Funeral insurance cancelled and not-so-simple assessment?

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Hello, welcome to this Moneybox podcast. Tax doesn't have to be taxing, not unless HMRC sends you a second demand without deducting payments you've already made on the first one. Simple assessment gets complicated. And it's a year since the Chancellor's first budget, but still weeks to wait for her next. We look at what might be in it. But first...

Thousands of people who've paid millions of pounds into an insurance plan they thought would cover their funeral costs face getting nothing in return. The insurer, Maiden Life, has told them their cover is being cancelled. Some had paid into the family protection plan. plan through their credit union for decades expecting a cash payment for their families when they died.

Credit unions are often used, of course, for savings and loans by people on low incomes who may not be able to access regular banking products, but their cover will now come to an end as a clause in the policy allows Maiden Life to pull the plug with just... just 30 days' notice, and give its customers, a number of whom are in their 80s, nothing. Anne is one. Now, I've paid that for 16 years for nothing. Maybe I'll have it too long. Is that what it is?

If I'd have died sooner, my family would have got paid out. I was in plan D. My family would have got £6,000. That would have been enough to bury me. I'm sick for my family. Because, I mean, I've got two sons that's disabled. I have a daughter that's taking two heart attacks. So where are they going to get the money to bury me? Well, we'll hear more from Anne shortly. But Sarah Rogers is in our Salford studio. She's been looking into this. Sarah, how was this plan supposed to work?

Well, in 1999, the family funeral plan was set up. But to be clear here, despite its name, this was life insurance and not a funeral plan which lets you pay for parts of your funeral in advance. Now, the policy, which was distributed through credit unions, Unions and overseen by broker C Mutual allowed members to add up to five people in their family, pay a monthly premium and then... When they died, expect a lump sum of between £2,000 and £6,000 with that money to go towards funeral costs.

It was closed to new applicants after 10 years and then it was later renamed the Family Protection Plan. But there are around 2,000 of these plans still active with millions of pounds paid in over the years. Of course, there has been a number of claims and payouts.

over that time as well, but now the insurer behind it, Made in Life, is withdrawing that cover. And we heard earlier how devastating the cancellation is for Anne. She's paid in for years. Why can't she just get her money back? Well, I have a copy of the... plan here and in the terms and conditions it says that cover can be terminated by the policyholder or the insurer at just 30 days notice and because this is a monthly insurance policy and not a savings product

Members' families could no longer receive payouts when they died. It did give longer than the 30 days notice required. In a letter sent to credit unions in September, Maiden Life said the company was under strategic review and was not renewing contracts. I did put it to Anne that it was there in the small print. Here's what she told me. Nobody ever, and I swear to God, my kids' life, no one has ever said that to me.

We should have been more informed if that was the case then. I would have never taken out that insurance policy on a month-to-month basis. No way. So what are you going to do now, Anne? I don't know him. I don't know. I'm 81 years of age. I thought £6,000, there's enough there to bury me. Okay, they wouldn't have a party after it, but as long as there was enough to bury me, no worry, no nothing. And now I've got nothing.

Well, I have reached out to Maiden Life a number of times, but haven't had a response. The broker, Sea Mutual, who oversaw the policy, said it believed all enrolling members had received written details of the cover. And it said despite efforts, another insurer...

couldn't be found to take over the plan. All of this, though, little comfort to people like Ann, Paul. Well, indeed, yes. And this plan was paid for by people through their credit unions, which, of course, they trusted. What have the credit unions said? Well, the main trade body, the Association of British Credit Unions Limited, said that the policy...

did offer quality protection, but recognises the distress that the withdrawal is causing. It says it's supporting individuals impacted. However, a number of credit unions have actually formed a separate group and are considering legal... action.

I should add as well, Paul, that this is hitting Scotland harder due to a higher concentration of credit unions there, and it is gaining some political attention. MSP Paul Sweeney raised it at First Minister's Questions this week, calling for immediate... I think it's deeply immoral and repugnant leaving thousands of...

Vulnerable, low-income, elderly people are high and dry like this. And many people have paid in far in excess of the value of what they would have gotten a payout on their death for the funeral cover. And they're just to be left completely high and dry, having given away, you know,

to £10,000 over many years. Now, Sarah, we've covered funeral plans many times on Moneybox, and they are now regulated by the Financial Conduct Authority. And a number of people affected have told us they thought this was a funeral plan. What does the regulator have to say? Well, it said this was not a prepaid funeral plan, but a renewable insurance product. It added it does not have the power to force firms to continue to offer products after they decide to withdraw them.

Thanks, Sarah. Well, with me in the London studio is James Daly from the consumer group Fair of Finance. James Daly, some members paying into this since 1999 on the expectation of a payout when they died. But it's not a funeral plan, so it's not... regulated. Can you explain why? So it is regulated. This was a group life insurance policy. It may have been described as a funeral plan and at that time in 99 all the way up to 2009 funeral plans were not regulated. But it wasn't a funeral plan.

And so I do think that there's something for the regulators to look at here, because clearly, you know, as Anne said, customers didn't understand that this was effectively a month by month policy. Your premium was just covering you for one month at a time. If people really understood that.

then surely they wouldn't have bought it. Well, no, that's indeed what Anne said. She said, I'd never have taken it out if I'd understood it. So she clearly didn't. And, of course, an important term like that... has to be obvious, hasn't it? It has to be on the front page of anything that you take out now, anyway. Yeah, absolutely. And certainly for the latter half of the period where these policies were sold, the insurance industry was under...

regulation of the Financial Services Authority. And it doesn't seem that they were compliant with those rules. I'd also question whether or not that clause particularly was compliant with the unfair terms of consumer contract regulations. So I'm glad that...

There are some consumers getting together to try and take this through the courts because they may have a case there. Yes, and of course, Paul Sweeney, the Scottish MSP, he wants redress. He called it immoral. Is there any chance of redress, do you think?

Well, I think there is on an individual basis, and I think we'll have to see whether the regulator finds that Maiden Life has been in breach of the rules more widely. But I would encourage people to think about taking this to the ombudsman, because we do see the ombudsman turning around and saying... If you weren't clear enough with customers about an onerous part of your terms and conditions, we're not going to let you stand by them. Yes, I mean, these are...

The general structure of these over-50s products, they are a bit of a gamble, aren't they? Because if you leave even an average time, you've paid in more than your family will get out. So they're good for people if they know they've got a short life expectancy, but on average, you're going to pay. Yeah, I mean, they're pretty poor value products, but they do have a very low entry point, and that's why they're attractive to a lot of people. But the ones that you see advertised on the TV...

don't end up having this one month's withdrawal clause that was in this policy. And so it is a gamble, but at least you know that at some point when you die, you will get something back. Whereas here, these customers are left. getting nothing. Yes, now we've talked about responsibility and so on, and for more than a year, all financial firms have had to abide by what's called the consumer duty, which means ensuring good outcomes for your customers.

Could those rules be applied at least for the last 12 months of this policy? Well, I think so. I think that as of July 2024, Made in Life would have had to look at this and say, is this fair value? Because you have to prove you're offering fair value to your customers under consideration.

And I think a product that is only insuring you for one month at a time and which presumably even by that stage they were thinking about pulling doesn't meet the terms of consumer duty. So definitely something for the regulators to look at there as well. Yes, and people listening who may have similar products with different providers, widely advertised, as you say, just very briefly, what should they be checking?

Well, I mean, I think you won't find clauses like this in today's policies. And, you know, if you're thinking about preparing for your funeral, look at a funeral plan because if you can afford them, they tend to be better value and they are now properly regulated. James Daly of Ferra Finance. Thanks very much. The customer journey isn't just changing. The journey is change.

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Now, simple assessment is supposed to be, as the name implies, an easy way for HM Revenue and Customs to tell people what they owe on their savings. But it's confirmed to Moneybox that it's now sending new or renewed assessments halfway through the tax year and asking for a total sum, part of which may already have been paid. And some tax advisors are concerned that people who paid their first... self-assessment bill.

Sorry, simple assessment bill back in the summer could easily find themselves paying twice for the tax. One person who thinks simple assessment is just too complex is Max. That's not his real name, by the way, who's received his second assessment. I understand that new information comes through, they get more data and so they might revise their estimate of how much tax I ought to pay.

That used to happen to me before when I filled in self-assessment tax returns too. And that kind of makes sense. And it would usually come out in the wash in the end. You know, sometimes you'd have underpaid, sometimes I'd have overpaid. And then I would either get a rebate or they'd ask me for some more. And I think that's an experience lots of people have had.

And as long as it all comes right in the end, that's kind of okay. But if they're sending a second letter that then doesn't acknowledge that there was a previous letter and... The thing that's particularly confusing about this one is it doesn't make clear, is this amount that they've asked for on top of the money I paid before or instead of, and do I just have to pay the difference? That's not at all clear from the letter that I've just received.

Well, that was one listener's experience. And I must say, having seen that form from HMRC, I think not at all clear is a kind way of describing it. Live now to Helen Thornley from the Association of Tax Technicians. Helen Thornley, you've also seen Max's simple... assessment. Is his criticism right? I think it's a very fair criticism. It's not at all obvious when you look at the letter. There's a couple of clues. It does say at the start it replaces any previous tax calculation.

But that, to me, I think is fairly standard boilerplate for this letter. The bit to look out for is where it says UAHMRC and gives a figure. Underneath, it gives you a little thing to say if you've already made a full or part payment towards your tax, check and take...

But it doesn't say clearly deduct that from the figure and pay the balance. And it requires people to understand that they need to go back and look at the first letter and check that it relates to the same tax year as well, because you don't want to take off what you paid for last tax year.

tax year, otherwise you will have underpaid. And then you would be in trouble. The revenue says most people only get one of these simple assessment forms. What's the scale of this? Because we used to have two ways of paying tax, PAYE through your job or self-assessment. Now we've got this simple assessment that's turning out not to be that simple. How many people does it affect? For the last...

Actually, we have details, which is 23-24. There were 1.3 million of these. They were introduced in September 2017 primarily for pensioners who couldn't pay their tax from deductions from their state pension and for people where the tax...

bill was too big to be deducted through their POIE code but since then particularly as savings rates have increased massively and a lot more people are getting savings income that needs taxing simple assessment is kind of stepping in to fill that breach to try and stop people having to come into self-assessment. Yes and of course people on high earnings used to be in self-assessment but now they've been taken out completely however much you earn haven't they so that's an issue for them as well.

Yes, indeed. I mean, if you've got high savings income of over £10,000, you still need to be in self-assessment. But HMRC would prefer to use the information they get direct from banks and building societies to pre-populate a simple assessment.

Self-assessment is the reverse of self-assessment. So HMRC uses data that they have to issue you with a calculation, which is the opposite way round to self-assessment. So it's quite a different beast. Yes, because with self-assessment, you provide the data generally. Now, the revenue has got back...

to us and confirmed that when it writes to Max, you owe HMRC about £1,400, that is actually not true. It does not take account of the £900 odd he's already paid. So in fact, he only owes, HMRC confirms, About 450. And it says if a customer's already paid the amount set out in the first simple assessment letter, they will owe the amount set out in the second letter minus what they've already paid. So why do people have to do their own arithmetic?

to work out what they actually owe. It's to do with, I think, HMRC systems just aren't capable of matching. previous payments from previous letters to the next letter. So your simple assessment will always show your total liability for the year. And then from that, what you actually owe, so your total tax bill will be one thing, but what you have left to pay, then sadly you'll have to do the manual.

annual adjustment of going, well, I know I've already paid something towards this tax year from an earlier assessment. But is there a danger that people will get this second assessment and it says UOHMRC a certain amount and they'll panic and say, oh, I better pay this and pay the whole... lot. So they'll have paid the first bill twice if they've already paid it. Yes, I think there's a huge danger of that happening. And what can people do if that does happen?

The advice I've had from HMRC is that if they do pay twice and they've realised they've paid twice, is they'll have to ring HMRC and request the refund back again, which will mean a little bit of time on the phone to HMRC, I'm afraid. When you say a little bit of time...

That can be quite a lot of time, can't it? Though when you get through, I'm sure they're very helpful, but it does mean you've got to do the work. If you don't do that briefly, what happens? Will their old computer system eventually... reconcile everything and get it right and give you some money back or take a bit less tax off you next year.

I would like to think that eventually it would spot it, but I wouldn't like to say how long that might take before they realise. So as I say, the advice I've had is very much to, I'm afraid, spend the time queuing on the helpline and to dial up for that refund. And is there any hope in a word that they'll... this simple assessment form?

Yes, something we're looking at, there's a working group with HMRC and the ATT and other professional bodies and we're trying to make the letters and the guidance much clearer for people. Well, some hope for the future. Helen Thorney from the Association of Tax Technicians. Thanks.

Now, it's just 25 days to go before the budget, which I can now say is later... this month on November 26th, already more than a year after Rachel Reeves' first budget. And, of course, the speculation continues in today's papers. One suggestion this morning is that up to £4 billion a year could be saved. when I say saved, I mean taken off arse, by scrapping or limiting what's called salary.

Now, that's where people take a pay cut. So the money sacrificed is then paid by their employer straight into their pension. And both sides avoid national insurance. With me in the London studio is David Dodgson. He's a chartered financial planner.

the independent advisors, the private office. David Dodgson, how popular is salary sacrifice? Extremely, Paul, I think, because it's a very simple way to get, well, certainly high rate tax relief at source. And that's a good segue from the previous story. If it's simple, it's easier for the individual, but it's also easier for HMRC. So I'm surprised they're actually thinking this is a good idea.

Yes, but it does mean you don't pay tax on, well, you don't pay tax on pension contributions anyway, do you? But it also means you don't pay national insurance. That was never intended. Is this a bit of a tax dodge? I wouldn't say it is. Perhaps it's an unintended consequence, possibly, and it will clearly be unpopular if it's removed, bearing in mind the fuss that we've had over employer cut. national insurance contributions increasing recently yes and of course it would penalize

employers more really in a way than individuals, wouldn't it? But it wouldn't work, for example, if you were on minimum wage because you can't be paid less than that. Is it just for middle and higher earners, for people who work for big employers?

dare I say it, for people with slightly broader shoulders? It's the people with those broad shoulders that seem to be targeted, certainly. Anyone who's earning over £50,000 does actually enjoy the benefit of salary sacrifice when it's available. So yes, that's...

It's clearly where they're focusing, well, the potential change. Now, we have no idea what Rachel Reeves is going to do. This is speculation. It was in a national newspaper this morning. It seemed to have some basis in things they'd been told. you think it's something Rachel Reeves might do, might be looking at? Quite possibly, because there's been quite a lot of, let's say, speculation around income tax relief.

decreasing as well, which is a slight concern. In fact, it's probably a major concern, certainly for higher rate taxpayers. Well, it's only a concern for higher rate taxpayers because that would be the quid pro quo would be that basic rate taxpayers would get a bit more. You're absolutely right, Paul.

In a sense, you could argue that that's quite a good way of focusing the tax relief. Who do the government want to increase the savings? It's certainly lower paid individuals. And if you can boost the level of income tax relief that they get, it's more likely to be a success. for change.

Yes, and it's also been suggested she might raise the basic rate of income tax from 20% to 22%, which would mean people on basic rate would be actually paying 10% more in their basic rate bill, wouldn't they? They would, but it would be better for them to make more pension.

contributions then perhaps it's linked or indeed ISAs because I want to move on to ISAs because there's another speculation that's concerning many of our listeners and that she may reduce the amount you can put into a cash ISA from the current £20,000 a year

Many listeners will be saying, chance would be a fine thing, I know. And that's to hope to encourage people to invest spare money in investments, in shares, not in cash. And not everyone's actually against that. Our reporter, Joe Casner, went to talk to shoppers in Liverpool. It's a great opportunity to save tax-free up to £20,000, so if it's reduced, it doesn't make sense at all. So they're restricting the amount, potentially, to encourage investment in stocks, and that's British stocks.

Do you think that would be a good thing? Yeah, that would be a good thing, but it's still a bit more risky, so people are a bit scared of investing in stock. Most people would probably just think about themselves rather than whether it's beneficial to the stock market or not.

I'm not unhappy if that's the way the government want to go. That's the way we need to go. I think ISIS has been a great thing for many years and a lot of people have done well from them. I think the situation we're in nationally, things need to be considered like this, unfortunately. So I'll manage my accounts accordingly.

Well, the Treasury, of course, doesn't comment on budget speculation, but it did say to us they are not looking at the overall £20,000 limit, David Dodgson. But that statement leaves open the possibility of changing the cash bit of that, doesn't it? into interpretation. Remind us how popular cash ices are.

Extremely. I mean, if we look at the numbers this year, we've had about 29 billion added to cash ices. In total, having sadly checked the Bank of England statistics, there's about 439 billion in cash ices. Is it a big... issue. Yes, it is a big issue. That is a huge amount of savings, isn't it? Now, one listener, Philip from Gloucester, wrote to us and he says he and his wife are in their 80s. He doesn't have time to take the risk of investing because he's afraid things will change.

you know, that he won't get his money back. And he wants an age exemption if the Chancellor does that. Any chance of that? I doubt it. And unfortunately, I also hope not, because it adds in another layer of complexity. And most people are already bamboozled by the various ISA rules that we have in place at the moment. Simplicity is king. So to make that, I have sympathy.

with what he's saying. But the fact of the matter is, I personally don't think it's a good idea to make that change. Now, we heard those people in Liverpool talking to our reporter, Joe Krasner. There are mixed views about moving savings into stocks and shares that does introduce...

risk, doesn't it? Though some people seem happy to do that. Some people are. And is it a good idea? Well, if the market's moving in your favour, it's a very good idea. But I think most of the people that have got money in cash ices have got it there because it's nice and secure and it makes them feel comfortable.

A lot of people are not aware of the fact that investing for the long term in stocks and shares is a good thing to do, but you've got to hold it. And it's completely different to cash ice for investing. I'm just going to read part of an email from Jill, who emailed us just this morning, who says, I've gradually been moving savings over to ISIS.

And if the Chancellor reduces it, I'll be taking my money out of my accounts and stuffing it in the mattress with it. I'll certainly not be investing in companies. I do not gamble. So, as she says, tax that, Ms Reeves. Very cross about this. And what I anticipate happening is if people are less able to put money into cash ISIS rather than investing it, they're more likely to actually put it into a standard bank account or savings account, which will be taxed.

And I'm not suggesting there's a conflict of interest here, but by reducing the cash ISO allowance, the HMRC could end up taking more tax. Well, I suppose that's why they're planning to do it, because less money will be going into cash ISO.

If you think of the tax that would have been paid on that interest on that £439 billion, that is quite a big cost for them. Indeed. Now, we talked about investments and the risk, that they've been going up very strongly and investments have done better than cash, better than inflation. for a few years now, but we've heard rumours and fears of a crash from very senior people. I mean, the Bank of England, the boss of the American Bank, J.P. Morgan, and if you're in your 80s...

in your 60s or 70s, never mind your 80s, you wouldn't have time to recover. Is that why cash is king among older people? I think it is, yes. I mean, it does still make sense to have stocks and shares exposure as you get older. But the fact of the matter is, you're absolutely right, Paul, you've got less time to recover. And it makes it more risky for an older individual than a younger individual.

What I would say is that if we're going to encourage people to invest in stocks and shares, we really do need to focus on the younger part of the population because they're the individuals that we are going to need to save a lot in the future. And you need to understand the risk of investing in stocks and shares. Yes, the risk and, of course, the benefits. And the reward. David Dodgson from the private office, thank you very much.

Well, just three Moneybox podcasts to go before Rachel Reeves reveals her actual plans. So subscribe to them if you don't already and hear the news and speculation first by listening live to Moneybox on Saturdays at noon on BBC. or send a voice note which we love or a comment to our WhatsApp. We do read and listen to them all.

In this podcast, the reporters were Sarah Rogers and Joe Krasner, researchers Emma Devlin and Catherine Lund, studio manager Isabel Whitehead. Our editor this week was Craig Henderson. I'm Paul Lewis, and this was a BBC News Money and Work production for... BBC Sounds. Our culture can cancel someone in the blink of an eye. Celebrities, sports stars, politicians, influencers and royalty can all find themselves in the firing line.

In the age of AI-generated evidence, lawsuits written in legalese you need to pass the bar to decipher, how are you supposed to separate the fact from the fiction? That's where we come in. I'm Manushka Matanda-Doughty and this is Fame Under Fire from BBC Sounds. We'll myth-bust, debunk, pre-bunk, fact-check and get to the truth behind the timeline. There are new episodes every week, so make sure you listen to Fame Under Fire and subscribe on BBC Sounds.

The customer journey isn't just changing, the journey is change. New ideas spread in an instant, expectations rise overnight, decisions are made in the blink of an eye. That's why companies need Sitecore. We put your brand in the moment, right when your customer is ready to act. So every message feels personal, timely, and makes your brand unforgettable. The journey is change.

Sitecore moves with it. See how at sitecore.com slash journey. Hear that? That's me with a lemonade in a rocker on my front porch. How did I get here? I invested to make my dream home. Home. Get where you're going with MDY, the original mid-cap ETF from State Street Investment Management. Getting there starts here.

Before investing, consider the fund's investment objectives, risks, charges, and expenses. Visit statestreet.com slash IM for a prospectus containing this and other information. Read it carefully. MDY is subject to risk similar to those of stocks. All ETFs are subject to risk, including possible loss of principal. Alps Distributors, Inc. Distributor.