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MONEY BOX 

Presenter:		Paul Lewis


TRANSMISSION	Sat 14th Sept  2002     1200 – 1230 RADIO 4
_______________________________________________________

ANNOUNCER :   Now on BBC Radio 4 FM time for MONEY BOX 
with Paul Lewis.

LEWIS:   Hello. In today's programme.... 
The government has extended help with winter heating costs to people 
living in warm places abroad but it still won’t help more than a million 
disabled people shivering in Britain.
 
HSBC and Barclaycard improve the deals they offer customers. Are the 
big banks listening to us at last?
                  
We investigate why some people have two National Insurance numbers 
and Louise Greenwood’s with me today…Louise

GREENWOOD:   I’m reporting on controversial plans that could mean 
big changes for local government pensions

LEWIS:   Thanks Louise, but first… (music) …music from the Caribbean 
island of Martinique where temperatures seldom fall below twenty five 
degrees but this year some people enjoying its warm tropical winter 
could get £200 from the UK government to help with their heating bills.   
It’s part of an extension of the winter fuel payment scheme which has 
been forced on the government by the European Union.  In future anyone 
who’s over 60 who’s qualified for the tax free £200 payment in Britain 
can now continue to claim it each year in nineteen other European 
countries including places like the Canary Islands, Majorca and the 
French Caribbean islands of Guadeloupe and Martinique.  Well with me 
is Mervyn Kohler from Help the Aged, Mervyn this seems a strange 
move…

KOHLER:   It is Paul.  It’s one of those wonderful bureaucratic wrinkles 
that we get at the edge of our benefits system isn’t it?  It would be a darn 
site simpler to pay people a decent pension in the first place.

LEWIS:   How many people will be affected?

KOHLER:   We gather from the DWP it’s likely to be about thirty 
thousand people so potentially that’s another six million pounds which is 
going to be spent on this benefit.

LEWIS:   To pay to people abroad.  It’s a bit strange but we have heard 
from one listener, Greg, who lives in France who says he won’t get this 
payment

GREG:   There is an injustice in that a person who’s in receipt of a 
winter fuel allowance today in the UK could move to another European 
Union country tomorrow and continue to receive that allowance but we 
could not.  Shouldn’t we be in receipt of the same benefits as those who 
happen to be in the UK?  It happens to get very cold in Burgundy, we 
often experience weeks in late January or February when the temperature 
doesn’t rise above, day or night, minus ten degrees centigrade.  And 
quite honestly £200 a year would really help towards our fuel bill.

LEWIS:   So Mervyn, Greg lives in France but he won’t get the 
payment?

KOHLER:   Yes, rules are rules. The rule is quite clear, you have got to 
be living, ordinarily resident in Britain and claiming the winter fuel 
payment in Britain before you actually move abroad.  So technically you 
could be resident here during this week and move abroad next week and 
still claim your winter fuel payment.

LEWIS:   And you’d get it year after year after year after that.  Now even 
in the UK there are people who don’t get it aren’t there.  People over 60 
who could get it, who are they?

KOHLER:   Mainly men between 60 and 65.  Anyone whom the DWP 
knows about ie they’re in receipt of a state pension or some other major 
benefit, they will get paid automatically but if the DWP do not know 
about you because you’re still in work and you don’t claim any of these 
benefits, you must claim and this is the week in which you will be 
judged eligible or not and you must get your claim form in by the end of 
this week if you want to receive that winter fuel payment before 
Christmas.

LEWIS:   Mervyn Kohler, thanks.  Well we’ve also had other 
complaints.  Aileen suffers from severe arthritis and diabetes but at 48 
she’s twelve years away from a winter fuel payment.

AILEEN:   Because we have to keep the heating costs down I have to 
wear lots of layers of clothing which makes my mobility worse.  We do 
at the moment spend all summer paying off our winter fuel bills and it’s 
a worry.  And to just get the £200 allowance would take the worry away 
as well as being able to keep the heating on for longer.

LEWIS:   Well with me is Mary Wilkinson, Editor of ‘Disability Now’ 
which has been campaigning for disabled people to qualify for Winter 
Fuel Payment.  Mary, how many people are there like Aileen who clearly 
need help but don’t get it?

WILKINSON:   Well we estimate there are 1.7 million disabled people, 
severely disabled people, those on the higher and medium rate of the care 
component and those on the higher rate of mobility compenent of the 
Disability Living Allowance

LEWIS:   They’ve already been assessed as very disabled and under sixty 
years old they don’t get any help

WILKINSON:   Yes

LEWIS:   So how much would it cost to extend it to them?

WILKINSON:   It would cost three hundred and forty million to extend 
it but I mean that is quite small compared to the one point seven billion 
that is currently being spent on all pensioners

LEWIS:   And has the government given any reason as to why it doesn’t 
paid it to these people?

WILKINSON:   It says older people are more eligible for it because 
many disabled people are elderly and therefore older people should be 
getting it and not disabled people.  They also say that there are many 
disability benefits that disabled people get to help them with the costs of 
disability and therefore it’s not necessary to extend the Winter Fuel 
Payment.  But we would argue obviously with all that.

LEWIS:   Well yes, I mean clearly Aileen gets those benefits but still 
feels she needs extra help in the winter so she doesn’t have to wear all 
her clothes all the time.  There has been a recommendation this week 
though that’s in your favour?

WILKINSON:   Yes we were very pleased about that.  The House of 
Commons Trade and Industry Committee is urging the Government to 
extend the Winter Fuel Payment to vulnerable groups, including disabled 
people whose condition required extra spending on heating.

LEWIS:   So the Government will have to respond to that report at some 
point

WILKINSON:   Well we hope so.  They haven’t responded so far

LEWIS:   How do you react, finally, to this extension to over 60s living 
in warm places when the people you’re concerned about can’t get the 
money at all?

WILKINSON:   Well I mean it’s a slap in the face for severely disabled 
people isn’t it? I mean people like Aileen, we know there are many of 
them, we did a survey of eighteen hundred severely disabled people and 
the examples that Aileen put forward of what she has to suffer are very 
typical of other people.

LEWIS:   Mary Wilkinson from Disability Now, thanks.  So remember, 
anyone born on the 22nd September 1942 or before can get the Winter 
Fuel Payment, regardless of their income.  Though if you’re in a care 
home or in hospital more than a year you can’t get it.  If you claim before 
this Friday as Mervyn Kohler said, you’ll get the payment before 
Christmas. More details of all that on our website 
www.bbc.co.uk\moneybox.

And now the first of our two good news bank stories.  HSBC is cutting 
its overdraft rates for six million personal customers.  Agreed overdrafts 
are coming down from more than 18% to just under 15% and the rate on 
unauthorized overdrafts is being halved – from nearly 30% to the same 
rate of 14.8%.  People who inadvertently slip into the red will no longer 
have to pay penalties, though frequent transgressions will cost you £18 a 
day.  The new standard overdraft rate of 14.8% is good compared with 
other high street banks but still a lot more than some of their smaller 
competitors.  Clive Wood is HSBC’s Head of Banking. I asked him if he 
was just the best of the worst?

WOOD:   Well I think you’ve got to look at the package in the round.  If 
you take some of the newer banks they still charge rates of approaching 
30% for unauthorized overdrafts, we don’t.  They do charge for 
occasional overdrafts, we don’t, they charge for small overdrafts.  The 
price of the overdraft is really not the issue here, it’s what happens when 
you stray outside your agreed facility.

LEWIS:   It’s what you want to make the issue because you’re actually 
not very good on the thing you don’t want to make the issue on.  I mean 
the issue of unauthorised overdrafts is obviously important to us, 
mistakes happen we get charged, people get annoyed.  You’re solving 
that problem, well done.  But you’re still very expensive for somebody 
who wants to use an overdraft as a way of borrowing money, authorized 
and officially over a period of time.  You’re still more than twice as 
expensive as your cheapest competitor, cahoot, which is an internet 
bank.

WOOD:   They are an Internet bank and yes we acknowledge here that 
the rates we charge for overdrafts do make a contribution towards 
providing free banking, a contribution to a network of seventeen hundred 
branches.  I think most customers understand that and are happy with 
that sort of linkage.

LEWIS:   What about this issue of paying us interest on money of ours 
that we keep in your bank.  Why don’t you pay us interest on that?

WOOD:   We do have no current plans to increase the rate of credit 
increase we pay on current accounts.

LEWIS:   Remind us what that is

WOOD:   It’s 0.1% on our mass bank account.  Now the reason for that 
is that we believe that for the great, great majority of customers service is 
a far more important factor than interest rate.  If you’ve got average 
credit balance of say £500, then an interest rate of say 2% is less than £1 
a month, before tax.  What’s far more important is service, is having 
branches, it’s having free banking, ATM networks etc.  These things are 
important. We’ve got lots of customers still walking through our doors 
who appreciate that service.

LEWIS:   Clive Wood.  HSBC’s Head of Banking.  So how does this 
offer compare with others?  We’ve surveyed fifteen banks and building 
societies and Louise Greenwood has been studying the results.  Louise,

GREENWOOD:   Yes and the results confirm that having an 
unauthorized overdraft really is the most expensive way to borrow 
money.  The highest rate of all is charged by the Nat West where it costs 
you a whopping 33.8%.  In fact the vast majority of banks, Barclays, 
Halifax, Bank of Scotland, and even the Internet providers like cahoot 
and Smile charge well over 20% if you accidentally go overdrawn.  The 
cheapest unauthorised overdraft came from the Alliance and Leicester 
who charge 12%.

LEWIS:   So all of those best avoided and indeed the HSBC deal at 14.8 
is quite good for unauthorised borrowing isn’t it?  But Louise what’s the 
cheapest way to borrow short term?

GREENWOOD:	Well you could go for a credit card with these 
same banks, Royal Bank of Scotland, Bank of Scotland and the Abbey 
National are all offering six months interest free credit to new customers 
but of course keep an eye on those spending levels.

LEWIS:   Thanks Louise.  And full details of that survey of course on 
our website, www.bbc.co.uk\moneybox

Now is your National Insurance number correct?  Not something we 
worry about most of the time but the Inland Revenue has discovered that 
some of us have been using the wrong number for years.  The Revenue 
started a fresh checking exercise a few months ago, partly to prepare for 
the introduction of tax credits in April.  But when it matched records on 
the National Insurance computer with those on computers used by tax 
offices it discovered that some people are using the wrong National 
Insurance number.  Like Sarah, who e-mailed us from Manchester

SARAH:   A couple of weeks ago I got this letter from the NI integrity 
section of the Inland Revenue saying that they were writing to me 
because their records show that I was using an incorrect National 
Insurance number.  This was a great surprise to me because as far as I’m 
concerned I’ve used the same National Insurance number all my life, 
since I’ve been eighteen, so that’s about twenty years now.  I assumed it 
was their mistake so the next day I rang them to check if it was a mistake 
and they said it wasn’t.

LEWIS:   And what are your concerns about this?

SARAH:   The letter went on to say that I should tell my employer what 
my National Insurance number was and failure to do so might mean they 
have difficulty in crediting my National Insurance contributions to my 
account.  So my concern is that the records won’t tally and that some 
National Insurance contributions might be lost in the process, possibly 
affected my future entitlement to benefits and pensions.  When I spoke to 
them on the phone they said over a million letters had been sent out and 
they realised that the letter had caused a lot of people to panic and they 
would be sending out another letter within the next week or so that gave 
further details but that hasn’t arrived yet.

LEWIS:   Well one listener’s story.  In Brighton listening to that is Tony 
Collins, he’s Executive Editor of Computer Weekly.  He follows the 
problems of government computer systems.  Tony, how many people do 
have the wrong National Insurance number?

COLLINS:   It’s very difficult to say.  What we do know is that we 
received some internal documentation a couple of years ago showing that 
there is really a bureaucratic mess worse than many people could 
imagine.  They have, according to their internal records, lost up to five 
million taxpayers’ records while trying to match those records, National 
Insurance records, with the tax computer system.  Partly as a result of the 
National Insurance numbers being wrong and what they’re trying to do, 
it’s slightly misleading of them to say they’ve only been doing it in the 
last couple of months, because what they’re doing is what they call a data 
cleansing exercise, which is trying to ensure that everyone has one 
correct National Insurance number.  It’s a little amusing to see that they 
appear to be suggesting it’s Sarah’s fault that she’s got the wrong 
National Insurance number.  It’s possible but it’s also possible that they 
made the mistake.

LEWIS:   Yes, I mean it is possible isn’t it that in the course of it being 
written down by one employer and then another and perhaps by Sarah 
herself, someone’s written it down wrongly – though she says she has 
had that same, what we now think is a wrong number, all her life

COLLINS:   Well it’s clear from the internal documentation that there’s 
a lot of people with a lot of incorrect numbers and it’s not always their 
fault.

LEWIS:   And could people lose their rights to pensions or benefits as a 
result of these mistakes?

COLLINS:    Well of course if they haven’t recorded National Insurance 
contributions on the system then the system won’t recognise those 
contributions and it could affect peoples’ pension entitlements.  I would 
suggest quite strongly that people should contact the Inland Revenue and 
make sure that they do have a correct record of their National Insurance 
contributions.

LEWIS:   And if people do suffer a loss, very briefly, can they claim 
compensation?

COLLINGS:   Well I think that’s why the letter to Sarah is very carefully 
worded and implies that it’s not official error – which is the term used 
when they can claim compensation.  But having said that yes people can 
claim compensation if it’s the Revenue’s fault.

LEWIS:   And they lose money.  Tony Collins from Computer Weekly, 
thanks.  And we asked the Inland Revenue, of course, onto Money Box 
to reassure us about all this but they refused to come on.  They said 
people should correct their number for the future if they get a letter as 
Sarah has and if they want to check their contributions for pensions and 
benefits so that they’ve been correctly recorded, they can ask for a 
pension forecast from the Department for Work and Pensions.  More on 
that on our website.

The TUC conference in Blackpool this week called on the government to 
protect pensions.  For many workers in private companies a secure 
pensions based on their final salary has been replaced by the lower and 
riskier money purchase pension where retirement income depends on 
stock market performance.  Until now worker in the public sector have 
been protected from this change, guaranteed a pension based on their pay 
when they retire.  But this week the government said it was considering a 
new compromise deal that could mean big changes.  Louise 
Greenwood’s been investigating…

GREENWOOD:   Yes it’s called the career average pension and it 
depends on your wage over your working life.  There are two million 
people across the country employed in local government, everyone from 
social workers to town planners, librarians to street cleaners.  As we’ve 
reported on Money Box in the past many local authorities are struggling 
to maintain the generous pension deals offered to these workers.  Indeed 
some have had to raise Council Tax bills to meet the shortfall in their 
pension fund.   This week the Office of the Deputy Prime Minister said 
its Local Government Pension Group was looking at new ways to plug 
the gap.  Local Government Minister Chris Leslie says the new career 
average pension could suit some workers better.

LESLIE:   It’s quite well known that the final salary scheme has a 
number of attractions but all we’re doing is looking at the context of how 
employment is changing in local government and finding ways of 
thinking whether there can be enhancements for those who might find 
that actually the current scheme is too rigid and not serving their best 
interest.

GREENWOOD:   This is because of the way the pension works.  Put 
simply, while the final salary scheme pays a proportion of the wage you 
were getting just before you retired career average pensions take the 
number of years you spent with your employer and pay a percentage of 
what you earned in each of those years.  It could prove fairer for part 
timers whose earnings vary and it also takes account of bonuses and 
overtime.  And crucially it removes the uncertainty of the money 
purchase scheme where there are no guarantees.  Its popularity is 
growing in the private sector.  This week Pittards, a small leather goods 
company in Yeovil, said it would offer the career average pension to its 
staff.  Tesco has already introduced it for the firm’s two hundred 
thousand employees.  Andrew Higginson is Tesco’s Finance Director

HIGGINSON:   Like all companies, you know, we’ve looked at the 
rising cost of pensions and tried to decide what’s the best way of going 
forward.  We didn’t feel that money purchase was fair because, you 
know, there is such a risk on the employee and the pensioner.  So we 
looked for a scheme whereby we could get a bit more certainty into our 
liabilities so that we could manage the position a bit more carefully but 
was still the right thing for staff in terms of guaranteeing them a 
retirement income.

GREENWOOD:   While local government workers are often on a low 
wage the guarantee of a secure pension based on a final salary has always 
been one of the job’s biggest attractions.  For many who reach the height 
of their earning power just before they retire a career average pension 
would not be nearly as generous.  Glyn Jenkins, National Pensions 
Officer with Unison, says it’s a scheme he can’t support even though 
he’s a member of the committee which floated the idea 

JENKINS:   My gut reaction is that I would be very concerned with 
career average as opposed to final salary because pensions is a very long 
term business and it’s quite likely that for most people they would do 
better under a final salary model, even now, than a career average.

GREENWOOD:   But across the pensions industry the scheme has its 
admirers.  Christine Farnish, Chief Executive of the National 
Association of Pension Funds says local government is facing stark 
choices in its pensions provision and this compromise is arguably a far 
better deal than the money purchase option.

FARNISH:   I think this is a welcome development.  If we’re not careful 
we’re going to see increasing polarisation between public and private 
sectors with those people working in the private sector looking very 
enviously at their colleagues over in the public sector whose pensions are 
being subsidised by them and comparing them to the far poorer pension 
provisions that maybe they have.  We do need to be realistic, many 
schemes will have to modify going forward if they’re going to continue 
at all.

LEWIS:   Christine Farnish.  So Louise how seriously is this idea being 
taken?

GREENWOOD:   Well most involved are playing it down.  Chris Leslie, 
the minister we spoke to, stressed there was no question of the final 
salary scheme closing to local government employees but there’s no 
doubt that the burden of these pensions is growing and this scheme could 
prove attractive for local authorities struggling to keep their council tax 
bills down.  However Unison the union which represents many of these 
workers has already warned that any threat to the current final salary 
pension will lead to strike action.

LEWIS:   Thanks Louise.  And if you have a question about pensions 
you can call our phone-in Money Box Live on Monday, 3pm, with 
Vincent Duggleby.  3pm here on Radio 4

Now we heard earlier in the programme about HSBC listening to 
customers and making changes, and this week another major financial 
institution has done the same.  A year ago Barclaycard planned to scrap 
free flights and other gifts which it gave to members of its Rewards 
scheme.  Here is how one loyal customer reacted on Money Box last 
autumn

MAN:   I understand that Barclaycard are planning to bring out another 
brochure at the beginning of November and I’m urging customers, look 
at that, and if it’s no better than what you’ve just brought out on 
November 5th they should put their Barclaycard and the brochure on the 
bonfire and take their custom elsewhere

LEWIS:   Well that was a year ago and after protests like that the scheme 
was changed to reinstate free flights and other popular gifts.  Now 
Barclaycard is going further with a new loyalty scheme.  It’s called 
Nectar and it’ll link Barclaycard customers with Sainsbury, BP and 
Debenhams.  It will provide benefits ranging from videos at Blockbuster 
to free flights.  Well live now to Peter Crook, Barclaycard’s Managing 
Director.  Peter Crook, did you get it wrong a year ago and are you now 
listening to your customers?

CROOK: Well I think we always listen to our customers but we did learn 
some important lessons about rewards last year.  Most importantly that 
our customers like rewards and we need to keep them fresh and exciting 
and I’m delighted to say that Nectar does just that by offering better 
rewards and the opportunity to earn them more quickly

LEWIS:   And what about those many, many, hundreds of thousands of 
customers who like Rewards, they’ve got Rewards points, what happens 
to the points they’ve earned so far?

CROOK:   Well a customer with Rewards points has a choice.  They can 
join Nectar now and transfer their existing Rewards points into the new 
scheme.  Barclaycard customers will receive five Nectar points for every 
one Barclaycard Reward point that they currently have but to cater for 
customers who have set their heart on a particular reward from our 
current brochure we’ll also be keeping our existing scheme running for a 
limited period of time and customers will have until the end of the year 
to continue earning Rewards points and until February next year to make 
a redemption.

LEWIS:   But if they do nothing by February next year those points will 
be lost?

CROOK:   Yes that’s right they will be.  And that’s why we’ve written to 
all our Reward customers in June informing them about the changes.  
They’ll also be getting a reminder as part of the Nectar launch mailing 
and some more reminders as the closure of the old scheme approaches.

LEWIS:   Why this link with all these retailers, these three big retailers?

CROOK:   Well I guess really when we looked at rewards we decided we 
could do something much better for our customers by getting together 
with some of the big names and it does offer the chance for our 
customers to earn rewards much more quickly, particularly if they shop 
in these places with a Barclaycard, then they’ll earn two lots of points.

LEWIS:   Does it also mean though that we’re going to get four times as 
much junk mail because they’ll all have them on their database and 
they’ll all be sending them offers through the post they may not want?

CROOK:   Not at all.  The scheme is run for us by a third party, they 
administer the Nectar scheme so we’re all part of that scheme and Nectar 
will actually send a quarterly statement to each customer which sets out 
the points they’ve earned from each of the sponsor companies.

LEWIS:   So will more retailers join in or is that it?  Sainsbury, BP and 
Debenhams?

CROOK:   No by no means.  We’ve got plans to bring in more retailers 
to make the scheme even bigger and better and I think you can expect to 
see some more big names to come in early next year.

LEWIS:   Now apart from Nectar you’re also cutting your interest rates, 
which has been a source of great criticism for Barclaycard hasn’t it?  Is 
this also a response to the people who are leaving you for cheaper cards?

CROOK:   Well Barclaycard’s the market leader and we want to stay the 
market leader…

LEWIS:   You mean you’ve got more customers than anybody else but 
you’re not the cheapest, you’re not the market leader in that sense are 
you?

CROOK:   We’ve got more customers than anybody else and we’re 
striving to provide our customers with the best deals so they don’t have 
to shop around every six months when the teaser rate expires on one of 
these 0% offers

LEWIS:   A teaser rate at 0% but what about the standard rate, what will 
you be offering your customers?

CROOK:   Well our starting rate is now 11.9% APR

LEWIS:   And is that for everybody or just for people with very, very 
good credit records?

CROOK:   No we have a range of prices so we actually price from 11.9 
upwards to 24.9

LEWIS:   Right so that’s your best rate, but certainly some improvement, 
thanks very much for talking to us Peter Crook Managing Director of 
Barclaycard.  And full details of how that will affect people with 
Sainsbury, BP or Debenhams cards are on our website.

Now Louise, some big retailers are being told to drop adverts for interest 
free credit?

GREENWOOD:   Yes.  Comet, Powerhouse, Time Computers and 
dabs.com, who all sell electrical goods, and the furniture store Courts, 
have all been warned by the Office of Fair Trading that their adverts are 
misleading and could break the law.  Consumer groups have long 
complained that while the offers of 0% APR last for a year failure to pay 
the balance by a set date means customers are charged interest from the 
date at which the item was purchased and often end up paying 30% over 
the odds.  Dixons and Allied Carpets have already dropped the adverts.

LEWIS:   Thanks Louise.  And that’s all we have time for today.  
There’s more information of course on today’s stories on our wonderful 
website www.bbc.co.uk\moneybox where you’ll also find details of how 
to contact us.  Alternatively call the BBC Actionline 0800 044 044, calls 
are free 0800 044 044.  Personal finance stories all week on Working 
Lunch BBC2 at 12.30, our pensions phone-in is on Monday at 3, Money 
Box Live with Vincent Duggleby.  I’m back with Money Box next week, 
today the reporter was Louise Greenwood, the producer was Jessica 
Dunbar and I’m Paul Lewis.
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