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An appeal in the House of Lords is due to begin this week that may determine the future of overdraft fees incurred by millions of customers across Britain.

The main banks in the UK put the appeal forward after a decision was made earlier in 2009 by the Appeal Court and is to be heard by five Law Lords.

The ruling upheld from last year gave the Office of Fair Trading (OFT) the power to decide whether or not bank account charges were fair.

There are currently around one million people waiting to find out if they can reclaim previous bank charges.

Banks make around £2.5 billion of income every year from charges applied to customers accounts as a penalty for going overdrawn without permission or paying a cheque or direct payment that bounces, billing up to £40 a time.

Marc Gander of the Consumer Action Group (CAG) said: “I hope the House of Lords will make a very clear finding that the bank charge terms are subject to the Unfair Terms in Consumer Contracts rules.”

The hearing comes nearly two years after the OFT and the banks made a joint decision to go to court in order to resolve the legality of bank charges.

This happened after banks became inundated by angry customers that felt the charges were 'unfair'. These claims were being fired both directly and through the courts.

Banks paid out an estimated £784m to around 378,000 customers before the test case agreement in 2007, rather than opposing the attempts made by customers contesting the fees.

But after both sides to the case agreed to the litigation, the Financial Services Authority (FSA) and the courts made a decision to halt any future claims until the case reaches a verdict.

Nick Spooner of the campaign group Legal Beagles said: “It’s going to be a very significant outcome, either way.”

The banks have always defended the charging system, describing them as reasonable, fair and legal.

If they are successful in the appeal, it will be a big blow to the OFT and campaigners involved in the bank charges case.

The banks employed Jonathan Sumption QC to represent them in the case – one of the UK’s top civil barristers.

Ray Cox QC – a barrister specialising in banking said: “If anyone can do it for the banks, he can, but he’s got an uphill task. But you can never be sure; the Law Lords will certainly not rubber-stamp the decisions of the other courts.”

The worst outcome for the banks could see all charges abolished, but this could force banks to charge account keeping fees.

Other effects caused by this outcome would be a mass refund to millions of customers dating back over at least the last six years, amounting to billions of pounds.

Some banks, including RBS, have put in contingency plans to allow them to be ready should the outcome fall against them, helping them to be ready for all scenarios.

Mr Spooner said: "A victory for the OFT would swiftly open the door for refunds of past charges.".

“If the OFT rules they were indeed unfair, I believe they will have to be refunded in total, as the unfair terms triggering the charges will be unenforceable.”

About The Author: UK Price Comparison website Which4U – Compare Credit Cards, Savings Accounts, Fixed Rate Bonds, Bank Accounts, ISAs, Loans, Mortgages, Insurance, TV & Broadband and Gas/Electric bills to find the best UK deals

Those looking to find a great value holiday with a bit of adventure this year should definitely consider Iceland, as their money will now stretch more than 40% further than last summer. This is due to the collapse to the Icelandic krona, pushing this holiday spot to the top of the annual Post Office Travel Services’ Best Value Holiday Destinations report.

Another great option is Poland, as the pound is currently worth nearly 19% more than 2008, making this a fantastic holiday destination for 2009.

Hungary also joins Iceland and Poland as the only destinations in Europe offering British tourists more holiday currency for sterling this year.However, in some cases the pound has fallen in value by less than 3%, making a number of other destinations a definite option. 

For example, the Czech Republic and Turkey offer a good selection of bargains – rated by the Post Office’s Holiday Costs Barometer survey of tourist staples as one of the best buys available this year.

Turkey is fast becoming this year’s top UK holiday choice – with a 60% year-on-year increase in Post Office currency sales based on data taken from the last 5 weeks. 

Holidaymakers that wish to travel further afield may want to consider Jamaica and Kenya, currently rating as top contenders for tourists as sterling is currently matching the value against these currencies from 2008. Impressive discounts on holiday packages could be the reason behind sales of Kenyan shillings which were up 97% in May and both destinations fall in Top 10 Fastest Growing Currencies at the Post Office. 

However, some of the countries that made it to last years Top 10 Best Value Desinations have fallen right to the bottom of the table due to the dramatic changes to the financial economy over recent months.  For example, the USA has fallen from fourth to 17th place as a result of the dollar now worth over 20% more than this time last year. This is the same scenario among many other ‘dollar destinations’ such as Dubai, Hong Kong and the East Caribbean are ranked lower too as these countries currencies are affected by the state of the dollar.

Despite this, data gathered from currency sales indicate that some of these destinations are still in demand – with the East Caribbean dollar for destinations which include St. Lucia and Antigua are currently second only to Kenya in the latest Post Office Fastest Growing Currencies table.

Sarah Munro, Post Office head of travel services said: “Our spending power may not be what it was last year but when you look back to 2002 - when trips to the USA were as popular as they have been recently - it is clear that a similar rate, around US$1.43 to £1m, did not deter UK holidaymakers from crossing the pond.”

“Holidaymakers looking for best value should choose destinations where they can get more for their pounds.  These include Iceland,which has been expensive to visit in the past, as well as Turkey and Kenya, rated as best buys in our cost of living surveys.  But they should not waste these savings by buying currency at the airport, where they will pay commission and get a poor rate.”

UK Price Comparison website Which4U – Compare Credit Cards, Savings Accounts, Fixed Rate Bonds, Bank Accounts, ISAs, Loans, Mortgages, Insurance, TV & Broadband and Gas/Electric bills to find the best UK deals

Nationwide Building Society has said its profits have been badly affected by an “unfair” amount of contribution it was made to pay for a savings protection scheme.

Nationwide profits fell by 69 percent (pre-tax) to £212 million based on the last tax year.

Nationwide has described the £241 million it was required to contribute to the compensation scheme as “illogical”. This was paid to the Financial Services Compensation Scheme (FSCS) in order to cover its customer for up to £50,000.

Falling interest rates have also resulted in lower returns from mortgages, which were also squeezed by bad debt.

According to Nationwide, these bad debts resulted in several repercussions, which included a significant increase in the number of missed mortgage repayments, hitting £394 million.

But amidst these troubling times, Nationwide said it remained strong.

Graham Beale – chief executive at Nationwide, said that the building society was the only major banking institution in the United Kingdom to refrain from raising capital or require aid through government bailout schemes.

“This reflects a combination of our naturally high capital and prudent lending practices which are the hallmark features of a strong building society,” he added.

Nationwide said that only 0.6% of its mortgage customers were more than 12 weeks in arrears – significantly less than the figure recorded by the Council of Mortgage Lenders industry – an average of 2.39% based on figures from the end of March.

Profits were also affected after the merger between Nationwide and the Portman, Cheshire and Derbyshire building societies.

But Nationwide was unhappy with the way the FSCS had calculated the contributions.

“We regard the fact that the FSCS charge is not linked to the level of risk posed to the financial system by individual institutions, but instead is allocated by share of the retail savings market, as illogical and unfair, producing a disproportionate outcome for the low risk retail funded institutions, particularly building societies.” Mr Beale said.

UK Price Comparison website Which4U – Compare Credit Cards, Savings Accounts, Fixed Rate Bonds, Bank Accounts, ISAs, Loans, Mortgages, Insurance, TV & Broadband and Gas/Electric bills to find the best UK deals

Pension experts have revealed that the scheme set up to protect final salary pensions could be in trouble.

With the recent increase in pension shortfalls, the Pension Protection Fund (PPF) is in danger of being submerged from high volumes of claims being made as a result of the credit crunch.

According to the findings, up to 91% of final salary schemes can’t afford to pay out benefits, with the under-funded schemes carrying deficits of more than £228 billion.

The PPF takes around £700 million from companies every year, but this has proved too little and doesn’t cover its liabilities. The PPF has a deficit of around £550 million.

The PPF has already carried the weight of 62 schemes that failed, which include Woolworths, and Lehman Brothers.

There are now growing concerns that further failed schemes will result in the PPF to collapse, leaving future companies at risk of bankruptcy vulnerable to loss of employee pensions.

The government has been called on by The National Association of Pension Funds to back the scheme and act as a safety net, but the government has yet to comment.

NAPF Chief Executive, Joanne Segars, said: “In these exceptional times, maintaining confidence and security in pensions is vital so it would be a sensible measure for the Government to be the ultimate guarantor of the Pension Protection Fund.”

Vince Cable, Treasury spokesman for the Party, said: “I get a very strong sense that this is the Titanic hitting the iceberg. It is potentially very vulnerable in a serious recession, which is what we are now getting into. Companies won’t be able to sustain the fund in its present form. The Government has to be explicit that it is standing behind it.”

The possible issues were identified following a survey conducted by Punter Southall, revealing that 60 percent of pension schemes are oblivious of how their funding is being affected by the recession.

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The last few months have been devastating to the the UK's economy, which has affected us all in one way or another. Unemployment recently hit 1.92 million between September and November 2008 – the highest level since 1997.

As the unemployment rate continues to rise, you yourself, or someone you know may have been affected. There are a number of steps that can be followed to place you in the best position in terms of both employability and financially.

Losing your job can be extremely distressing, but it is important not to panic.

The first thing you should do is to make a visit to your local job centre. As well as increasing your chances of finding a job, this will also help you to find out exactly what benefits you’re entitled to.

If you require any kind of technical or legal advice, make an appointment with your local Citizen Advice Bureau.

You may be offered redundancy counselling, which is designed to help you deal with this change, as well as offering support with getting your life back on track. This can be anything from helping you to make the first steps to find a new job, to providing financial advice.

You may think you are strong enough to deal with losing a job on your own, but doing anything towards getting yourself back on track both emotionally and through finding work, is a step in the right direction and is always recommended.

You could be entitled to a redundancy package. Always make sure you understand your rights as an employee, so read through your employment contract. By law, employers must give employees notice before mading them redundant. This tends to be at least 1 week for every year of service, up to a maximum of 12 weeks.

If you completed two or more years service for the company that made you redundant, you qualify  for a statutory redundancy payment, which can be calculated by half a weeks pay per year of service for those aged between 18 and 21, a full week between 22 and 41, and anyone aged 42 and over is entitled to 1.5 weeks per year of employment, to a maximum of 20 years. Unfortunately for high earners, the weekly payment has been capped at £350.

Beyond this statutory pay, some firms offer additional packages to further compensate staff they have to let go. This is usually calculated by multiplying one months salary by the number of years service completed, with the first £30,000 tax free. Anything above this amount is subject to your tax band, so anyone that earns below £34,800 will be on the lower rate of 20%, and anyone above this amount will be on the higher tax band of 40%.

If you earn more than £34,800, there are certain measures you can follow to ensure you don't pay more tax than you need to. Ask your company to hold the payment back until they have issued you with your P45 as this will mean that you will only have to pay 20% of the remaining payout.

If the payment is added to you last pay check, 40% will be deducted at source. The remaining tax is usually paid in the following year's tax return.

You may find it useful to consider negotiating with your company allowing you to put yourself in the best possible financial position. For example, you could discuss the possibility of exchanging your notice period plus any holiday owed for payment.

It may be wise to consider putting these savings into your pension

You could avoid having to pay any tax on any surplus by paying your payment straight into your pension. Every year, everyone is eligible to make tax free payments into pension schemes amounting to the equivalent of a years salary.

This may be a very appealing option depending on your situation, as if you are 49 or over, you can withdrawals up to 25% of your pension without having to pay a penny to the tax-man. This is definitely worth considering if you are over the age of 50.

NOTE - As of April 2010, those aged under 55 will be unable to qualify for the 25% tax free sum.

For younger individuals, this may not be the best option, as it would involve locking your money away for many years.

If you were wise enough to take out unemployment insurance, make it a priority to find out exactly what you're entitled to.

For homeowners, redundancy can be a chilling prospect. The last few months has seen a jump in repossessions and people falling into difficulty repaying  mortgages. You may wish to consider taking out insurance to cover your mortgage should the worst happen. Ensure you understand what the insurance offers, as many providers have tightened their conditions due to the current economic climate.

To qualify for unemployment insurance, employees must not have been informed of any job cuts or voluntary redundancies, and you will not be covered if you're made redundant within 120 to 190 days of taking out the policy (depending on your provider).   

Also, check your existing insurance policies, as you may be surprised at how many products also cover redundancy.

If you find you are facing problems keeping up with mortgage repayments, the first thing you should do is contact your mortgage company. This is very important, as if you were to face repoession, the fact that you didn't keep them informed of your situation could work against you.

Many lenders are now offering between 3 and 6 month payment deferrals based on your current situation. Again, being able to prove that you are actively looking for a job will work in your favour.

Once your payment comes through, you need to know what to do with it, and for many this means finding the best savings option. Earlier we covered the option of depositinf funds to your pension, but for those that are not in a good position to lock their savings away for a number of years, it is well worth considering fixed rate bonds and ISA's, as these tend to provide higher returns than regular savings accounts.

UK Price Comparison website Which4U – Compare Credit Cards, Savings Accounts, Fixed Rate Bonds, Bank Accounts, ISAs, Loans, Mortgages, Insurance, TV & Broadband and Gas/Electric bills to find the best UK deals

If you managed to make use of your Individual Savings Account (ISA) allowance in the last tax year, then you will be pleased to know that as of 6th April, you have another £7,200 of potential tax free investments in which you can deposit into ISAs.

If you didn’t manage to use up last years ISA allowance don’t worry, just deposit your savings into an account as soon as possible and benefit from tax free returns on your investment.

If you aren’t familiar with ISAs, it’s well worth checking them out, as you could be missing out on some great tax-free returns on savings and investments.

Savers are given a great opportunity to save at least £3,600 each year (also further possible £3,600 in investment ISAs) and pay no tax on any of the earnings. All individuals aged 16 and over can apply for an ISA, giving them the opportunity to invest upto £7,200 each tax year and earn tax free returns on their investment. The ISA allowance can be made up of either up to the full £7,200 in an investment ISA, or up to £3,600 in a cash ISA, and up to the remaining amount in an investment ISA.

Think of cash ISAs like a savings account, offering all of the features you would expect to see in a number of types of savings accounts, but with the difference being that you don’t have to pay any tax on the returns on your investment. It is common knowledge that with stocks and shares dealing comes risk, and there are no exceptions when it comes to investment ISAs, so you must be careful with where you plan to invest.

There are several different combinations of features that will differ from provider to provider, so it is up to you to choose the one that suits you best. You can choose whether you want to make a lump sum investment, or regular payments, and if you want your interest to added onto the total, or paid into a separate account.

UK Price Comparison website Which4U – Compare Credit Cards, Savings Accounts, Fixed Rate Bonds, Bank Accounts, ISAs, Loans, Mortgages, Insurance, TV & Broadband and Gas/Electric bills to find the best UK deals

Cash ISAs have become a very popular saving method in the UK, but it is surprising to hear that many have not heard of stocks & shares ISAs, which if used effectively can provide huge profits, all of which remain tax free.

If you don't know much about ISAs, here's some helpul information. Each year, everyone over the age of 16 is entitled to a tax free savings allowance. The total limit is currently set at £7,200 (although there have been rumours that this will increase) of which a maximum of £3,600 can be invested into a cash ISA, then the remaining amount into a stocks and shares ISA, or the full allowance £7,200 can be used to invest in a stocks and shares ISA.

Any interest earned from cash ISAs, or similarly any returns gained through stocks and shares ISAs is completely tax-free, helping your savings to grow faster.

Cash ISAs usually offer savers attractive rates of interest, but if you don't mind involving an element of risk to give you the potential to earn some great returns, you may want to consider investment ISAs. As with all dealings on the stock market, there is an element of risk involved, so you have to do a bit of research into where you choose to invest, and steer clear of shares that are likely to fall.

There are now a number of people who became millionaires from investing their yearly ISA allowance (£7,200) in stocks and shares and investment ISAs, allowing them to do so without paying a penny in taxes.

These Isa millionaires did take around 20 years to build up to this figure – including ISAs predecessors ‘personal equity plans’ (Peps) which were previously used as a form of tax shelter.

This new breed of ISA millionaires will all give you the same advice, never waste a year’s Pep or Isa allowance.

This was of course down to knowledge and luck, as an ISA wrapper allows you to invest in what you want, as opposed to letting a bank invest on your behalf, but this can be half the fun of it. It doesn’t take long to see that these people have saved hundreds of thousands that would have otherwise gone straight to the tax-man

Last year, despite the state of the economy, Barclays Stockbrokers produced a number of people lucky enough to become ISA millionaires from their stock selections.

UK Price Comparison website Which4U – Compare Credit Cards, Savings Accounts, Fixed Rate Bonds, Bank Accounts, ISAs, Loans, Mortgages, Insurance, TV & Broadband and Gas/Electric bills to find the best UK deals

Fixed rate bonds are savings accounts with a difference. To start with, they are more of an investment than simply somewhere to save your cash, and like most investments, they come with an element of risk.

Is is important to be aware of how much compensation is offered by your provider, incase it were to collapse. Always aim slightly lower than the maximum compensation limit to allow your investment to grow without exceeding this limit. Alternatively, you could have your interest paid into a separate account

Unlike an instant access savings account that has lots of activity with constant withdrawals and deposits, bonds generally only allow you to make a single lump-sum deposit, with no additional deposits throughout the rate. Earl withdrawals – though possible, will result in penalties such as having your interest capped or in some cases closing the account completely.

Fixed rate bonds are designed to encourage long term saving, offering high 'fixed rates' for accounts that are left untouched for the life of the bond. This is because inflation is used to measure the increase in price, so anything below it would effectively cause your money to erode. Once the term reaches an end you are able to access your balance with the added interest.

The main elements of a bond account are the fixed term – this is the period of time you agree to lock your money away for, and the fixed rate – this is the rate at which your interest will be earned.

Another difference between fixed rate bonds and instant access accounts is that that the rate offered upon opening the account will not fluctuate to reflect changes made to the Bank rate. This allows you to lock your cash in on a rate that will remain the same throughout the chosen term, so you can predict exactly how much the account will earn.

This can allow you to freeze you account on a high rate, allowing you to protect your savings from falling rates and earn the highest returns.

Last year saw the economy suffer a big blow, which resulted in rates being slashed in an attempt to stimulate the economy by reducing some mortgage holders, and encouraging lending. This had a big effect on the rates offered on savings accounts, so anyone that opened a fixed rate bond account before October would be feeling very smug.

This can also work the other way, as you could lock in on a rate, then soon after see rates rise, while you are left behind earning under the odds on your savings.

You can, to an extent, make predictions on the direct the rate is likely to go. Many clever savers took advantage of the credit crunch by spottin a trend in falling interest rates and locking in on a high rate to avoid falling rates. With The Bank of England base rate now at its lowest point on record, savers are getting less returns on investments. Many economists believe the rate will continue to drop as low as 0%, so now may be the time to avoid further losses and freeze your rate with a fixed rate bond.

UK Price Comparison website Which4U – Compare Credit Cards, Savings Accounts, Fixed Rate Bonds, Bank Accounts, ISAs, Loans, Mortgages, Insurance, TV & Broadband and Gas/Electric bills to find the best UK deals

Since the credit-crunch, savers have become much more cautious and are keen to not only seek the best returns, but also a safe haven.

Over the last 6 months, rates have been on a downward turn, so savers must be careful with where they store their cash in order to get the highest returns.

The two obvious choices in today’s savings market are Term Bonds, and Individual Savings Accounts (ISA). Although both types of savings accounts have their similarities, there are several advantages and disadvantages to each and it is this topic of discussion that this article will be focussing on.

Fixed Rate Bonds

Term Bonds provide a rate that is fixed throughout the duration of the bond, giving savers a predictable income with no surprises. Once you have chosen a fixed rate account, you are able to calculate exactly how much interest you will earn, minus the tax, to give you your end balance.

Most Fixed Bonds offer very high deposit limits, generally between £500,000 to £2 million, but some, such as ICICI, will let you invest as much as you like. Fixed rate bonds tend to only allow a single deposit upon opening the account.

There are no limits to how many fixed rate bond accounts you can open within any one year, so unlike ISA accounts, if you decide to close your account for any reason, you can still invest any amount elsewhere at any time.

Fixed Term Bonds generally offer the highest saving rates available, but these tend to be on shorter-term bonds, as they carry less risk to significant rate cuts leading to banks and building societies paying you over the odds in interest for long periods of time.

‘What goes up must come down’
If you are extremely lucky – and do your research, you could open a fixed rate bond before rates significantly fall, allowing you to earn well above savings rates offered to new and variable rate customers. If you cast your mind back to October last year, when the Base rate stood at 5%, you would be very happy with yourself if you were earning this kind of rate on your savings today, with the Base rate now at 0.5%.

A big element to a fixed rate bonds is the fixed term. You must be realistic with your finances and only go for this option if you can afford to lock your money away for some time. If you find that you need to withdraw any amount from your account, the bond will close and in most cases you will lose any interest to accumulated to date.

As well as the possibility of rates falling during the life of your bond, you could see the opposite effect, with rates significantly rising, leaving you locked in at a low rate. Before applying for a fixed rate bond you may wish to consider doing some research into recent trends in the base rate. It has been predicted by some economists that The Bank of England base rate will constinue to fall throughout the year.

Like any normal savings account, you have to pay tax on any interest accumulated, as this counts as income. The general tax rate is 20% for those earning less that £34,800 per annual, and 40% for anything above. There are other conditions to non-earners so check out the HM Revenue for more information.

Individual Savings Accounts

Individual Savings Accounts (ISA’s) offer a tax free alternative to saving. ISA's are very similar to regular savings accounts, but ISAs allow savers to benefit from tax free interest. Every year you are entitled to add up to £3,600 to your ISA, and the interest accumulated from your total balance will be tax free for life. You can deposit up to £3,600 between now and April 2009, which is when your allowance is renewed.

Like many savings accounts, ISA’s offer a variety of options such as instant access, fixed rate, and base rate guarantees.

Unlike a fixed rate bond, most ISA’s allow you to deposit as many times as you like throughout the year, as long as you stay within your £3,600 annual limit. It is better if you can afford to deposit the full amount at the beginning of the tax year, as this will allow you to earn the maximum possible interest, but for those that would rather have the flexibility to save as they earn, ISA’s are great for making monthly deposits from a salary.

Bonds and ISAs both encourage savers to leave their savings to grow, without making withdrawals. However, rather than deducting the interest earned to date and closing the account, ISA’s simply give savers an annual deposit limit of £3,600, and once this has been reached, no more can be added, regardless of any withdrawals.

Because savers can get good returns from paying no tax on the interest they earn, ISA’s tend to offer lower rates than Term Bonds.

Most ISA’s are affected by cuts made to the Bank of England Base rate, so if you open an ISA when rates are high, you cannot guarantee they will stay high. Fixed rate ISA’s allow you to fix in at a rate for a specified term, but this does carry some risk, as rates change, especially over a long term.

Always check out what kind of compensation scheme is used by your proposed bank or building society to ensure that your savings are covered in full. For more information on this, see Which4U’s Top Ten Savings Tips.

The bottom line for all savings accounts is to ensure you are earning the highest possible returns on your money. Although ISA’s offer tax free interest, you may find that the difference in rates offered against fixed rate bonds will in fact leave you worse off. Before making a choice, compare the savings market for the best deals, and use your new found knowledge of these accounts to make an educated decision on where to invest your savings.

One last thing to remember is to always make sure (where possible) you keep the interest rates paid on your account above the rate of inflation (incuding tax deductions), as anything below would result in your money actually losing value. Inflation is used to measure the rate at which prices will increase, so if this level is higher than the interest you are earning, your money will be slowly eroding.

UK Price Comparison website Which4U – Compare Credit Cards, Savings Accounts, Fixed Rate Savings Bonds, Bank Accounts, ISAs, Loans, Mortgages, Insurance, TV & Broadband and Gas/Electric bills to find the best UK deals