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 HERE. MONEY BOX Presenter: PAUL LEWIS TRANSMISSION: 22 APRIL 2006 1200-1230 BST RADIO 4 LEWIS: Hello. In today’s programme – first shortfalls, now windfalls. The Standard Life boss tells Money Box why members should vote yes to change the mutual insurer into a stock market company. When in Rome, pay as the Romans pay – in euro. Paying in pounds abroad can add 4% to your bill. New ideas this week to get the un-banked banking. POMEROY: It’s not enough just to have the products and services available because just having the products and services available doesn’t mean they will reach people who are not in normal contact with financial institutions. LEWIS: Legal moves in Europe and London to get help to people who say they’ve been robbed of their pensions. And we look at the new deals to give a boost to your tax free savings. But first, this week more than 2 million Standard Life policyholders have received details about the company’s plans to float on the stock market. And let me declare my interest here and say I’m one of them. One form tells you how many shares you’ll get if the change goes ahead; another invites you to vote yes or no to the plans; and a 114 page book tries to explain the changes that Standard Life is proposing. I’ll be talking to Standard Life’s boss Sandy Crombie shortly. But first Louise Greenwood’s here. Louise, remind us who’s eligible. GREENWOOD: Well it’s 2.4 million people who have with- profits policies and these could be endowments, pensions or savings plans. And there’s a cut off date to be able to vote and get a windfall. You must have taken out the policy before 31st March 2004, which is the day that the board announced its plans to float the company. People with policies that matured before the special general meeting that’s being held on 31st May this year are not technically eligible, but Standard Life intends to change the rules so they too will get windfalls. LEWIS: And how big will those windfalls be? GREENWOOD: Well Standard Life has said that everyone will get a fixed allocation of 185 shares to compensate for loss of membership and there’ll also be a variable amount of shares that almost all members will get on top of that. Now how many you’ll get will depend on the type of policy you have, how long you’ve held it, and how much it’s worth. Standard Life says the average windfall will be worth around £1700. And if you keep them a year, you’ll get extra shares – one for every 20 that you hold onto. LEWIS: Thanks, Louise. And Standard Life says shares will be worth between £2.40 and £2.90. Many shareholders who’ve seen very little growth in their investments for some years are unhappy. Richard from Pembrokeshire will grudgingly vote in favour. RICHARD: Between my wife and I, we’ve got four endowment policies and these are to pay off our mortgage. We find that these are grossly in shortfall of what we thought they would be and we find it very disappointing that Standard Life are having to invest a huge amount of money to float themselves on the stock market to keep themselves viable. So when it comes to our share allocation, it will be gratefully received whatever it is, but we’ll cut and run and try and invest it better elsewhere. LEWIS: And Mark from Kent is more than disappointed. MARK: Really it’s been a sham from start to finish. I would like to vote against demutualisation even if it only stops Mr Crombie et al from getting their share allocations. They’ve already admitted that they’ve overpaid for business to advisers and they’re reducing commissions, so they’ve actually been selling unprofitable business. I think we should get them to resign and apologise. LEWIS: Well Mike Hogan is a former investment banker who tried and failed to be elected to the board of Standard Life last year. He’s also concerned about how the company is run. HOGAN: It’s taken us 2½ years to get where we are and it’s cost £158 million. They’re talking about total cost by the time the flotation takes place of £250 million, which if they raise £1.1 billion is an extraordinary 20% of the money raised. You ally to that the fact that directors are largely rewarded irrespective of the performance which is delivered to members, which is a major problem. LEWIS: How will you vote? HOGAN: I shall vote for demutualisation. At least it gives us an opportunity to be involved in the process, opens it up to additional outside influences, and would hopefully go some way to restoring value possibly by way of having a major shake up of the way in which the company is run. LEWIS: You seem to be saying that you have no confidence in the present board. HOGAN: Well I think that you know they’ve let us down in the most appalling fashion in that we all went in there because we trusted them and our trust has been completely abused. The only good story that comes out of this is the way in which the directors have taken care of their own interests and they’ve made themselves very rich men. LEWIS: You seem so critical of the company that I don’t really see why voting for it will help address those concerns. HOGAN: Well first of all the money that’s lost, you’re never going to get back; it’s gone. In the circumstances, what is the best possible position for us? The best possible position actually is to take the shares and then press as hard as we can for the kind of change that we’re talking about to management contracts, such that the company actually responds and is better run in future. LEWIS: Well three Standard Life customers there. Live now to Edinburgh to speak to Standard Life Group Chief Executive Sandy Crombie. Sandy Crombie, three listeners all disappointed with Standard Life and it has to be said fairly hostile to you. How do you respond to that? CROMBIE: Hello Paul. Yes, fairly typical of the reaction I’ve had as I’ve gone round the country meeting members. I’ve had sixteen road shows, roughly 200 per audience, and I think the views we’ve heard expressed today are typical and probably expressed with greater reserve given that they’ve been expressed on radio than those I’ve heard face to face. LEWIS: So they’ve all been telling you you’ve run the company badly and you’re paid too much? CROMBIE: I think there’s no doubt that policyholders are disappointed. Expectations have run very high indeed about what Standard Life could and would deliver for people and the disappointment is correspondingly high. These products are quite fundamental to our members’ lives – the endowments have helped put roofs over their heads, the pensions products have been to provide for comfortable and often early retirements that won’t now be delivered in quite the same timescale with the same comforts. So there’s no doubt the disappointment is very high indeed. LEWIS: The concern is endowments will actually take the roofs away from their heads if they’re not enough to pay off the mortgage. Why on earth, given all that and given your admission to me that these are fairly typical views, should people vote yes for the same board but to run a plc rather than a mutual? CROMBIE: People here are not voting for a board. They’re voting for a future for the company in which they invest, they invest their life savings. I think this direction is absolutely the right one. As I’ve gone round the country, people have been concerned to know “what will I get and why should I vote?” and the reasons are quite straightforwardly expressed. As things stand, our members will all receive their fair share of the fund in which they invest, the with-profits fund. If they accept these proposals, they will receive both their fair share of the fund in which they invest, plus their fair share of the company. This is not meant to be compensation for the disappointment they feel in their products, but it is nevertheless for very many members a very helpful delivery of extra value. LEWIS: Well yes and I think many of them will, like our listener say, he’ll use it to help pay off his under performing endowment and then get out. How many people do you need to vote for this to go through? CROMBIE: Of those who vote, for this to progress then 75% must vote for it. There’s no minimum number of people required to vote, but as directors we’re trying very hard indeed to contact all of our members and have a large turnout so there’s a good mandate for the future of Standard Life. LEWIS: Sure because if you only have a dozen people voting and eight vote in favour, the court isn’t going to be very pleased, is it? They’re not going to pass it. How many do you have to have voting really to get this through? CROMBIE: There’s no minimum number. We had a million who voted in the year 2000 and my objective is to get as many as possible of our members to vote, so that what we have is a mandate for the future. Naturally I hope they will vote for the proposal. LEWIS: Of course you do. What will you get out of it? I mean you were paid really an extraordinary amount last year – I think £3 million if you count your pension contributions as well. Are we going to see that go up under a private company? CROMBIE: I’ve made it abundantly clear as I’ve gone round the country that I will not accept any payment that’s conditional on a particular outcome. Last year, I was offered large bonuses by the non- executive directors who decide what I should be paid and I turned them down because last year I felt that I just couldn’t demonstrate to members that we had delivered significant value under my leadership. LEWIS: Yes. CROMBIE: This year I’ve been able to demonstrate enormous value gains for the membership and I have accepted the bonuses offered to me. LEWIS: Sandy Crombie, thanks. And remember if you want to vote, return the form before May 28th or of course attend the meeting in person, May 31st, in Edinburgh. People who use their credit card abroad could be short changed by shops and hotels who immediately convert purchases into pounds rather than charging in the local currency. It’s very common in Spain, France and Italy, but happens in other countries too. The practice is allowed by Europe’s strict rules on competition, but for that to work customers should always be given a clear and well explained choice. But Money Box listener Richard Lawrence told us that didn’t happen when he travelled in Europe over Easter. LAWRENCE: My experience is that no choice was offered, the matter wasn’t even brought to my attention. Their attitude seemed to be very much that, oh well, you’re from the UK, you should be paying in pounds. I didn’t have a choice, but I had to sign a slip that said I had had a choice. I ended up with about a 4% difference, which some people may brush aside, but to me it’s the principle of the way it’s being done. LEWIS: Converting your payment to pounds at the till is fairly new. It’s called Dynamic Currency Conversion or DCC. Although customers should be clearly told what’s happening, that information may be in the local language and the merchant may rely on you reading the credit card slip before you sign it but after it’s been converted into pounds. Richard feels the whole system needs investigation. LAWRENCE: The vast amount of tourists and business travellers that are going abroad that are perhaps not aware of this is one thing, but even if they are aware of it what can they do? We’re powerless. I’d like it to be established whose responsibility this is. Nationwide seem to be saying that it’s Visa’s responsibility - and I would therefore assume Mastercard are in a similar position – so whoever has the authority to do something about this should make sure that it is regulated properly. LEWIS: Well I asked Visa Europe’s Head of Compliance, Stanley Scoglund, what he made of Richard’s complaints. SCOGLUND: Those instances are extremely regrettable, not to say deplorable. There should be full transparency and an informed choice. Where the consumer’s not given a choice, you are given a certain time frame to correct this, and we would go back and check that particular merchant again to ensure that they actually do provide choice. So there is a compliance programme and there are also financial penalties involved should a member institution not cooperate. LEWIS: But what can an individual customer do? SCOGLUND: What consumers should do is to contact the issuer of that card and state in writing that they haven’t been given a choice. That particular bank or card issuer can charge back the transaction and they will then be charged in the local currency, the original currency. LEWIS: And what is Visa Europe doing to try to make sure that this information is clearly presented to customers from other countries when they shop abroad? SCOGLUND: We do try to control this at every level. What we have done now is that we have put new requirements in place in order for the technology to do the job. Before you enter your PIN, you will have written information on the PIN pad stating you have the choice of paying either in pounds sterling or in euro. Which one you know do you want - yes or no? And then you confirm. LEWIS: But you know I have no idea why I’m being asked that. I have to be asked if I want to pay in pounds at a rate of x percent or whether I want to pay in euro and leave it to my bank. I’ve got to have the two things to compare, haven’t I? SCOGLUND: Yes and I have seen many solutions in the European market where that is part of the screen on the PIN pad. I’m not going to lie to you and say this works perfectly in every instance. I think by introducing new technical requirements that we are moving as an industry to a much better standard in terms of what you’re looking for – consumer choice and knowing why you are being asked this question. LEWIS: Stanley Scoglund from Visa Europe. Research has confirmed that if you pay in pounds rather than euro, you’ll end up paying about 4% more than if Visa or Mastercard did the conversion later. For most cardholders that’s partly offset by the 2¾% currency conversion charge their own bank slaps on. But that charge doesn’t apply to our listener Richard. He has a Nationwide card, which is one of the very few cards that doesn’t add this charge. Nationwide has issued advice for its cardholders on how they can ask in French, Spanish and Italian to pay in euro. But whatever your card, if you’re planning to use it abroad this summer it’s probably best to reject the offer to pay in sterling. In most cases you’ll be better off having purchases charged in euro. And you can have your say and share your experiences on using your card abroad on our website, bbc.co.uk/moneybox. The government is to spend £20 million on a new campaign to highlight the problems faced by people without access to bank accounts and other basic financial products. It’s the latest slice of money to be allocated from the £120 million Financial Inclusion Fund, launched in November 2004. The project will be managed by the Financial Inclusion Taskforce, which explained to a conference this week how the new money will help it meets its goals. Jennifer Clarke was there. CLARKE: When the Financial Inclusion Taskforce was set up just over a year ago, it had three aims: to reduce the number of people without bank accounts; to increase access to affordable credit; and to boost the availability of money advice. It told delegates here this morning that it’s making strides in all those areas, but taskforce chairman Brian Pomeroy says it must do more if it’s to reach its target group. POMEROY: It’s not enough just to have the products and services available because just having the products and services available doesn’t mean they will reach people who are not in normal contact with financial institutions. CLARKE: The conference was shown new research, highlighting a number of barriers which prevent people from joining the financial mainstream. POMEROY: There are people firstly who may simply not know about banking services – they’re basically ignorant of them. Secondly though, even if they’re not ignorant of them, they may not trust them, which means that without some kind of prompting or help or assistance it’s unlikely this group of people will approach financial institutions. And, thirdly, in some cases just lack of confidence – i.e. banking is for rich people, it’s not for people like us – which is a form of self-exclusion, if you like, based on beliefs about the way people will be treated by financial institutions, and we would like both to dispel the belief but also dispel any reality that lies behind the belief. CLARKE: The taskforce thinks the best way to do this is to connect to people through third party organisations they already deal with and it’s persuaded the government to give it another £20 million from the Financial Inclusion Fund to develop the idea. Economic Secretary to the Treasury, Ivan Lewis, accepts a more creative approach is needed. I. LEWIS: Well many of the people we’re talking about will not respond to conventional communication marketing advertising strategies. We need to look at where those people go, who they trust: for example faith groups, credit unions, social housing, landlords and Sure Start. We have to use intermediaries who have contact and the confidence of the people that we’re talking about here. CLARKE: The idea is to involve groups which could for instance promote the benefits of a bank account or alternative forms of credit in the course of their normal dealings with consumers. Taskforce member Teresa Perchard will develop the campaign over the summer, but already has utility companies in her sights. PERCHARD: There are millions of people who use pre- payment meters to pay for electricity and gas. They could be paying less if they paid through a bank account and direct debit, but it’s the fuel companies who know who these people are. You know they’re in touch with consumers dealing with fuel bills all the time and they could play quite a key role in getting across some messages to large groups and signposting where people could go for further help in a particular community. CLARKE: People here at the conference have welcomed the new campaign, but they are concerned that the taskforce is already halfway through its 2 year lifespan and that the money in the Financial Inclusion Fund is a one off commitment. Delegate Sue Davenport runs one of the UK’s largest credit unions in Leeds. She says there’s a risk that the money could run out before much progress has been made. DAVENPORT: They have to recognise that it’s not a quick fix and that they can’t treat this as a short-term initiative. We have to give people the time to actually deliver on this. It’s a long-term issue and it needs a long-term solution. CLARKE: But Economic Secretary Ivan Lewis rejects that criticism. He’s just one of four government ministers from three different departments who addressed the conference today and he insists that he and his colleagues are fully committed to improving financial inclusion. I. LEWIS: This government’s vision for the future of this country is to strengthen it on the inextricably linked foundations of social justice and of economic success. That will always be our raison d’etre - that link between fairness and opportunity and prosperity. Tackling financial exclusion is an integral mainstream part of achieving the kind of society that we’re striving to achieve in this country. CLARKE: So the taskforce, which is just over halfway through its life, and the money which is already almost all distributed, that’s not the end of the story? I. LEWIS: Absolutely not. LEWIS: Ivan Lewis ending that report by Jennifer Clarke. Two weeks into the tax year and you can invest up to another £3,000 into tax free savings accounts. Cash ISA’s are highly popular. Last year more than 9 million people put over £20 billion into one, taking the total to close to £100 billion. Any interest earned is tax free and the money in there is easy to access. To get our business as the tax year begins, new deals are being offered and Sonia Rothwell’s been taking a look at some of them. ROTHWELL: Well one account that’s been getting a lot of attention on the best buy tables is National Savings and Investment’s Direct ISA. It’s what’s called a direct product because it’s available online or over the phone. Dax Harkins is from National Savings and Investments. HARKINS: We think that our product offers as well as a great rate of 5.05%, also customers will get confidence, and that’s because unlike lots of ISAs in the market at the moment it doesn’t include an introductory bonus. And on top of that, we also guarantee that it’ll be 0.55% above base rate until at least 5th April 2008. ROTHWELL: But to get that 5.05%, you have to have a spare £1,000 in cash to open the account. Also, if you want to top it up, you have to pay in at least £250 a time and if you want to make any withdrawals they also have to be £250 each. LEWIS: What other deals have come onto the market since April 6th? ROTHWELL: Well one cash ISA which does what it says on the tin account, if you like, is that offered by the National Counties Building Society. You can open it with just £1 and it guarantees to stay 0.4% above the base rate until the end of this financial year. At the moment you’ll get 5.1% interest, but it can’t drop below 4.9% unless the base rate falls. And if the base rate rises, the interest rate will go up too. You can withdraw money with no restrictions or penalties, though there is ten days loss of interest if you transfer the money to another provider within the year. LEWIS: Now if you’d put your full cash allowance into ISAs each year since they began in 1999, you could have well over £21,000, which in theory you could transfer to another ISA provider. But will they all take it? ROTHWELL: Well you have to remember that you must make sure you’re transferring your ISA and not just taking out the money and putting it into a new ISA account or you lose all of the tax advantages. That said, the fact that some people may well have over £21,000 of ISA cash to transfer means some providers who are otherwise offering favourable rates aren’t allowing transfers for some products. Now Sue Hannums from AWD Chase de Vere says there’s a good reason why providers offering competitive interest rates are being more cautious about accepting transferred ISA’s. HANNUMS: The reason I believe these providers are only looking for new money and not looking to take in transfers is the differences between paying out interest on smaller amounts – say the £3,000 – and paying out interest on the larger amounts of past transfers of £21,000. The providers have to pay out an awful lot more in interest, which is why I believe that they can afford to offer the fantastic rates on the smaller amounts. LEWIS: So, Sonia, which accounts will take those bigger balances? ROTHWELL: Well a couple that might be worth a look are Bradford & Bingley’s E-Savings ISA, which is offering 5% on amounts over £1,000 with no penalties for withdrawals. They guarantee their rate will be no lower than the Bank of England base rate until the end of 2006. Also there’s Alliance & Leicester’s Direct Issue 2 ISA, which is offering a variable rate of currently 4.5% and will take the larger value transfers. LEWIS: Thanks, Sonia. We reported on Money Box last month that the government had rejected the conclusions of the Parliamentary Ombudsman, who said it should pay compensation to 85,000 people who’d lost their pensions. Well now that rejection faces fresh legal challenges. Ros Altmann, a former government adviser who’s been assisting the campaign, is taking two separate routes to try to overturn the government’s decision. On Tuesday she’s off to Brussels to ask the European Parliament to force the government to obey EU law. ALTMANN: Essentially there are laws in Europe which forbid governments from allowing people to lose their pensions in the way that has happened in the UK. The UK is the only country in Europe in which it can happen. And we have signed up to the laws which say government must make sure that pensions are protected for solvency, but it hasn’t worked. LEWIS: And Ros Altmann’s taking legal advice on Friday about the possibility of challenging the government’s rejection of the Ombudsman’s report in the English courts through what’s called a judicial review. ALTMANN: What we have to show is that the government’s response is not reasonable. Certainly on the initial advice we’ve had, it would appear that the government’s response does not look reasonable. For example, the Prime Minister said we can’t comply with the Ombudsman’s report because it would cost £15 billion. Here we are weeks later. Everybody has asked them to explain where they get the figures from and they have not been able to do so. Again ministers have said that leaflets that were given clearly warned people that there were risks or that they needed to take advice. That is simply not true. LEWIS: Ros Altmann. And we’ll keep you informed on how those appeals progress. Well that’s it for today. You can find out more from the BBC Action Line – 0800 044 044 – and of course our website, bbc.co.uk/moneybox, where you can listen to the programme again and have your say on using credit cards abroad. Some of you are. Also on Standard Life. I’m here on Monday with our phone-in Money Box Live – this week on borrowing and credit cards. Back with Money Box same time next week. Today the reporters were Jennifer Clarke and Sonia Rothwell, the producer Louise Greenwood, and I’m Paul Lewis.