The Obscurer

Category: Business

It’s A Wonderfuel Life

I can’t say I’m happy about the changes over at Eastlands. I actually went to the City-Sunderland game – my first live match for some years – but all through Saturday evening I kept mulling over what I feel has been a disastrous and self-defeating decision. It’s truly shocking. Just when did they change the supplier for the Meat and Potato pies? I’d been looking forward to their unique qualities all Saturday and I couldn’t believe it when they fobbed me off with some bog-standard Holland’s effort for the absurd sum of £2.50. I blame the Cook. But that’s that anyway, I’m done with them; that was the last pie I ever buy at the City of Manchester Stadium.

Ha-ha, do you see what I did there? Meanwhile I just find it depressing that City’s current owners – who hitherto had seemed to be doing just about everything right at the club – decided to take a leaf out of the Big Book of Football Stereotypes and act in the impatient and short-termist way that foreign billionaire owners are expected to. It doesn’t take much to squander the vast reserves of goodwill I had for them, as I was grateful that they took over from Thaksin Shinawatra then behaved impeccably and honourably from thereon in; but that’s what they’ve done, and it will be a long hard slog for them to earn my respect again (although, being a fickle fan, winning some trophies will go some way towards doing that, no doubt).

But I’ll give them their due; they’re feeling their way into this football club ownership lark and I know where they’re coming from, as I’m feeling my way back into blogging since my recent hiatus. That’s perhaps why, on reflection, I wish I hadn’t bothered with that last post on the bankers’ bonuses, a clumsy collection of loose semi-thought bundled together in a post, the existence of which is partly thanks to the fact that I had a free afternoon. So as I’m approaching my usual Christmas sabbatical I’ll try to tidy this place up a bit and not make such a mistake again. Some hope. But in that vein I’ve ditched those weekly twitter digests that were just cluttering the place up in the absence of any other posts. If you want to read my twitterings then you can always follow them here, and they are also duplicated on my tumblelog over here; there really is no need to triplicate them, so now, if I can’t think of anything worthy of a full post then this site will simply go quiet, but I will always be back.

While in the mood to tidy up I think I’ll finish off this story from last year, because I hate leaving loose ends lying around, I really do. You’ll recall, perhaps, that British Gas had doubled our direct debit payment, despite our being in credit? Well they had. And last Winter came and went, we shovelled money to the gas board hand over fist, and in the Spring we found that those payments had just about covered our seasonal usage, and so we were still over a hundred pounds in credit. Time, perhaps, to rethink the level of our monthly payment? Well British Telecom and E-On thought so; our telecoms provider gave us two free months as we were in credit with them, while our electricity supplier refunded our credit and lowered our monthly payment. But from British Gas we heard nothing.

Summer arrived, then Autumn, during which, of course, our gas usage plummeted while our payments remained sky high, and by the time of our October statement we were now some £315 in credit. Time, now, surely, to readjust our payment amount? I’d have thought so, but perusing our gas bill I found a notice warning against this, as British Gas said that they strongly suggest we all wait until the Spring before any payment amount is altered. If only they’d stuck to this policy the previous year, when they’d hiked our monthly direct debit in Summer and Autumn; then, perhaps, our account wouldn’t have gone in credit to the value of China’s trade surplus? Well anyway, I couldn’t be bothered waiting until Spring, and I couldn’t be bothered negotiating with British Gas, so we skipped over to E-On for a dual-fuel account, a process that took around six weeks, buy which time our account had become £415 in credit. Only then, once we had left, did British Gas finally repay us.

So a happy story in the end in which everyone is a winner. E-On has a new customer; British Gas earned a paltry sum of interest on our money; and I have a tidy lump-sum to spend as I wish. I know I could moan about British Gas earning interest that should have been mine, but unless yields on pissing money against the wall have risen sharply in the past year I wouldn’t have done anything of note with that spare cash. As it is, their crazy direct debit policy has turned out to be an unlikely savings plan. So ultimately, and ironically, I end this tale with a sincere and honest “Thank you, British Gas”; because this year, after a fashion, Christmas is on you.

The "More" Gauge

“Congratulations, Mr Quinn; you are now the proud owner of an endowment policy to pay off your newly acquired mortgage!”
I was slightly confused as I shook the unindependent financial advisor’s hand, not least in part because my surname is not Quinn, and it would still be some years before I would decide to adopt that moniker for my online shenanigans. How was I to know that she would call me by my future pseudonym to ease the telling of this story? Still, my confusion was as nothing compared to the apprehension I felt at buying a house and taking on an accompanying twenty-five year mortgage single-handedly; but I had done my sums, I thought I could afford it, and unless I wanted to live with my parents for the rest of my natural it was something that just had to be done.

There was a sharp knock at the door which then opened. A fresh-faced member of staff stuck his head into the room and blurted breathlessly,

“Stop selling endowment policies. This minute. We’ve just found out…they’re crap.”

The unindependent advisor’s face changed from the beam of financial wizard who had just earned a bundle of commission to the scowl of a cheap conjurer who had realised she had been rumbled.

“Get out…GET OUT!” she screamed, as I was ushered from the room.

And so it was that I became the last person in Britain to take possession of an endowment mortgage.

But you know, things didn’t turn out too badly for me. A few years later I sold that house and moved in with my then girlfriend. The equity on the house paid for all of our wedding and half of the purple Rover 200 that still adorns our drive. And even though I’d flogged that house and rid myself of that mortgage, I still kept on paying into the endowment policy as an investment, anticipating a tidy lump sum in the eventual future. If I had taken out a repayment mortgage rather than an endowment then on selling the house I wouldn’t have had much to show for it, having done little more than to have paid off a few years worth of interest on a mortgage for a house that was no longer mine.

Over the years the name of the company that runs my endowment policy has changed as often as that of a firm of dodgy builders you may see on an edition of Rogue Traders; from Black Horse, to Lloyds TSB, to Scottish Widows. The name has changed, but what has stayed the same has been the nature of the regular letters I’ve received from them, reporting on their progress in investing my cash is a way that should – in theory – earn me a sum of money capable of covering the cost of the mortgage they still believe I possess. Despite the many fluctuations in the economic outlook over the past decade, my provider has consistently warned me that they are failing to earn a sufficient return on their investments to meet the price of my old house (minus deposit). Since there would have been no such concerns if I had taken out a repayment mortgage, then another way of putting it could be that I have been paying money to some so-called financial experts in the hope that they would invest it wisely, but the return on that investment currently seems to have failed to match – or has in fact been outperformed by – the returns on a simple repayment loan set at an extremely low level of interest.

So what to do? Well, nothing, basically. After all, as I said, even if my endowment policy doesn’t cover the cost of my mortgage when it matures, that mortgage and house are long gone as far as I am concerned, and so any shortfall is irrelevant in that regard. But recently there has been a change of tone in Black Horse Lloyds TSB Scottish Widows’ correspondence. Sure, they are still admitting that they’re not going to get anywhere near hitting their nominal target, but now it seems the time for prevaricating is over: action is needed, and needed NOW! I concur of course; if they are failing in their job then they really should take action to sort things out. Yet strangely, rather than detail the actions they are taking to put things right, instead the letter informs me of the sort of actions I should be taking; rather than it being a case of them getting their act together, instead it seems that I am the one who needs to pull up my socks and make arrangements to cover this shortfall that they have created (although apologies and an acknowledgement that it is their failures that have led to this shortfall, there are none).

They are nothing if not helpful, though, my endowment policy provider, whatever it is they’re called today. They haven’t just abandoned me to try to find my own way out of this crisis. Oh no; their letter runs through a number of options I can take so to aid me in my plight. They suggest I could change part of my mortgage to a repayment loan (not feasible in my case, since I don’t have that mortgage any more), I could set up an additional savings scheme (to pay for a house I no longer own) or I could vary my endowment plan by increasing my payments into it (or, in other words, they are saying “look, I know we’re not on track to get anywhere near to earning you the lump sum we said we would do, but you could always bung us a load more money to see if we can get it right this time, eh?”) None of these options seem to me to be worthwhile, tempting, or in some cases physically possible.

But Scottish Widows hasn’t finished yet. They’ve clearly read up on Nudge, and want to help me to make the right choice. For them. So they say that all they require is a simple signature on a piece of paper and in a trice they are willing to authorise an increase in my payments into the policy by some 25%, and that should solve all my shortfall problems. Perhaps. Well, at least until the next set of circumstances conspire against them and their smart investing ways. Oh yes, and smuggled away in the small print it mentions in passing that if I refuse to give them any more money they will in turn refuse to “lifestyle” my endowment policy; in other words, in the closing years of my policy they will no longer transfer some of my units into lower risk investments, so to protect against sudden drops in the stock market in my policy’s final days. Which is nice of them.

Now, giving these folk another wedge of my cash is the last thing I want to do, frankly, but I would quite like to keep that lifestyling bit if you don’t mind. A conundrum then. Which options should I choose? I need a second opinion. Fortunately Scottish Widows are also forced to include a leaflet from the FSA with their correspondence, and that leaflet also handily goes through all the options I can take to deal with my theoretical shortfall, indicating the pros and cons for each choice by a selection of ticks, crosses and question marks. Repaying my mortgage early by paying a lump sum or overpaying each month, for example, earns two ticks ( “this will reduce the amount you owe…” and “it may be better value that saving up separately…”) and two question marks ( “you should check whether your lender will make an early repayment charge…” and “you should check when your lender will give you the benefit from extra payments…”). So, converting part of the mortgage to a repayment loan earns 3 ticks; converting the whole mortgage to a repayment, 2 ticks, 1 cross and a question mark. Starting an additional cash savings plan gets another 3 ticks, while doing the same with a stocks and shares ISA gets 1 tick, 2 crosses and a question mark. As for altering the endowment policy: extending the term gets just 1 tick, 3 crosses and 2 question marks, while bringing up the rear with 3 crosses, 2 question marks and not a single tick is the option to pay more into my existing endowment policy. Even though I could suggest a fourth cross I feel the FSA has omitted there – that “it’s probably not a great idea to shovel yet more money to the people whose investments have created your shortfall in the first place” – this is still the option the FSA feels is the worst possible available, and it is also the option that Scottish Widows wants to bully me into taking. And indeed will punish me if I don’t take it.

As I say, this isn’t a major problem for me as my endowment policy is designed to pay for a house that is now owned by other people (although as my wife’s endowment policy is also currently going south we may need mine to swing into action to pay for the house we do live in.) Still, it will be pretty annoying if my continued investment suffers due to a lack of lifestyling should my endowment policy happen to mature the day after a Lehman Brothers-type bankruptcy and accompanying stock market collapse. More annoying is the principle; that Scottish Widows feels it can just request I pay more money into an endowment policy that by the very nature of the request they admit is to some degree failing, and unilaterally alter the terms and conditions on that policy should I refuse to comply.

All of which is a rather roundabout way of saying that I really must get around to digging out the helpline number and giving the FSA a ring. What do you reckon? It’s not as if they have any more pressing matters to deal with at the moment.

Life’s A Gas

Donald S writes an open letter to his gas supplier.

Dear Atlantic Gas

Quick question about a letter you just sent me last week, dated October 2008. I don’t understand how you can write to me in October telling me that gas prices “will” (future tense) increase from 25 August 2008 (2 months ago). This is gas I’ve already used at an agreed price. You surely aren’t allowed to raise prices retrospectively for goods I’ve already bought? After all, PC World can’t come and call on me for an extra tenner for that Epson printer they sold me at 49.99 last month. Why are you allowed to do the equivalent?

I know the feeling, or rather I know a similar feeling. We recently received our statement from British Gas wherein they announced that it was their sad duty to inform us that our direct debit payment would be increasing from £63 to £87 a month. Curious, I thought, since the statement showed that we are over £120 in credit with them as it is, having paid them £189 this quarter while using £50 worth of gas; but winter’s a-coming, and as they explained, over the last 6 months wholesale gas prices has risen by over 60%, and British Gas’s new prices came into effect on the 30th of July, so this explains the dramatic rise.

Or does it? Because it was only three months ago in our previous statement that British Gas said they were increasing our monthly payment from £42 to £63, when we were just £15 in debit at the time and heading into those lean summer months. So how can a 60% increase in the price of gas in the last 6 months translate into a doubling of our monthly payment in the course of 3 months? Well, it evidently can, but it shouldn’t. Perhaps they just want my money to be earning interest in their bank account rather than in mine.

British Gas helpfully included a little brochure with our statement explaining how they work out the monthly direct debit charge, taking into account gas usage as averaged over the year, long term weather forecasts, current payment levels and so on. It’s pretty easy to work out, I can only think it a shame that the cack-handed all-fingers-and-thumbs numpty with the calculator who came up with our new monthly figure must have done it last thing on a Friday when his mind was already in the pub and without him referring to any of our previous statements.

Now I know that I could phone up British Gas and point all this out to them, perhaps ask if they can come up with a more sensible payment figure which has some basis in reality, but I’ve been there before and I have bad memories of the last time I tried such a tack. The friendly call handler agreed that the new payment at the time of £45 was indeed way too high and she said she would lower it to more a common sense figure of £28. Job done. In fact all that happened was that we continued to be charged £45 but our payment date moved from the 1st of the month to the 28th, meaning we actually paid them £45 twice in the month they made the change. Once bitten, and all that, so I’m leaving it be for now.

Instead I can guarantee that history will repeat itself in another way; come April, British Gas will realise, not for the first time, that we’ve massively overpaid for the gas we’ve used, they’ll again send us a cheque to repay what they owe us, and then they’ll once more concoct a brand new but lower monthly direct debit payment, but this time one so low that it won’t even come close to covering our consumption of gas.

Then, and only then, will I be tempted to call them up and tell them not to bother, that they can spare themselves the effort; I’ll reach for that handy guide to how they figure out the monthly direct debit and I’ll do their work for them, simply presenting them with my new, higher, reality-based monthly charge and telling them that they can like it or lump it. Either that or I’ll just pluck a new figure out of mid air, for all the difference it would make.

What A Shower

Fund manager Mark Mobius of Templeton Asset Management was interviewed about investing in emerging markets on the BBC’s Working Lunch programme last week. The interviewer, Nik Wood, began by asking just what an emerging market is.

It was actually the IFC, the International Finance Corporation at the World Bank. They were struggling with what to do with these underdeveloped countries, the poor. They were referred to as underdeveloped, poor, the South, so forth and so on, and … one gentleman from the IFC was in his shower in Washington one morning and he came up with the idea of emerging market which was a more optimistic name.

The shower? I have to wonder what IFC man was up to in the shower when the word “emerging” popped into his head, but I really don’t think I want to know.

Inside Out

Oh dear.

Property investment training firm Inside Track, which claims to have created hundreds of property millionaires in the UK, filed for administration on Tuesday, the latest victim of Britain’s housing downturn.

The company, which says it has trained more than 100,000 individuals, said demand for buy-to-let landlord training had shrivelled as mortgages became more expensive and less accessible and as housing prices sagged.

So it looks as if my dreams of travelling in time will remain just that; looks. On a more positive note, however, perhaps I have now received the last of their smuggy and disdainful (but eminently compostable) correspondence that boasted of how you just can’t lose in the property market – especially if you stump up some £3000 in hard cash to pay to Inside Track in the first instance – and which gloatingly mocked and cackled at all those other sad, foolish saps and loser-types; too weak, too timid or just too alert to leap aboard the good boat Inside Track as amazingly it rose with the high tide but then strangely failed to defy the laws of gravity once that swell had subsided.

Which only goes to prove the age-old adage that a Devil in hand can butter no goose on time.