Students face doubling of interest rate on loans

Published on Sunday 15 July 2007 01:57

INTEREST rates on student loans are to double this autumn after the new rate was set at 4.8%.

The new figure, based on the retail price index for March, is twice the current rate of 2.4%.

The increase follows suggestions that a commercial interest rate should be charged on the loans to stop wealthy students and their parents from exploiting cheap loans at the taxpayer's expense.

Interest is charged as soon as the money is borrowed and graduates must start repaying their loan once they are earning more than 15,000 a year. Repayments of 9% of their salary above that level will be automatically deducted from their salaries.

Pension shutdown

FOUR out of five final salary pension schemes are now closed to new members, according to the latest survey from the Association of Consulting Actuaries into the state of the UK's company pensions.

However, not only new employees are being hit by the pensions crisis. The survey found that 14% of schemes had also closed for future service by existing employees, preventing them from continuing to save into their fund.

This finding was supported by separate research from the Office for National Statistics which revealed that some 1.3 million employees have dropped out of an occupational pension scheme since 2000.

Danny Alexander MP, Liberal Democrat shadow work and pensions secretary, said: "The plummeting membership of private sector pension schemes is down to Gordon Brown's cynical mismanagement of pension savings. With Mr Brown's tax raids on pension funds and the explosion of complex regulation, people have simply chosen to opt out of saving in a private occupational scheme."

Chief reprimanded

EQUITABLE Life chief executive Charles Thomson has been reprimanded by the disciplinary body of the Faculty of Actuaries for misconduct.

It received a complaint that he had written his own reference and presented it to the company when attempting to secure his current position, pretending that it had been written and approved by his former employer, a chief executive of another insurance company.

The disciplinary body concluded:

"Such conduct on the part of an actuary, particularly a senior member of the profession, seeking a senior position is prima facie a failure to comply with the standards of behaviour and integrity which the public and the profession might reasonably expect from a member."

House prices slow

HOUSE price growth is slowing in the UK, according to the Royal Institution of Chartered Surveyors.

The number of surveyors in June reporting a month-on-month rise in prices was at its smallest since early 2006.

Property exodus

INVESTORS in some of the largest UK commercial property funds have had exit penalties imposed as fund managers attempt to stem the flow of money out of their funds.

Scottish Widows Investment Partnership, New Star Asset Management, Norwich Union, M&G and Standard Life, have all repriced, effectively imposing exit penalties on investors.

This means investors will forfeit between 3.9% and 6.7% of the value of their investment if they leave a fund.

However, Justine Fearns, research manager at financial advice group AWD Chase de Vere, is urging investors to stay calm, pointing out that property funds are still likely to turn in high single-figure returns in 2007.

She said: "When inflows are strong, the margin between the bid price and offer price for units in any property fund is narrow. If outflows are strong, then bid prices may be reduced to safeguard investors still in the fund."

1.3bn blunder

FRAUD and mistakes made calculating awards led to 1.3bn worth of tax credits being wrongly paid out in 2006/7, according to the head of the National Audit Office.

Sir John Bourn acknowledged that HM Revenue & Customs had taken steps to reduce errors and fraud but said there was no evidence this had had any impact, adding that the level of incorrect payments remained "unacceptably high".

Boost for savers

ONE week after the Bank of England raised the base rate to 5.75%, Anglo Irish Bank has increased the rates on its savings accounts by the full 0.25%.

The new rate on its Easy Access Account is 6.1%, and for its Seven Day Notice Account is 6.15%.

Nationwide Building Society also passed on the full base rate rise to customers. The increase takes the rates for its Child Trust Fund, Money Income 60 Plus and Instant Access accounts to 6.25%, 5.71% and 5.75% respectively.

Slightly less generous was Cahoot, the internet arm of Abbey, which has only passed on 0.2% to some of its savers.