Christmas 2010 spend to hit £50 billion

This Christmas is expected to see record spending levels, despite the freezing weather that hit the UK earlier in the month

Barclays recently released figures predicting a record £48.9 billion spend over the Christmas period - an 8% increase from last year.

It has been suggested that the quieter high streets seen earlier in the month that came as a result of snow and ice will simply result in even busier crowds in the last remaining shopping days on the run-up to Christmas.

December 23rd is predicted to be the busiest day for debit and credit card spending, with estimations exceeding £1 billion.

Meanwhile, ATM use is expected to peak on Christmas eve, with withdrawal rates amounting to around £88 million at a rate of more than £24,000 a second as shoppers raid there savings accounts for any last minute purchases.

According to the figures, a record £30 billion will be spent on debit cards throughout December. Despite the freezing weather conditions earlier in the month and further cold spells to come, most transactions will still take place on the high street, with online shopping making up just over a quarter of the total debit card spend.

Most debit card spending will take place in supermarkets, with an estimated £6.4 billion set to hit the checkouts as people prepare to indulge over the festive period. Fueling stations will also see sales of around £1.6 billion in debit card transactions, as people travel to their Christmas destination to settle down for a long weekend.  Meanwhile ATM's will give out £18 billion this month.

{The high spending levels are also expected to continue after Christmas, with anyone that likes a bargain making the most of the sales during the extra bank holidays as Christmas and Boxing day fall on a weekend this year. Many will also be looking to avoid the VAT rise next month by making any large purchases now.

London will see the highest spending levels this month, with over £5 billion in sales expected.

Dan Wass, Director of Current Accounts at Barclays said: “The early snow falls this month meant that the start of December was a little quieter on the high street than expected.  This is likely to put even greater pressure on retailers as we draw to the end of the Christmas countdown, with customers being forced to do their shopping at the last minute.

We urge customers to stay safe in busy areas and encourage them to use their debit cards rather than carrying large amounts of cash.  Nearly all shops, restaurants, bars and online companies accept debit cards so it is the easiest way to get your Christmas spending done quickly and securely. We would remind customers to take care of their card and their PIN, especially when using their PIN in crowded places.

Budgeting is also essential - customers can use Barclays mobile banking to keep track of their balance whilst they are out shopping.  They can also sign up to weekly text alerts for a mini-statement of their bank account.”

How to earn Cashback on your Christmas Spend

How to earn Cashback on your Christmas Spend: "- Sent using Google Toolbar"

Spend or save?

When returns fall along with interest rates, should we even bother saving?

This is the dilemma that many consumers face when rates are low.

The deputy governor of the Bank of England says that low interest rates paid on savings accounts should encourage savers to go out and spend their money in order to help kick-start the economy.

Charlie Bean, a member of the committee that determine the Bank rate, advised savers to "eat into" the capital they have built up throughout periods of low rates - now being as good a time as any, as the Bank rate has been at a record low of 0.5% since March 2009.

He commented to Channel 4 news: "What we are trying to do by our policy is encourage more spending, ideally we would like to see that in the form of more business spending".

"But part of the mechanism that might encourage that is having more household spending so in the short term we want to see households not saving more but spending more."

He added that savers benefited from significantly higher rates in the past and could now eat into some of their capital while rates remain low.

But is this good advice? Take a look at two opposing views.


Spend Spend Spend:

Vicky Redwood, senior UK economist at Capital Economics, says:

"Charlie Bean has been criticised for suggesting that consumers may need to dip into their savings in order to spend more.

"But that is exactly what lower interest rates and looser monetary policy is designed to encourage. Lower interest rates reduce the returns on saving and hence increase the incentive to spend - with higher consumer spending then boosting overall economic activity.

"Indeed, data released this week by the Office for National Statistics showed that without a sharp drop in household saving in the second quarter, the drop in households' incomes would have fed directly through to a sharp drop in their spending - and potentially prompted the economy to slip back into recession.

"Of course, in the longer-run, households need to save more and borrow less - as I am sure Charlie Bean would agree.

"But right now, with the recovery faltering, what the economy needs is for people to get out and spend."

Save Save Save:

Brian Johnson, insolvency partner at HW Fisher chartered accountants, says:

"You can see the Bank's logic, as more people spending will act as a stimulus to the economy.

"However, by urging people to spend the Bank of England is asking the British public to take a real leap of faith, especially when faced with considerable uncertainty in the form of public sector cuts and fiscal tightening.

"The British public will also be baffled by the mixed messages it is receiving. On the one hand we have the government saying that our country needs to massively cut its debt, and as soon as possible, on the other hand we have the Bank of England telling us to spend, spend, spend.

"Charlie Bean's message also completely contradicts what people have been urged to do over the past few years, namely pay down their debts and prepare themselves for the age of austerity.

"A paradox of thrift it may be but for the Bank of England to openly encourage the public to spend in such an uncertain climate is a dangerous strategy that may well backfire."

While rates may not be as high as they were in the boom times before the credit crunch, savers are still able to get some reasonable rates on some savings accounts, Isas and fixed rate bonds.

Alternatively, those looking to secure higher returns may wish to consider stocks & shares ISAs, allowing them to invest in shares but without having to pay income tax on their returns.

UK savers to benefit from increase to Isa limit

Savers will be happy to learn that the Individual Savings Accounts (Isa) allowance will be rising next year.

The rise is expected to see the Isa limit go up from the current level of £10,200 per year to £10,670, which will come into force at the beginning of the next financial year (April 2011)

The news comes after this years increase from £7,600 to £10,200 which was announced in last years budget and came into force from October 2009 for all saver aged 50 and above, and everyone else at the beginning of this tax year.

Savers can only save half of the total Isa limit in cash Isas with the remainder available for stocks and shares isas, or the full amount into stocks and shares isas.

There are currently over 20 million savers in the UK with a tax-free Isa.

Stocks and shares Isas have become increasingly popular with savers seeking a higher return on their savings, especially as many savings accounts are offering measly rates after the base rate has remained low. This is despite the risks involved when dealing in these types of investments.

"With rising taxes, savers and investors really should make sure they put as much as they can in their Isa each year," said Rob Fisher, of Fidelity Investment Managers.

"Over 42% of the UK population are still not taking up their Isa allowance. Isas are an all year round use-it-or-lose it tax perk and a perfect way to avoid giving hard-earned money straight back to the taxman."

Tax-free savings accounts were first introduced to UK savers 11 years ago as an incentive to encourage saving.

How to reduce the impact of the new higher rate income tax

The new tax year is fast approaching, and with it comes a new top rate income tax that will affect everyone fortunate enough to be earning over £150,000. The new upper limit tax rate will be 50% of anything above this amount .

In addition, higher rate on dividends will move from 32.5% to 42.5% of the grossed up income (equivalent to 36.11% of the net dividend) for all taxable income above £150,000.

The changes will become effective from 6 April and as a result, private banks and wealth managers have been advising those to be affected to act now in order to protect their income by all possible means. Many are taking steps to bring forward earnings to this tax year, or planning their finances in an attempt to reduce the impact.

Below are some tips outlined by Which4U that should be considered by higher earners as well as the rest of us:

1. Make full use of all your tax allowances

Many of us complain about how much tax we pay, but fail to take advantage of tax free breaks provided to all individuals by the government. In fact many of us could be missing a trick when it comes to tax relief.

Always ensure you have used up your allowances by the end of each tax year. A popular tax free savings incentive may your first port of call, in the form of individual savings accounts (Isas), offering you a tax free annual allowance of £10,200 (or £7,200 for those under 50 until April 6th) that can be added to your Isa every year, as well as tax-free National Savings & Investments products.

No income tax is required to be paid for any interest or capital gains earned using Isas, so compare Isas by shopping around to find the best Isa rates, or alternatively if you wish to invest in a stocks and shares Isas, you should do some research into the market.

If your spouse does not work or has earnings that fall in a lower tax band, consider transferring investments that provide an income to them. This will now not only appy to spouses on the basic rate tax but also those in the 40% band, if the other spouse currently earns above £150,000 per year.

2. Close your bank account According to advisers at Deloitte

People with savings accounts that pay interest on annually that is due for payment after April should consider closing the account(s) before the new tax rules are applied, as this will allow the interest payment to be subjected to a lower income tax rate. One the new tax year hits in April, you can simply open a new account.

3. Wait until the new tax year to donate to charity

After 6 April, those that will fall in the new high earners category that make donations using the Gift Aid scheme will qualify for a higher tax relief on the donation, which means that more money will reach the charity.

However,consider any potential impact that the charity might have if you delay a regular donations, especially in today's financial climate.

4. Accelerate your income

Some employers have chosen to pay employees their salaries early to avoid the higher tax. It may be worth finding out if this option is possible. This might be easier for those in entrepreneurial or family businesses.

You can also make use of any share options you currently hold, as these will attract income tax so you will pay the lower rate. Anyone that is already getting pension income is able to opt to receive annual payouts as a lump sum before the new rules start.

5. Add more to your pension in the new tax year

Nowadays, pensions have become a less attractive option to those earning £150,000 or more, with tax relief reduced to 20% on some contributions.

However, if you do fall into this category, you will need to act fast. In the new tax year, those in the new higher rate tax band will be entitled to put a minimum of £20,000 and a maximum of £30,000 into their pension, with a 50% tax relief, before the new restrictions become effective in 2011.

Advisers at Deloitte have advised those earning between £100,000 and £113,000 - who will effectively be subjected to 60% tax from April as a result of their personal allowance also being eroded - to add to their pensions.

6. Consider venture capital trusts (VCTs)

Although these start-up investment schemes do carry risk, they are being utilised as an alternative to pension funds for higher earners because contributions attract 30% tax on the way in.

7. Move assets to an offshore bond

Offshore bonds are investment bonds operated by life insurance companies that also have some life insurance attached to them. This means that you can avoid paying any tax until you encash the bond. So in theory, by the time you come to encash the bond, your situation may mean that you qualify for a lower rate of income tax, for example when you're retired - or if you have become an expat or a non-dom. In this case, you may not have to pay any UK tax at all. A number of respected financial advisers are using this approach when advising clients.

8. Move from income investments to Capital Gains Tax

In 2008, the capital gains tax rate was reduced to 18% and investors have since been searching for investments that provide returns that are taxed as capital gains instead of income.

According to advisers, the approaching 50% income tax band has sped-up this switch. In the past year, demand for products such as zero dividend preference shares have risen significantly, as well as funds that work to a total return basis rather than generating income, such as absolute return funds.

9. Consider leaving the country

This may seem like a rather extreme measure, but a number of advisers including those at Cazenove and Schroders Private Bank have said that many clients are seriously considering this option in response to the higher tax demands.

For more great tips check out the Which4U blog - http://blog.which4u.co.uk/ or http://hubpages.com/profile/Which4u

Top 10 Holiday Tips for 2009

As more of begin to feel the pinch from the turbulent economic climate, many have tightened up on spending, becoming more aware of what they’re spending and taking a more savvy approach to their finances. But although people may be cutting back on luxuries, figures show that a large number have drawn the line at sacrificing their summer holidays – could it have anything to do with English weather I hear you cry!?

If you're part of this crowd, there are a number of the questions that you should consider when looking to get the best value from your holiday, such as: Where are the most cost-effective destinations in terms of currency? Is it cheaper to leave booking until the last minute? When is it worth paying with plastic abroad?

Many people will be making a change from the norm when deciding where to go on holiday this year. A recent poll suggests that almost 50% of people would be reassessing holiday plans for 2009, and almost a fifth said they would be on the look-out for a cheaper holiday.

The following Top 10 money saving tips can be incorporated into anyone's holiday to help your money go further:

1. Choose your destination wisely - Consider choosing a destination based on current exchange rates for your intended currency – The euro zone has become far less attractive in recent months due to poor exchange rates, so try looking further afield to get more for your holiday pound.

2. Shop around for your travel insurance – There are savings to be made when looking to insure yourself while abroad, such as not going for a travel insurance policy that covers you for unnecessary things such as extreme sports when you plan to lie on the beach all day. At the same time it would be unwise to not declare something that could later void your policy, as this could cause serious problems and end up costing you dearly.

   If you travel for than twice a year, it may be worth looking at annual cover. Also, if you use credit cards, consider looking at what’s on offer in the market, as some cards come with a range of perks including annual holiday insurance. Rachel Cutler from Tesco Travel Insurance said: “Travelling without insurance can be a costly business, and it can leave you high and dry in a medical emergency. To save money, anyone who travels more than twice a year, including weekend breaks, will be better off with an annual policy; and if you’re unlikely to venture further afield pick European cover only - you should be able to extend the territory if necessary.”

3. Not just Where, but When - If you’re looking at travelling to a far-away country or have already decided on your destination, then it can be better to book as far in advance as possible. If you’re not bothered about where you want to go, leaving it till the last minute can often give you a much better change of bagging the best bargain!

4. Every penny makes a pound - In the current climate people are likely to be wary of how much they fork out for the actual holiday in terms of travel/accommodation costs, but it can be the little things that we don’t plan for that add up. For example, research carried out by Santander Credit Cards revealed that a whopping £1 billion pounds was spent replacing essential items that holidaymakers had left at home!

   It may seem obvious, but make a list well in advance of your travels as this will give you time to think about everything will need so you can avoid getting billed for being forgetful.

5. Keep your eye out for a bargain – carriers like ryanair often have great sales allowing you to get away cheaper. The introduction of low-fare airlines have swayed many from sticking to UK destinations like Blackpool, to be a little more adventurous and hit the skies, and the best thing is it is likely to cost you less! Although these low cost airlines tend to fly to closer destinations around Europe, they do fly outside the euro zone too, so it’s well worth checking how the pound stands against these currencies.

6. School holidays - The unfortunate reality is that families with young children are generally made to pay more for taking their summer holiday during the school holidays, especially when looking to go on a package holiday. According to research by Santander Credit Cards, Brits that go on holiday abroad during this period can end up paying 40% more than the same holiday taken in mid-August. You’re unlikely to even get away from this when holidaying in the UK - while you may avoid poor exchange rates, UK resorts tend to increase rates by an average of 39% during the school holidays.

   Head of Abbey Credit Cards - Callum Gibson, said: “While school holiday premiums may be inevitable, Britons heading abroad this summer can save money by cutting out unnecessary costs such as foreign exchange fees, which are charged by most providers for card transactions made in a foreign currency.”

7. What to be aware of when exchanging foreign currency – To begin with, there’s no such thing as ‘commission free’ so don’t be fooled by a bureau de change making such a statement. This is because they have to make their money somewhere, so is usually in the form of poor rates. The best thing to do is order your currency in advance as many companies will deliver it for free, so avoid leaving it until you get to the airport as you’ll end up paying through the teeth before you’ve even left the country!

   Sam Gooch, travel money expert at which4u.co.uk said: “One of the most important things to consider when buying foreign currency is the exchange rate you will receive. “Many banks and airport bureau de exchanges’ are devious in the way they attract custom through advertising 0% commission, while disguising their fee with high exchange rates that fall well above average.”

8. Is cash always king? Making payments abroad – It is extremely easy and convenient to pay for goods and services by plastic, giving you peace of mind for a number of reasons. You may not want to carry too much cash around, especially when in unfamiliar surroundings, after all if you lose cash you are very unlikely to see it again.

   Using a credit card can offer you protection against fraud, allowing you to get back any money lost as a result of fraud from your card company. On top of this, providers now offer a payment protection policy to cover you for all purchases made on your credit card between £100 and £30,000. This feature is provided by law, under Section 75 of the Consumer Credit Act, and covers you against anything bought on your card within this price range that turns out to be faulty or never gets delivered.

9. ET Phone Home! From the start of this month lasting until the end of August this year, Vodafone are providing a new service to allow people on the Vodafone network to make or receive calls or texts home from abroad (from specified countries) at the standard UK calling rate.

   The Vodafone Passport scheme is free to join, allowing customers to benefit from calls to the UK from abroad at standard calls rates, dropping the connection fees used in the past (75p + standard rate).

   Another great feature in this offer is that you can even use your inclusive minutes to makes calls on holiday. You have to join the scheme to qualify for this deal, so don’t forget to add that to your list of things to sort out before you go. The countries included are:

   Albania, Andorra, Austria, Belgium, Bosnia, Bulgaria, Canary Islands, Channel Islands, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Faroes, Finland, France, Germany, Gibraltar, Greece, Hungary, Iceland, Isle of Man, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Madeira, Malta, Monaco, Norway, Poland, Portugal, Republic of Ireland, Romania, San Marino, Slovakia, Slovenia, Spain, Sweden, Switzerland, The Netherlands, Vatican City, New Zealand, Australia.

10. Travelling by train? - A popular way to travel around various countries is by train. However, this can work out very expensive, especially when moving around on a whim, as 9 times out of 10 if you choose to pay on the day you will end up paying an extortionate fare.

    One way around this is to consider an InterRail ticket. These unique tickets charge a one off fee and allow you to travel between different areas of the world using your pass. Some trains may require a supplement, such as high-speed and sleeper trains.

    Take the European ticket as an example. You can choose from a number of different durations to best suit your travel needs, i.e. 22 days continuous; 1 month continuous; 5 days within 10 days; 10 days within 22 days, all varying in price, and you can get a discount if you are ages 25 or under.

    I mentioned above that you may want to stay away from the euro due to poor exchange rates, but this pass covers a whole range of countries, so you may wish to follow a path that avoids this currency, and with 30 countries to choose from, you really are spoilt for choice! The Global euro pass covers the following countries:

    Austria, Belgium, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Denmark, Finland, France, FYR Macedonia, Germany, Great Britain, Greece, Hungary, Italy, Luxembourg, Montenegro, The Netherlands, Norway, Poland, Portugal, Republic of Ireland, Romania, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey.

    If you are only interested in a single country, you might wish to go for a one country pass - which entitles you to travel within your chosen country as well as extra benefits such as discounted or free shipping services and reduced admissions to museums.

    Alternatively you could go for the InterRail Benelux Pass offering access to trains within Belgium, The Netherlands and Luxembourg; or the Greece Plus Pass, which includes ferry crossings from and to Italy as well as unlimited access to trains across Greece.

Look after your savings and spread them between banks

Use our tables to distinguish which banks have separate Financial Services Compensation Scheme (FSCS) registrations and which fall under the same institution.

The banks listed in the table below each hold an indipendant FSCS registrations, so if your cash is spead across multiple savings accounts shown in the table £50,000 will be compensated for each account held if the bank were to collapse

For a full up-to-date list on which banks are counted as individual, with an indipendant FSCS registration click Which4u Banks Table. This page is regularly updated to cite any changes in the banking sector.

Grouped Banks The table below shows which banks/building societies fall under the same institution. The banks are also numbered 1-9 to aid colour blind readers. If you have multiple savings accounts that fall within the same colour/number, you will only be covered for up to £50,000 for all accounts. You can still hold multiple accounts with different colours, the key is to mix them, spreading your money across several savings accounts.

HBOS and Lloyds. This merger deal is still in the early stages so a decision has not yet been finalized and is unlikely to be for another few months. For now these two are treated as separate institutions, so if you have savings spread across both, you will still be covered for up to £50,000 for each account held. But make sure you're aware of the core parts of HBOS (Halifax, Bank of Scotland, B'ham Midshires, Intelligent Finance, The AA and Saga) only count as one institution, so if you have multiple accounts more than one of these providers, you will only be liable to receive £50,000 cover overall.

Abbey and A&L. The giant Spanish bank Santander's recently bought both Abbey and Alliance & Leicester. They tell us there are 'no plans to change' their FSA registrations, meaning they will separated in terms of institutions so you're protected up to £50,000 in each.