BSA: Scrap tax on savings interest

CoinsHard-pressed savers must be given more radical help in next week's Budget to ease their misery, the UK's building societies have urged.

The tax people pay on their savings interest should be scrapped for as long as the bank rate remains at its ultra-low level, the Building Societies Association (BSA) said.
The rules around tax-free Isas should also be relaxed to give savers more opportunity for some real returns on their cash, the BSA said.

Savers have seen their returns plummet as the Bank of England has held the base rate at a record low of 0.5% for four years.

The average rate on a one-year fixed-rate bond was 2.78% four years ago but is just 1.83% today, while the typical rate on a three-year deal has fallen from 2.98% four years ago to 2.19%, according to financial information website Moneyfacts.

Campaign group Save our Savers estimates that people have lost a total of £100 billion in interest over the past four years because savings rates have been savaged.

The BSA, which represents all 46 UK building societies, suggests that the tax people pay on their savings interest should be done away with for as long as the base rate remains at its historic low.

For most savings accounts, excluding certain products such as Isas, income tax at 20% is usually automatically taken away from interest before it is paid.

At the moment the rules surrounding Isas mean that savers can only place half of the current £11,280 Isa allowance into cash savings and the remainder must be invested in stocks and shares.

The BSA, whose members hold almost one third of cash Isa balances in the UK, said these rules should be simplified so that people can put all of their Isa savings into a cash Isa if they want to. This could give savers greater flexibility and enable those approaching retirement to move more of their savings into cash to give themselves more certainty over their returns.

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BSA: Scrap tax on savings interest

More than 46,000 of 106,000 the complaints received by the FOS in the second half of last year related to payment protection insurance (PPI). And the organisation is expecting to receive a record 165,000 PPI complaints in 2012/2013.

The huge numbers are due to the PPI mis-selling scandal that should now be a thing of the past, but there is no doubt that the insurance, which can add thousands to the cost of a loan, is highly unpopular!

(Pictured: Martin Lewis after the PPI payout ruling)

Complaints about mortgages jumped by 38% in the last six months of last year, the FOS figures show, compared to an increase of just 5% in investment-related complaints.

Common gripes about mortgages include the exit penalties imposed should you want to sell up or change you mortgage before a fixed or discounted deal comes to an end, and the high arrangement fees charged by many lenders.

While there is nothing in the data released by the FOS about the number of complaints relating to savings accounts, hard-pressed savers have been struggling with low interest rates for several years now.

You can get up to 3.10% with Santander's easy-access eSaver account, but many older accounts are paying 1.00% or less and even this market-leading offer includes a 12-month bonus of 2.60% - meaning that the rate will plummet to just 0.50% after the first year.

Banks are imposing the highest authorised overdraft interest rates since records began, with today's borrowers paying an average of 19.47%, according to the Bank of England.

A typical Briton with an overdraft of £1,000 is therefore forking out around £200 in interest charges alone. Coupled with meagre returns on savings, it's enough to make your blood boil!

While authorised overdrafts may seem expensive, going into the red without permission will cost you even more due to huge penalty fees.

Barclays, for example, charges £8 (up to a maximum of £40 a day) each time that there is not enough money in your account to cover a payment.

If you need to send money abroad, the likelihood is that your bank will impose transfer charges - and offer you a poor rate of exchange. Someone transferring a five-figure sum could easily lose out by £500 or more as a result.

The good news, however, is that you can often get a better deal by using a currency specialist such as Moneycorp.

Automated telephone banking systems, not to mention call centres in far-flung parts of the world, are one of our top gripes - especially as we often encounter them when we are already calling to report a problem.

In the words of one disgruntled customer: "What is it about telephone banking that turns me into Victor Meldrew? Well, maybe it's the fourteen security questions, maybe it's the range of products that they try to push or maybe it's because I'm forced to listen to jazz funk at full volume while my phone bill soars.

"Actually though, I think it's because the people I eventually speak to rarely seem able to solve the issue I'm calling about."

The days of a personal relationship with your bank manager are long gone - for the huge majority of us at least.

When ethical Triodos Bank investigated recently why around 9 million Britons would not recommend their banks to a friend or relative, it found that almost a third felt they were not treated as individuals. Another 40%, meanwhile, were simply disappointed with the customer service they received.

When you're in a rush, the last thing you want to do is wait in a long queue at your local branch.

Researchers at consumer champion Which? recently found that most people get seen within 12 minutes, but you could have a much longer wait if you go in at a busy time. Frustrating stuff!

The Triodos Bank research also indicated that the bonus culture that ensured the bank's high-flying employees received large salaries, even when it was making a loss at the taxpayer's expense, was hugely unpopular with consumers.

About a quarter of those who would not recommend their current banks said this was the main reason why. And with RBS executives sharing a £785 million bonus pool despite the bank, which is 82% publicly owned, making a loss of £2 billion last year, it's not hard to see why.


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