Rip-off News round-up. Our pick of the last week's media (Thu 5th March)

Bank Bust recession: Incomes return to 2007 levels, but working-age households remain worse off

The Institute for Fiscal Studies (IFS) said average incomes in 2014-15 are about the same as they were in 2007–08, before the banking crisis triggered a deep recession. The average has been lifted because people over 60 are better off. Their average income is forecast to be 1.8% higher in 2014-15 than in 2007-08, but the average income of 22- to 30-year-olds is estimated to be 7.6% lower than before the financial crisis. While pensioners have been hit badly by the rising cost of energy and food in recent years, they have been helped by measures such as the “triple locking” of the state pension, which guarantees it is raised by a certain amount. Household spending power has risen owing to a big drop in inflation and a steady fall in unemployment, the thinktank said. But the recovery has been slower than after the previous three recessions because incomes have been squeezed by weak wage growth, tax increases and benefit cuts. Andrew Hood, an IFS research economist who co-wrote the report, said: “The young have done much worse than the old, those on higher incomes somewhat worse than those on lower incomes, and those with children better than those without.” The IFS said large falls in real earnings (adjusted for inflation) have had a bigger effect on wealthier households, while poorer households, which tend to spend a bigger share of its income on food and energy costs, have been hit harder by the rising cost of living. GUARDIAN

RBS paid out £421m in bonuses in 2014 despite £3.5bn loss

Royal Bank of Scotland has revealed it handed out £421m in bonuses in 2014 as it reported its seventh consecutive year of losses. RBS said it would reduce its operations to 13 countries, compared with 38 at the end of last year and 51 in 2009, just after it was bailed out. The move is intended to focus the bank on the UK. Losses have reached £43bn since the 2008 bailout. There were also provisions of £2.2bn, including for foreign exchange rigging and another £400m hit for compensating customers mis-sold payment protection insurance. In an attempt to defuse any row over bankers’ pay in the runup to the general election, chief executive Ross McEwan will not receive a £1m payout intended to prop up his pay as a result of the EU bonus cap, which limits bonuses to one times salaries. The £421m total bonus payout at RBS in 2014 follows the £588m paid out last year. McEwan insisted that such payments were necessary despite another year of losses. He said he did not want his own pay to become a distraction and said he needed to be able to motivate staff to turn around the business. The chancellor, George Osborne, also attempted to keep the focus on pay at the bailed-out bank, writing to the chairman to urge him to keep RBS as a “back marker” on pay. “In the context of RBS’s conduct fines in 2014, it is right that the bonus pool is down again. I would also expect that, as in the past, no executive directors or members of the executive committee will receive bonuses, despite improved profitability,” said Osborne’s letter. GUARDIAN

Lloyds Bank blasted for handing boss whopping £11.5m payout after massive taxpayers bailout

The bumper package for chief executive Antonio Horta-Osorio included a delayed £7.4million share bonus promised to him in 2012. It came as Lloyds, who are 24 per cent owned by the taxpayer, announced profits jumped fourfold to £1.8billion last year. Horta-Osorio – who pocketed a salary of more than £1million a year – also got a £900,000 “fixed share award”, £800,000 annual bonus, £578,000 pension plus other perks. His total pot is 319 times the average salary for a Lloyds’ worker. David Hillman, of the Robin Hood Tax campaign, said: “It’s good news that Lloyds are returning to rude health but that is tarnished by a part state-owned bank paying their chief executive such lottery-sized awards.” Labour’s Shadow Treasury Secretary Cathy Jamieson added: “People will be taken aback by the huge scale of these bonuses.” Lloyds, rescued by a £20billion bailout in 2008, dished out a total bonus pot of £369.5million for last year, down 3.6 per cent on 2013. DAILY RECORD

Institute of Directors poll: Seven-figure salaries damage UK firms' reputation

Public anger over the size of top executives' salaries is damaging the reputation of UK firms, according to a survey of business leaders. In a poll of more than 1,000 members of the Institute of Directors (IoD), 52% said excessive pay packets were eroding people's trust in big companies. More than half of those surveyed also agreed performance-related pay should be deferred by up to three years. The poll was carried out on behalf of the High Pay Centre think tank. In November, the IoD denounced a proposed £25m pay package for the new head of oil and gas giant BG Group, Helge Lund, as "excessive" and "inflammatory", while shareholders in the firm threatened a revolt. Meanwhile, the salaries awarded to the chief executives of Britain's biggest banks have drawn public anger. Last week, HSBC revealed that its boss, Stuart Gulliver, was paid £7.6m in 2014, while chairman Douglas Flint's total pay increased to £2.5m. Antonio Horta-Osorio, the chief executive of Lloyds, which was bailed out by the government at the height of the financial crisis, is set to receive a total remuneration package of £11m. And the boss of Royal Bank of Scotland - another bailout recipient - announced last week that he would not receive a bonus after the firm reported a loss of £3.5bn for 2014, although his pay could still total almost £3m. The director of the High Pay Centre, Deborah Hargreaves, said the think tank's findings showed that "outside the boardrooms of big corporations, ordinary small and medium-sized business owners are as appalled by the culture of top pay as anybody else". She added: "When big business leaders rake in seven or eight-figure pay packages every year, including massive bonuses regardless of company performance, we are clearly seeing a corporate governance failure, rather than a fair and functional free market... Ordinary workers, customers and wider society, not to mention shareholders, are being ripped off." BBC NEWS

Banks' PPI mis-selling compensation bill now totals £24.4bn

Payment protection insurance (PPI) was mis-sold on a massive scale to people who did not want or need it. When compensation payouts began in 2011 the banks estimated they would have to return £4.5bn. That figure has been revised upwards every year, as ,ore victims have come to light. The latest amount set aside for PPI mis-selling has been detailed in banks' annual results released over the past few days. Barclays said its provision increased by £200m in the last three months of 2014, taking the year's total to £1.1bn. Santander added another £30m. Lloyds, partly owned by the taxpayer, set aside a further £700m over the same period, bringing its total for the year to £2.2bn. RBS, which is majority-owned by the taxpayer, made an additional £400m provision, to bring the total for the year to £650m, while HSBC allowed an additional £278m taking its total for the year to £624m. All these amounts come on top of billions of pounds which have been set aside by the top banks in previous years. PPI is designed to help policyholders repay loans and credit card debts in the event of illness, accident, redundancy or death. But it was mis-sold to millions of people. Policies often did not pay out when people needed help. Many sales staff did not explain PPI properly, for example to the self-employed or those with pre-existing medical conditions who would never be able to make a valid claim. Compensation claims have led to an average payout for millions of people, averaging just under £3,000 each. BBC NEWS

Barclays posts 'messy' full-year loss as shares fall, boss gets £5.5m

U.K bank Barclays posted a loss in its statutory full-year earnings on Tuesday as it set aside more money for potential fines related to its foreign exchange operations. Adjusted pre-tax profit increased by 12 percent in 2014 to £5.5 billion ($8.46 billion), compared to the year before, beating estimates of £5.3 billion in a Reuters poll. Adjusted net profit stood at of £2.8 billion for the year, up 27 percent. However, the bank recorded a statutory net loss of £174 million which includes all the one-off costs incurred, compared to a profit of £540 million in 2013. A provision of £1.25 billion was put aside for "ongoing investigations" and potential litigation relating to its foreign exchange operations, Barclays said. This included an additional £750 million put aside in the last quarter of 2014 which weighed on its earnings for that period. Many other lenders have settled or resolved similar issues, but an ongoing probe by a New York banking regulator means that Barclays has yet to fully realize any potential fines. "We remain focused on addressing outstanding conduct issues," CEO Antony Jenkins said in the report on Tuesday. "I regard the behavior at the center of these investigations as wholly incompatible with our values, and I share the frustration of colleagues and shareholders that matters like these continue to cast a shadow over our business." Shares were down by over 2 percent as markets opened in Europe on Tuesday morning. The bank's bonus pool was reduced by 47 percent, the bank said in its earnings - an average reduction of 17 percent per employee. After turning down his bonus last year, Jenkins was awarded £1.1 million for this 2014, bringing his total pay to £5.5m. Its dividend for shareholders was kept at 6.5 pence per share for 2014. CNBC NEWS

Coutts, known as the Queen's bank, is being investigated by German authorities on alleged aiding of client tax evasion

The bank, which is owned by Royal Bank of Scotland (RBS) and exclusively open only to those of significant financial means, said the inquiry was focussed on its Swiss operation. The bank looks after £20bn belonging to 32,000 international customers including sovereigns, celebrities and multimillionaire entrepreneurs. It was concentrated on not only the wealth arm itself but also current and former employees, RBS said. The development comes at a time when HSBC's private bank in Switzerland has been mired in controversy over alleged collusion in tax evasion - behaviour its group chief executive Stuart Gulliver and chairman Douglas Flint confronted in a hearing before MPs on Wednesday. RBS chief executive Ross McEwan added: "I want to be very clear, if we find any evidence on wrongdoing we will come down incredibly hard. It's just not the type of behaviour we'll have in our organisation. SKY NEWS

Bank of England to boost watchdog role after failing to spot forex rigging

The Financial Conduct Authority fined five leading banks including the taxpayer-controlled Royal Bank of Scotland a total of £1.1bn in November for rigging the foreign currency markets. Penalties from the US authorities brought the total tally to a record £2.6bn. The investigations centred on traders’ use of chat rooms to coordinate currency rates in the minutes leading up to a daily 4pm “fix”. Now the Bank of England plans to beef up its watchdog role after it failed to spot one of the biggest scandals in the City’s recent history. The central bank said a “root-and-branch” review of its market intelligence operations had found that some staff were unfamiliar with the way City firms operated. Last year the Bank of England called in one of the most respected figures in the legal world, Anthony Grabiner QC, to investigate allegations that some of its staff may have been involved in manipulating the £3 trillion-a-day foreign exchange markets for almost 10 years. But he has warned the Treasury select committee that a draconian approach to regulation of London’s financial markets could chase business to New York or Frankfurt. Grabiner told the committee: “My own view is that you can’t leave a market of this size in an unregulated form. You really do need to have a careful look at it, but you must not undermine the valuable marketplace you have created because if you make it too expensive or too complicated it’ll end up in Frankfurt or New York or somewhere else and then UK Plc loses out.” GUARDIAN

Pensions Minister vows to probe 'dark corners' for hidden charges that slash value of retirement pots

Steve Webb said today that the Government and regulators had a duty to 'restore faith and fairness in British pensions' as the City Watchdog, the Financial Conduct Authority, and the Department for Work and Pensions called for evidence about 'transaction' charges on defined contribution pensions - ones where worker and employer contributions are taken and invested to grow a retirement fund. Myriad fees are deducted from worker's pensions savings that are not made explicit in the headline cost. These seemingly small percentages can eat huge chunks of a pension - the difference between a 0.75 per cent 3 per cent a year charge can be £20,000 for someone paying in £200 a month for 20 years. Charges can range from fees paid to stock brokers and tax on buying shares to research purchased by fund managers to help them make investment decisions. The FCA commissioned research that showed there may be as many as 40 implicit or explicit charges that apply to a group personal pension. Taken together, these can double or more the overall cost to the end investor. Yet despite this, investors are never given the total cost on including these charges. Instead an 'ongoing charge figure' is quoted that excludes transaction costs. A report by the Financial Services Consumer Panel - which is paid for by the Financial Conduct Authority - from November said that the hidden nature of transaction costs, and the fact that fund managers can simply raid investors' money to meet them, mean that they have no incentive to drive costs lower. Charges are so opaque, the report said, that 'even fund managers frequently do not appear to know' how much they really amount to, and that 'around two-thirds of investment managers could not provide information on transaction costs'. The Panel advocated moving to a single fee that encompasses all costs 'where the asset manager is no longer free to extract unlimited charges from investors’ funds entrusted to it.' It said that previous attempts to improve disclosure and cap costs have failed in part due to 'stiff and effective industry resistance', and that 'consumers continue to suffer detriment 17 years after problems were first highlighted'. Regulators have been working to give pension savers a better deal. The introduction of Independent Governance Committees will be accompanied by a charge cap of 0.75 per cent on the default funds within workplace pension schemes. But this cap does not include transaction costs. DAILY MAIL