followed by flats at £174,052, semi’s at £170,650 and terraced houses at £143,512.

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If you want a loan, one of the first issues you’ll have to decide is whether you want a secured or unsecured loan. The decision is rarely straightforward so here’s a few pointers.

Let’s start off making sure you know the difference between the two sorts of loan.

With a secured loan, you give the lender the right to register a legal charge on your property at HM Land Registry. As most people have a mortgage that is secured by a first charge on your property, the loan company agrees to take a charge that ranks behind the first charge. This means that if your home is sold, then the sale proceeds would first be used to repay the mortgage and then the remainder becomes available to repay the second charge (and any other registered charges). Then, when all the charges have been repaid, you receive the balance of the sale proceeds.

The central point you have to appreciate about any secured borrowing, is that if you default on the repayments, then the lender automatically has the right to apply to the Courts to repossess your home and sell it to recover the money they are owed. In this context, you need to think very carefully before you agree to such a charge.

With an unsecured loan, you don’t provide the lender with any security. As such, the loan becomes a more risky venture for the lender as the lender has no automatic route to recover what it is owed.

You will appreciate therefore, that unless you’re a homeowner you don’t have to decide between a secured or unsecured loan. As you have no property, you could only qualify for an unsecured loan.

As a general guide, unsecured loans are available from £500 up to £15,000 (sometimes £25,000) and the repayment periods range from 3 to 12 years. As these loans are more risky for the lenders, then on a like for like basis, they charge a higher rate of interest compared to a secured loan. Interest rate premiums of between 1% and 3% aren’t unusual and if you have a poor credit record your application is quite likely to be declined.

Lenders are far more relaxed if you agree to a secured loan. Typically the amounts they’ll lend are greater ranging from £5,000 to £75,000, and even more. And they’ll allow you to spread your repayments over a much longer period – 10, 15, 20 and 25 years are common. The interest rate you’re charged will then depend on your credit rating, so in today’s market this could be as low as 6.7% if you have a good track record - but as high as 18% to 20% if you have severe credit problems.

These days around 50% of homeowners have some form of impairment on their credit record. This means that even if they want an unsecured loan they’re probably going to be declined. In these circumstances the only option available will be a secured loan and even then, they won’t qualify for the lowest interest rates.

The problem is that even though your instinct tells you to shop around for the best deal, if you do and in the process make multiple loan applications, you’ll actually damage your credit rating. That’s because each application you make is recorded by the big credit agencies such as Experian, and the more applications they record, the lower your credit rating becomes. As a result the interest rates you are quoted will tend to increase with each successive application and in the end all you will get is outright refusals. Not only that, but your now worsened credit score could stay with you for years making your financial life very difficult.

So what’s the solution? Your best bet is to use a loan broker. With their knowledge of the loan market they will know which lender is most likely to accept you at the best possible interest rates. This means that you avoid making multiple loan applications and are assured a good deal.

And where can you find these brokers? Online of course! Just search for “secured loan” and you’ll find lots to choose from. Even better, make life simple - click on “Loans” on this web site and we’ll find you a great loans deal!

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Do you remember the E111 form you were supposed to get if you travelled in Europe? I can see all those shaking heads!

Well, the good news is that it doesn’t matter any longer as the E111 form was replaced on 1st January 2006 by a new European Health Insurance Card (EHIC).

This new card, which is valid for up to 5 years, entitles you to the same level of health care in the country you’re travelling in, as would be enjoyed by a resident of that country. It covers free and discounted healthcare plus emergency medical treatment and applies to all the EEC countries plus Norway, Switzerland, Iceland and Liechtenstein. But be aware that this might not include all the treatment you get free in the UK under the NHS.

Nevertheless, it’s important to have an EHIC as it could save you time, money and a great deal of hassle if you’re unlucky enough to need medical attention. It cuts through some of the red tape you would be faced with if you were relying just on the medical provisions of your travel insurance policy.

Furthermore, in many areas of Europe, the best medical attention is still reserved for those with private insurance cover. Private insurance also bypasses those long hospital queues – after all who wants to spend their holiday not only ill, but queuing as well!

The other point to be aware of is that nationalised hospital facilities may be many miles away from your holiday location whereas private medical and dental clinics are to be found in many tourist areas catering primarily for holidaymakers.

Remember that private travel insurance covers you for much more than just medical expenses. Holiday cancellation (due to prior illness), loss of luggage or individual items are all insured.

We do recommend all travellers get an EHIC and comprehensive travel insurance. After all, you’ve saved up for ages for the holiday and if something goes wrong you shouldn’t have to worry about the financial implications.

The best travel insurance bargains are to be found online. Try searching on your favourite search engine for “travel insurance”. Even better, click on Travel Insurance on this web site and save time and money!

We say, get travel insurance and get peace of mind.

How to get a European Health Insurance Card
The card is free from any Post Office or by phoning 0845 606 2030. You can also apply online at the Department of Health website at www.dh.gov.uk/travellers

In recent years we have seen rises of up to 450% in the fees charged by lenders when borrowers want to redeem their mortgage. But now the Financial Services Authority (FSA) is going to crackdown on these exit fees.

To date lenders have told you the exit fee they currently charge, but have then retained the right to increase that charge at any time and without advising you. This has given lenders a free hand to increase these charges and many have taken the opportunity with an outstretched hand! Take the Cheltenham & Gloucester for example; they’ve increased their exit fee from what was £50 to £225. The Woolwich increased theirs from £95 to £275.

The FSA is now in talks with the mortgage lenders to bring them to heal. They want fees to be disclosed at the outset and for that disclosed price to be fixed for the duration of the mortgage. The FSA hopes to have the binding undertaking from the lenders by June this year.

On a wider front, always remember to take into account all the lenders charges and money saving extras when you’re working out which mortgage to apply for. To illustrate the point, let’s say you wanted a 2-year fixed rate mortgage and were attracted by the offers from The Halifax and Northern Rock.

The rate offered by the Northern Rock is currently 4.19% plus a 1.5% arrangement fee and an exit fee of £250. The Halifax’s rate is 4.39% with an arrangement fee of £499, an exit fee of £175. Within the package there’s also free legal work and free valuation that could save around £750. So which deal is the cheapest?

Taking a £100,000 repayment mortgage over 25 years and costing it over the first two years with redemption at the end of the second year, The Northern Rock comes out at £14,671 whereas The Halifax comes out at £13,864 – a saving of £807 over the northern Rock. And this saving doesn’t take the extra £750 legal and valuation savings offered by the Halifax. Therefore, The Halifax’s offer at the higher rate of 4.39% is in fact the cheaper cost on this basis.

Our advice is read all the small print! And be aware that the lenders use all sorts of words to describe charges - arrangement, application, booking, reservation, completion, early redemption are all words to described a charge or fee. So keep your eyes skinned!

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Thanks to the latest budget changes, you can now buy life insurance and get tax relief. But the tax relief is only available on a new special type of life policy. You can’t get tax relief on your existing life insurance.

These new life policies exploit provisions in the new Finance Bill and should result in savings of between 5% and 15% for a standard tax payer and around 30% for a higher tax payer.

But you must be aware that there are strings attached! You have to buy an absolutely standard life policy. You can’t add extras such as critical illness cover and the insured sum must be a fixed sum. And only one life can be insured on each policy - it has to be a bog standard, level term, single beneficiary, life insurance policy.

The Chancellor has added more restrictions, but quite frankly, these are unlikely to pose a problem to anyone unless they’re extremely wealthy!

You can’t have one of these new style life policies if your annual life insurance premiums plus the annual contributions you make to your pension fund exceeds £215,000. Furthermore, if the when you die, the value of your pension fund plus the payout from your life policy exceeds £1,500,000, the current lifetime limit set by the Chancellor, then any excess will be taxed at 55%. Payouts from conventional life insurance policies are not part of this calculation.

Standard tax relief on the premiums is automatically collected by the life insurance company so you pay a lower premium which already reflects standard rate tax relief. If you are a higher rate taxpayer, you’ll have to claim an extra tax rebate through your self-assessment tax return. However, once you’ve told your taxman about your policy, you should automatically get your tax relief through your ongoing tax code.

So why are the savings at around 5% to 15% for a standard tax payer and around 30% for a higher tax payer, less than the value of the tax relief? Well, the life companies have to administer the tax relief and there are certain operational restrictions imposed on the insurance companies by the Inland Revenue - and this adds to the insurance costs - so the premiums are a little higher than conventional life policies. But after the tax relief you should make worthwhile savings.

As with all these tax changes, you must be aware that the Chancellor could remove the tax relief at a later date. Having said that, it’s rare for a tax change to be applied retrospectively, so you are likely to be safe. Your income could also drop and move you into a lower tax bracket. This would decrease your savings.

These new life insurance policies are now available from most of the big UK life insurers and life insurance brokers. However, you won’t be able to get a quotation online – you’ll have to get one on the phone from a Life Insurance Adviser.

And just to confuse matters somewhat, these policies are known under a range of names: Pension Term Insurance, Life Insurance with Tax Relief, Life Protection with Tax Relief – but they all mean exactly the same thing.

And just to confirm one common miss-understanding, no, you don’t have to buy a pension at the same time!

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If you run a small business you know that if a member of your team was taken seriously ill or died, your business would be hard hit. Sales or production could fall, key skills could be lost and the general pace of the business could fall.

Insurance is available to offset those financial risks, risks that are potentially most serious in a small business. After all in smaller businesses other employees can’t be moved across to fill the gap - there’s simply noone spare so the problem remains until the person either returns to work or has to be replaced.

If the person is off sick with a serious illness such as cancer or a heart attack you simply don’t know when, or if, they’ll return to work and management is caught in a cleft stick. Do they take on a temporary employee or a permanent employee, or are you forced to simply wait until matters resolve themselves? And how much will all this cost the business in terms of both extra costs and lost sales and profit?

Traditionally, it’s Keyman Insurance that’s covers these very real risks but nine out of ten small businesses still don’t carry this insurance. It’s either because they haven’t thought about it or they’ve found it to be too costly.

A spokesperson for the Federation of Small Businesses said, “In an ideal world, small firms would be insured against everything, but reality demands the businesses prioritise threats and occasionally take risks”.

But there is a cheaper potential solution. It’s called Group Critical Illness Insurance and it’s about half the price of standard Keyman Insurance.

With Group Critical Illness Insurance, the company decides which employees to insure and how much to insure them for, pays the premiums and receives all lump sum payouts. Claims can be made as soon as any of the insured people are diagnosed with a scheduled critical illness and the policy will list a long list of chronic illnesses that are covered. As you would expect heart attacks, strokes and cancer are the biggest three biggest reasons for claims but the full list is much longer. For example, kidney failure, meningitis, CJ Disease and even blindness.

The important point to realise is that for the company to make a claim, the insured employee must survive at least 28 days after they are diagnosed with the critical illness. (Some insurance companies have now reduced this to 14 days so please check before you buy.) So if the employee died before the end of the survival period, the claim would be invalid. In that context, it is not as comprehensive as full Keyman Insurance – but at around half the price of Keyman Insurance there has to be a little compromise!

Simon Burgess, the Managing Director of British Insurance says: “Group Critical Illness Insurance is a real alternative to full Keyman Insurance and at around half the cost, it’s great value for money. If business managers find Keyman Insurance too expensive there’s little excuse for not filling most of the gap with Group Critical Illness Insurance. Don’t pay the price for apathy”.

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With the housing market showing strong signs of recovery, especially in London and the South, the number of homeowners taking out mortgages in excess of £500,00 is increasing.

In the past, borrowers with these mega mortgages have had a mixed reception from the lenders – they were pleased to provide the facility but they looked on them as a higher risk. For that reason they were typically charged a premium rate of interest. But no longer. The table has turned.

Mega mortgages have joined the mainstream and lenders are competing hard for the business. Instead of paying a premium, borrowers are being offered about a quarter of a percent less than comparable deals for more normal sized mortgages. This is because interest rates remain low and because lenders are increasingly basing their lending decisions on the borrowers ability to afford the repayments rather than simply the security provided by the property.

If you want a mega mortgage you’ll find that the banks will generally be the most welcoming. They tend to set higher lending limits than the building societies and other mortgage lenders. Some lenders restrict the amount they’ll lend against an individual property whereas many of the smaller lenders set a cap at £500,000. But perhaps the best way of sourcing a really competitive mega mortgage is to go through a specialist mortgage broker. Any broker worth their salt will be able to source a great deal on six and seven figure mortgages.

For example, the Halifax has a 4.49% fixed rate for a two years on loans up to £2 million. They’ll lend up to 90% of the property’s value and the arrangement fee is just £499. If you’ve got at least 25% deposit then there are several deals around at 3.99% again for a two year fix with a fee of just a quarter of a percent.

Latest House Market Facts

House prices rise 0.5% during March driven by buoyant London market.

This is the fourth successive month of growth in house prices. It is also the highest monthly rise since the summer of 2004.

Over the last 12 months house prices have risen by +0.1%.

The national average house price now stands at £162,500.

In March London prices grew by 1.1%

The performance of the London market is a result of a number of factors:
A shortage of new housing coming onto the London market and the city has underperformed in terms of house price growth over the last few years. This in turn has meant that incomes and house prices in the capital are more closely aligned than in other regions.

In contrast, levels of affordability remain stretched across much of the country.

At a local level away from the capital, prices have picked up – mainly in cities in the South of England. Cities in the North of the country saw slower price growth, with Liverpool, Manchester, and Newcastle all reporting growth of just 0.1%.

Other parts of the country where prices have picked up over the month include Berkshire (0.7%) and East Sussex (0.6%).

The under-performing counties this month are Derbyshire (-0.1%) and the Isle of Wight (-0.1%).

The areas reporting the highest rises in March are all across London: Central London & City (1.9%), East London (1.4%), North London (1.2%), West London (1.2%), South-West London (1.0%) and South-East London (0.8%).

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On 4th April we alerted our readers to the apparent implications of the changes announced by the Chancellor in his latest budget.

By Thursday last week the estimates of the numbers of people that could be hit by the new anti-trust provisions in the recent budget hit 4.5 million. Then the following day the draft legislation for the Finance Bill was published - and the estimates fell to 1 million people.

So, with specific reference to life insurance policies written in trust, what’s happening?

Well first of all, we have to make the point that we are talking about the draft Finance Bill and it’s three months before that legislation will become law. It still has to pass through parliament and it’s possible that the situation could change. If it does we will keep you informed.

On Friday the Government retreated from its previous position that existing life policies written in trust will be caught by the new legislation. The position now is that if your life insurance policy was written in trust before budget day 2006, then the money in the trust remains totally free of tax and fees. That’s one headache out of the way.

However, if your policy was written in trust after the 2006 budget day, then the new rules do apply.

Gordon Brown’s latest budget has changed the tax rules on life insurance policies written in trust. Regular readers of our Blog will know that we have consistently reminded people taking out life insurance, that they should have their policy written in trust in order to avoid future Inheritance Tax (IHT).

The new rules introduced at the recent budget mean that even if your policy is written in trust and there is a claim on your policy, your estate will have to pay a tax charge of up to 6% on the value of the payout that comes above the IHT threshold of £285,00. This new rule applies from 5th April 2006.

Whilst this new tax is not to be welcomed, the new tax is only 6% which is still better than the 40% your estate would have to pay if your life insurance policy had not been written in trust. So, we believe that it is still worthwhile writing your life insurance policy in trust.
Having said that, there is now a danger that the tax charge of up to 6% could mean that there is insufficient IHT free cash generated by your policy to achieve your financial objective. If this is the case, don’t take any action just yet.

The Association of British Insurers (ABI) is meeting the Treasury this week to discuss the situation thrown up on life insurance policies by these tax changes. The insurance industry believes that the Government brought in the package of anti IHT avoidance measures, which included life insurance policies written in trust, without fully appreciating the impact on the man and woman in the street. Some commentators believe that the Government will back track and take life policies out of these anti trust measures. We’ll see!

Even if the new tax measures are not rescinded, existing life insurance policy holders should be aware of the transitional arrangements which will reduce their estate’s tax bill. The Treasury is saying that only the part of the policy that was in force after budget day will be caught in the IHT net. This means that if you have a 15 year policy for £100,000 and it has already been in force for 5 years, then only 66.6% of any payout would be subject to the new 6% tax – so in this example, your estate would have to pay tax of £3,999.96 if your estate, excluding the insurance payout, fully exceeded the IHT £285,000 threshold.

We will provide our readers with an update as soon as we hear the outcome of the ABI’s meeting with the Treasury this week.

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Shambolic is how many have described the recent overhaul of the NHS dental service. Seven in every ten dentists have either quit the NHS or have signed their new NHS contract “under dispute”. This means that they’ve given notice to the NHS that in three months time they have the right to refuse NHS patients and switch to private practice.

The rumpus is about the new contract which many dentists claim has been rushed and forced upon them without proper consultation. The new contract was designed to streamline the service by replacing some 400 different dental charges with just three charges. From now on patients will be charged £15.50 for a check-up, £42.40 for filling irrespective of the number of fillings and £189.00 for more complicated work such as bridges and crowns. Each charge pays for a complete course of treatment, no matter how long it takes and no matter how many teeth have to be treated.

But dentists claim that these price bands will frighten many patients off and make them delay treatment leading to an explosion of tooth decay. Dr Anthony Halperin from the Patients’ Association says, “I’m concerned that many patients will wait until they need multiple treatments to try to get value for money. If that does happen, it is likely we will see a significant rise in tooth decay”.

The exodus of dentists from the NHS means that up to 16 million patients could be left without state dental care. What’s more, if you have to switch to private care, there’s no certainty that you’ll find a dentist who will accept you onto his list. There are signs that dentists are going to be very choosey about who they treat. It seems possible that many dentists will only accept those who are either well off or who have dental insurance.

So how do you set about getting insured? Well without doubt, the Internet is going to be the place to find the best deals. Many dentists will leave details of one or two schemes in their waiting rooms but they aren’t insurance experts.

Specialised dental insurance brokers will essentially offer you two key options: dental insurance and dental capitalisation schemes. There is a third option - cash plans – but they tend to cover a wide range of medical treatment with dental treatment being but one small part of the cover.

Dental Insurance
The problem for the customer is the range and complexity of the policies on offer. Almost every policy is different with its own pros and cons. The broker’s job is to understand your needs and come up with options within your budget.

A typical example helps to set the picture. With Western Provident the policyholder pays the first 25% of each treatment but can claim up to £250 per year towards routine treatment including check-ups, fillings and visits to the hygienist. Emergency dental treatment is covered up to £1,000 per year but the maximum cover for accidental dental injury is £250 per treatment. The cost? If you’re aged between18 and 49 the premium is £12.48. Older and up to 69 it’s £15.90 per month.

Capitalisation Schemes
A capitalisation scheme is the most expensive option and the option favoured by many dentists. It’s also the most expensive option! Before you take the policy, your dentist makes an assessment of your dental health and places you in one of five or so, treatment groups. The group you’re in then controls the cost of your scheme. The better your dental condition, the less you pay.

For example, a dental care scheme from Denplan costs between £9 and £30 per month.

Cash Plans
The final alternative is a composite health cash plan. These insure you for a wide range of health treatments including dentistry but also such things as eye treatment, hospital treatment, physiotherapy, chiropody even allergy testing. Each type of treatment has a maximum claim value for each kind of health treatment but they tend to be a bit on the mean side. In our view, you’re much better off with a dental insurance policy or a capitalisation scheme.

You pay your money and take your choice!

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The Office of Fair Trading (OFT) has ordered banks to slash their late-payment fees on their credit cards to a maximum of £12. It says that their existing charges which average £20 to £25 and have risen by up to 40% in the last 2 years, are both unfair and illegal.

This groundbreaking decision opens the way for card holders to reclaim refunds for overcharging amounting to half a billion pounds!

The OFT says that late payment charges on store cards, mortgages and overdrafts should also be cut and is threatening legal action if they fail to comply. Indeed they say, ”If default charges are greater than £12, we will, subject to certain exceptions, presume they are unfair with a view to bringing enforcement action in the courts – we will litigate if we have to, against the strongest and most powerful institutions”.

The OFT’s decision is based upon the 1999 Consumer Contract Regulations in association with case law dating back to 1914.

If you want advice on winning refunds for overcharging visit https://www.which.net/campaigns/personalfinance/bankingcharges/whatyoucando.html

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Do you update the contents value on your policy each year? You should do.

Thousands of policyholders risk having any claim they make down sized because they’ve failed to insure their belongings for the correct amount. This can arise because they simply failed to calculate the value properly when they first took the contents insurance out, or they’ve bought extra bits and pieces and forgot to update their insurance value.

Take CD’s and DVD’s for example. How many have you got around the home? Norwich Union says it values these at £10 each. So if you’ve got a collection of 200, that means your insurer is likely to expect you to have included £2,000 cover for these never mind anything else. And then there are your mobile phones, I pods, stereos, flat screen TV’s, home computers and they like. Tally them up and watch their value mount.

And have you remembered to value the contents of your garden shed and garage? The average value there is around £2,000! All in all, the insurer More Than, estimates that the average family’s household possessions are now worth over £45,000.

If you’re uncertain whether you’re insured for the right amount and want some help, we suggest you visit the web site run by the Association of British Insurers. On the site you will find a useful checklist to help you calculate the correct level of cover you need. You can visit their site at www.abi.org.uk

Remember, if you don’t insure for the right value and have a claim, your payout will be scaled down proportionately to reflect the extent to which you are under insured.

About Contents Insurance
Contents Insurance covers everything in your home that’s moveable. That includes you carpets and curtains – even the lino! However, if it’s screwed down or built in, then those items such as kitchen units and sanitary ware, are covered by your buildings insurance.

The same principles apply to items kept outside. If you have a statue cemented onto a wall, it’s covered by your buildings insurance, but if it simply stands on the wall, it’s covered by your contents insurance!

Gordon Brown’s latest budget has changed the tax rules on life insurance policies written in trust. Regular readers of our Blog will know that we have consistently reminded people taking out life insurance, that they should have their policy written in trust in order to avoid future Inheritance Tax (IHT).

The new rules introduced at the recent budget mean that even if your policy is written in trust and there is a claim on your policy, your estate will have to pay a tax charge of up to 6% on the value of the payout that comes above the IHT threshold of £285,00. This new rule applies from 5th April 2006.

Whilst this new tax is not to be welcomed, the new tax is only 6% which is still better than the 40% your estate would have to pay if your life insurance policy had not been written in trust. So, we believe that it is still worthwhile writing your life insurance policy in trust.

Having said that, there is now a danger that the tax charge of up to 6% could mean that there is insufficient IHT free cash generated by your policy to achieve your financial objective. If this is the case, don’t take any action just yet.

The Association of British Insurers (ABI) is meeting the Treasury this week to discuss the situation thrown up on life insurance policies by these tax changes. The insurance industry believes that the Government brought in the package of anti IHT avoidance measures, which included life insurance policies written in trust, without fully appreciating the impact on the man and woman in the street. Some commentators believe that the Government will back track and take life policies out of these anti trust measures. We’ll see!

Even if the new tax measures are not rescinded, existing life insurance policy holders should be aware of the transitional arrangements which will reduce their estate’s tax bill. The Treasury is saying that only the part of the policy that was in force after budget day will be caught in the IHT net. This means that if you have a 15 year policy for £100,000 and it has already been in force for 5 years, then only 66.6% of any payout would be subject to the new 6% tax – so in this example, your estate would have to pay tax of £3,999.96 if your estate, excluding the insurance payout, fully exceeded the IHT £285,000 threshold.

We will provide our readers with an update as soon as we hear the outcome of the ABI’s meeting with the Treasury this week.

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The UK’s 2 million Muslims face an ethical problem when organising their money. Conventional mortgages, loans, credit cards all involve the payment of interest and interest, or “riba” as it is called under Islamic law, is forbidden by the Koran. (See below for a precise definition of “riba” and other Islamic finance words.)

British banks and building societies are increasingly catering for the specialist needs of Muslims through a series of alternative arrangements that adheres to the scriptures in the Koran. Here are just two of them:

Ijara with diminishing Musharaka
This is an Islamic home finance alternative to a mortgage that has been adopted by several banks and building societies. Musharaka basically means partnership. Under this financial concept, the financial institution buys the house and becomes its legal owner. Then over a set period, say 25 years, a monthly payment is made. Each payment includes a charge for rent plus a charge that buys a small proportion of the house itself. It’s a sort of shared equity plan with the proportion of the house being owned by the contract holder, steadily increasing as payments are made. On the final payment the house is owned outright.

Ijara
Here the financial institution buys something that you want, for example a car. The institution then allows you to use it for an agreed period in return for a monthly payment that covers the cost of the institution’s capital. In practice it’s a form of leasing

So where can you arrange Islamic finance? Here are three suggestions:

HSBC is developing a special range of Islamic products under the Amanah brand. These products include home finance plans, commercial finance, home insurance, and various current accounts and pensions. Hussam Sultan, Amanah’s product manager says, ”As a bank, we are not here to moralise or tell our customers that Amanah finance is the way to please Allah. We’re just here to provide them with a choice”.

Over the last year Lloyds TSB has been introducing Islamic products to its branches. 33 branches now sell Islamic products. They say, “It is important for our customers to see that we are following the right procedures. We have a panel of four Islamic scholars who over-see the products. They offer guidance on Islamic law and audit the products”.

The Islamic Bank of Britain has 3 branches in London, 2 in Birmingham, 1 in Manchester and Leicester. They are the only British bank specifically catering for Muslim customers and claim to be totally halal. All their products are approved by their Sharia’a Supervisory Committee – Muslim scholars who are expert in all matters of Islamic finance.

Glossary of various Islamic words used in finance
amanah: Trust, with associated meanings faithfulness, trustworthiness and honesty. As a central secondary meaning, the term also describes a transaction where one party keeps another’s funds or property in trust. This is in fact the most widely used and understood application of the term. It has a long history of use in Islamic commercial law. Amanah can also be used to describe different commercial or financial activities such as deposit taking, custody or goods on consignment.

arbun: Means a form of down payment. A non-refundable deposit paid by the buyer to a seller upon concluding a sale contract, with the provision that the contract will be completed during a prescribed period.

gharar: Means uncertainty. One of three fundamental prohibitions in Islamic finance (the other two being riba and maysir), Gharar is a sophisticated concept that covers certain types of uncertainty or contingency in a contract. The prohibition on gharar is often used as the grounds for criticism of conventional financial practices such as speculation, short selling, and derivatives.

Islamic banking/ Islamic finance/ Islamic financial services: Means financial services that meet the requirements of Islamic law or Shariah. While designed to meet the specific religious requirements of Muslim customers, Islamic banking is not restricted to Muslims: both the service provider and the customer can be non-Muslim as well as Muslim.
ijara: Means an Islamic leasing agreement. Ijarah allows the bank to earn profits by charging rentals on the asset leased to the customer instead of lending money and earning interest. The concept of ijarah is extended to a hire and purchase agreement by Ijarah wa iqtinah.

maysir: Means gambling. Another of three fundamental prohibitions in Islamic finance (the other two being gharar and riba ). The maysir prohibition is often used as the basis for criticism of conventional financial practices such as speculation, conventional insurance and derivatives.

mudarabah: A Mudarabah is an Investment partnership, where capital is provided to one party/entrepreneur (the Mudarib) by an investor (the Rab ul Mal) in order to undertake a business or investment activity. While profits are shared on pre-agreed proportions, any loss of investment is born totally by the investor and the mudarib loses the expected share of income.

mudarib: The mudarib is the investment manager or entrepreneur in a mudarabah (see above), who invests the investor’s money in a project or portfolio in exchange for a share of the profits. For example, a mudarabah is essentially similar to a diversified pool of assets held in a Discretionary Managed Asset Portfolio.

murabaha: means purchase and resale. Rather than lending money, the capital provider purchases the desired asset or commodity (for which a loan would otherwise have been taken out) from a third party and resells it at a higher predetermined price to the capital user. By paying this higher price by instalments, the capital user effectively obtains credit without paying interest. (Also see tawarruq.)

musharaka: Means profit and loss sharing. It’s a partnership where profits are shared in pre-agreed proportions whereas the losses are shared in proportion to each partners capital or investment. In a Musharakah, all the partners to the business undertaking contribute funds and have the right, but not the obligation, to exercise executive powers in that undertaking. It is similar to a conventional partnership and the holding of voting stock in a limited company. Musharakah is widely regarded as the purest form of Islamic financing.

riba: Means interest. The legal concept extends beyond interest, but in simple terms riba covers any return of money on money. It doesn’t matter whether the interest is fixed or floating, compounded or simple, and at what the rate is. Under The Islamic tradition Riba is strictly prohibited.

Shariah: Islamic law as disclosed in the Quran and through the example of Prophet Muhammad (PBUH). A Shariah compliant product meets all requirements of Islamic law. A Shariah board is the committee of Islamic scholars available to an Islamic organisation for guidance and supervision for the development of Shariah compliant products.

Shariah advisor: Means an independent professional, usually a classically trained Islamic legal scholar, who advises an Islamic financial organisation on the compliance of its products and services with Islamic law, the Shariah. While some Islamic organisations consult individual Shariah advisors, most establish a committee of Shariah advisors (often known as a Shariah committee or Shariah board).

Shariah compliant: Means an act or activity that observes the requirements of the Shariah, or Islamic law. The term is often used in the Islamic banking industry as a synonym for “Islamic”- for example, Shariah compliant investment or Shariah compliant financing.

sukuk: Similar characteristics to a conventional bond. The difference is that that they are asset backed and a sukuk represents a proportionate beneficial ownership in the underlying asset. The asset is then leased to the client to yield the return on the sukuk.

takaful: Means Islamic insurance. Takaful schemes are designed to avoid the elements of conventional insurance (i.e. interest and gambling) that are so problematic for Muslims, by structuring the arrangement as a charitable collective pool of funds based on the idea of mutual assistance.

tawarruq: This is the reverse murabahah. When used in personal financing, a customer with a genuine need buys something on credit from the bank on a deferred payment basis. That customer then immediately resells it for cash to a third party. The customer thereby obtains cash without taking an interest-based loan.

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