Money digest: today’s need-to-know financial news | 25 May 2016

Another day, another story of ineptitude by the taxman. According to The Telegraph and other news outlets, more than three million people may have paid the wrong tax after chaos at HM Revenue and Customs left callers waiting for over an hour to speak to staff last year. In a savage report by the National Audit Office, it said that a decision to cut jobs in HMRC meant that call waiting times tripled to 47 minutes last October as paper tax returns were due. The Whitehall auditors said HMRC got its timing badly wrong when rolling out its digital strategy, which involved moving more personal taxpayers online and reducing demand for telephone and postal contact. More than 5,000 people were moved away from its call centres at a critical time. The cost to the economy of leaving millions of callers hanging on the line – which is officially priced at £17 an hour – was £97 million, up by 50 per cent in three years. The Telegraph also reports on a new study by Relate. The counselling charity found that money can help make marriages more stable but also make couples more likely to get divorced. The charity found that the number of couples whose marriages or long-term relationships are in trouble peaked around the time of the last recession and has since fallen back, adding weight to the idea that financial instability puts strain on family life. Pensions cheer The Daily Express devotes its front page to pensions today. According to a study by Close Brothers Asset Management, Britain’s pension pots are nearing a record high as savers benefit from a resurgent stockmarket. The average fund has grown by 136 per cent since 2002, with younger generations benefiting the most. Workers aged 25 to 34 have seen a 168 per cent rise in 14 years while those nearing retirement will benefit from a 120 per cent surge. The pension boom is the result of buoyant stocks and shares, the report explains. The UK now has more than 12 million defined contribution pension savers. These pots are taking over from the final salary defined benefit schemes that many employers are now closing because they are too costly. Help for homeowners Today’s Times says that homeowners could switch mortgage providers in a week from next year under plans to boost consumer power. Mobile phone providers would also have to unlock out-of-contract handsets free of charge to make it easier to change suppliers and save money. The agreement will save consumers about £48 million a year in unlocking charges and will be announced today as ministers try to extend seven-day switching to most services. Sajid Javid, the business secretary, will acknowledge that many consumers fear that changing some services is too cumbersome and difficult. In the most ambitious proposal of the Better Markets Bill, announced in the Queen’s Speech last week, mortgage providers will be asked to offer the same standard of service that banks must offer those who change their current accounts. Typically it takes between four and eight weeks for customers to change mortgages but current account holders are guaranteed that all changes will be completed within seven working days, with the bank liable for any errors. Meanwhile, the Daily Mail reports that Nationwide is set to launch mortgages that allow young people to get on the housing ladder by using wealth tied up in their parents’ or grandparents’ property. Bosses at the building society said they wanted to make it easier for relatives to pass on cash to first-time buyers.

And they also pledged to help older people release money from their homes to ease financial worries in retirement. Nationwide unveiled the plans yesterday as it announced a 23 per cent rise in profits to £1.3 billion for the year to April.

The paper also reports that the former chairman of the City watchdog is urging the Government to make people in their 50s work until the age of 70 before they can claim a state pension.

Lord Adair Turner, who headed the Financial Services Authority, will argue at a government pensions review that the age should be raised to cut costs. He wants the official state pension age to be increased to 70 by 2030. This would force millions of people in their 50s to wait up to three years longer to draw their pensions.

The state pension age is already set to rise to 66 by 2020 and 68 by 2046. However, Lord Turner, who served as head of the Pensions Commission, said those affected should be given more than the current £155.65 a week.

Brexit fears Interest rates may have to rise in the face of a slowing economy if Britain votes to leave the EU, according to the Governor of the Bank of England. Mark Carney warned that policymakers would have limited space to stimulate the economy after a Brexit vote because a sharp slowdown in growth could be accompanied by a spike in inflation. Carney also said that mortgage costs for homeowners could rise even if the Bank cut rates to boost demand. Money worries

The British workforce is burdened by financial worries, and it’s costing employers an estimated £120.7 billion a year. That’s the key finding of a new report looking at the state of the nation’s finances, commissioned by alternative finance provider, Neyber.

With the UK economy lacking financial resilience, the research reveals how personal financial stresses are actively contributing to the reduction in GDP; 17.5m hours are lost by employees taking time off work as a result of financial stress.

The study highlights the effect financial worries can have on our efficiency at work – more than half of employees said being under financial pressure affects their behaviour and ability to perform their job in the workplace – rising to 62 per cent for those under 34. A further 51 per cent say financial pressure affects their relationship with colleagues and 46 per cent say it affects their relationship with their line manager.

Progress on flooding claims

The number of insurance claims for flooded homes and businesses made in the wake of December’s storms has climbed to more than 15,000 with 85 per cent of these either fully or partly paid out so far, the Association of British Insurers said.

Holiday gloom Aviva, the UK’s leading insurer, has revealed it paid out over £19.2 million last year to UK holidaymakers whose holidays had to be cancelled before they started. Despite the number of holiday cancellations, just a quarter of would-be holidaymakers take out insurance at the same time as booking their trip.  A third buy it the month before their trip and 10 per cent of travellers don’t bother with  insurance at all, leaving themselves at risk from hefty medical bills or losing their holidays altogether. Across its travel insurance business, the insurer received 30,000 claims from disappointed travellers whose holiday plans had to be put on hold due to family bereavements, illness or other circumstances.