Money news, advice and predictions for savers and spenders.
By Jeremy Gates
The plunge in the spending power of the pound abroad, and the debt mountain facing several countries in the eurozone, has left Britons puzzled over where to holiday this summer.
This week two suppliers of foreign currency gave their analysis of where the best value can be found. Many travellers only started planning trips after Germany knocked England out of the World Cup.
According to an analysis by ICE (International Currency Exchange), Croatia and Bulgaria are both 'key hotspots' for summer.
Both offer better value against the pound than a year ago.
Joanna Williams, head of marketing at ICE, says: "The popularity of the eurozone is seeing a resurgence due to the strengthening pound against the euro - which saw a 19-month high this week.
"But Brits are also capitalising on favourable exchange rates, low day-to-day living costs and Mediterranean temperatures in non-euro hot spots Croatia and Bulgaria."
At the Post Office, head of travel money Sarah Munro, says: "Football fans looking to escape World Cup woes will get the best deal by heading off to a Balkan beach resort.
"There, sterling will stretch further - and none of the region's soccer nations remain in contention."
The Post Office also identifies Bulgaria, Croatia - and the embattled eurozone - as the only places where the UK pound buys more foreign currency than a year ago.
"English soccer supporters will score an own goal if they fail to consider a holiday in the eurozone, where prices can be up to 43% lower than a year ago", the Post Office says.
All this, of course, assumes the crisis in the eurozone is contained for the rest of this year - and way beyond.
Not everyone is sure this will be achieved. Political commentator Peter Oborne argued the other day in the Daily Mail that Greece and Portugal will "inevitably" quit the euro at some point.
This possibility, he thinks, seriously heightens the risk of accepting euro notes with serial numbers prefixed with the letters Y (coming from Greece) or M (Portugal).
"In these extreme circumstances, the euros issued by these two countries might be converted back to drachmas and escudos - leaving the value of them in jeopardy", he writes."
"Of course, under European Central Bank rules, the value of this money ought to be fully protected, but who knows what will happen if there was a major crisis?"
He says that he will steer clear of notes with serial numbers G (Cyprus), S (Italy), V (Spain), T (Ireland) and F (Malta).
'Safe' euro notes, in Mr Oborne's view, are prefixed Z (Belgium), U (France), I (Finland), and H (Slovenia).
And we can, he says, have 'total confidence' in notes with serial numbers beginning with X (Germany), P (The Netherlands) and N (Austria).
Could millions of Britons face fresh humiliation at the hands of the Germans, leaders of the fight for the euro?
Although 16 of 27 EU member states have so far replaced their currencies with the euro, doubts about its long-term viability have intensified this year.
Growing fears that some member countries could default on their debts helped to push London's FTSE 100 index of leading shares below 5000 this week - around 15% down on its mid-April peak of 5833. That could be costly for someone about to take a pension.
Of course, Britain's expulsion from the ERM in 1992 showed how currency crises can spiral suddenly out of control.
But other commentators see little need yet to start checking serial numbers on euro notes.
Chris Saint, at the currency division of financial advisor Hargreaves Lansdown, says: "There have been anecdotal reports of consumers, and some traders in Europe not wishing to accept euro notes from peripheral EU states.
"But if a serious and fundamental crisis occurred, it is difficult to see that the question of where notes were issued would be a major issue. Given the ECB is in charge of policy, all notes would still be valued in all countries of the zone.
"If any country had to leave the eurozone and revert to a previously used currency, it would hardly be an easy process which takes people by surprise. Bearing in mind the time it took to prepare for the euro, I do not see currency change as something that happens overnight."
Mike Lenhoff, chief strategist at Brewin Dolphin, a fund manager holding £23 billion for 130,000 private clients, is equally sceptical.
"My sense is that the eurozone, the International Monetary Fund and the European Union have been involved in a big stabilisation programme to see governments through the crisis and ensure they can sell their debts in the market", he says.
"They are very keen to do all they can to make the system work. I am not convinced at this stage that the system will break down although, of course, anything is possible.
"Secondly, I remain confident that holders of euro notes face no serious risk, regardless of their serial numbers, because I believe the ECB and the member banks in each country - Bank of France, Bank of Greece and the others - would honour and exchange any notes under threat at the prevailing rate of exchange.
"If they failed to do so, they would undermine the currency of the remaining eurozone members. I simply cannot see that happening."
Ian Strafford-Taylor, chief operating officer at foreign currency provider FairFX, is "simply flabbergasted" by the notion that any euro notes could suddenly lose their value.
He says: "I had no idea euro notes are prefixed in this way to indicate a supplier country.
"But my understanding is that notes are issued on behalf of the ECB, rather than by specific countries. Nobody suggests the ECB itself could go bust.
"I would be flabbergasted if things got to that stage. I would assume that if any country did leave the euro to revert to its own currency, a standard conversion rate with the euro would apply."
Of course, the more serious the doubts about the euro, the stronger the case becomes for taking abroad with us cash, pre-paid currency cards, and credit and debit cards - which usually charge foreign usage transaction fees of 2.75% - 2.99% on each purchase.
While the eurozone is in crisis, the sterling-euro conversion rate moves in our favour. That has given Britons more reasons to cheer lately than Wayne Rooney's shooting.
:: Information: Hargreaves Lansdown arranges money transfers to other countries, but does not supply notes (call 0117 311 3257 and visit www.H-l.co.uk); ICE (call 0870 850 5091 and visit www.iceplc.com); FairFX (visit www.fairfx.net).
See www.moneysupermarket.com for a useful comparison of the costs of different methods of spending abroad.
Poundnotes
:: More than 5.5 million fixed-rate products holding more than £110 billion of savers' cash mature in 2010, with July alone seeing nearly 600,000 reaching maturity, and savers could get a shock when they reinvest the money because rates have fallen so low, says HSBC bank.
The bank claims investors who have already seen their fixed-rate savings mature this year stand to lose £722 million in income if they put the money back into similar products.
Savers whose bonds matured after 18 months face the biggest plunge because in late-2008 rates were around 7%.
For customers who back equities in the next few years, HSBC World Selection offers a portfolio invested globally for deposits from £50 upwards.
Savers might also be tempted by the six-year Protected Equity Bonds launched by Nationwide BS, which can be held within an ISA.
It promises a minimum return of 9% gross at the end of six years (1.44% AER), with maximum potential returns of up to 50% gross of the sum invested if stock markets in London, Europe and America hit a serious 'bull' run.
Minimum investment in the Nationwide BS bond is £3,000.
:: Consumers who buy almost all financial products through one supplier - including mortgages, cash ISAs, credit cards and current accounts - could waste more than £2,800 a year, financial website moneysupermarket.com has claimed.
Kevin Mountford, at moneysupermarket.com, says: "At a time when finances are tight, it is important to make the most of every penny."
"Many people like doing all their banking with the same provider, but the old adage of not putting all your eggs in one basket couldn't be truer in this instance."
:: Pensioners beware: the mutual society MGM Advantage says the gap between the retirement income paid on the best and worst-performing annuities is getting wider as annuity rates generally continue to fall.
On a £50,000 pension pot, says MGM, annual income for a man could range from a top quartile of £3,361 per year to £2,931 - meaning a loss of nearly £2,200 in the first five years.
For a woman, the gap ranges from £3,249 to £2,739 - a five-year difference of £2,550.
MGM Advantage recently repositioned itself as a retirement income specialist.
:: Do you see gold as the best defensive investment in uncertain times?
If so, check out the WAY Charteris Gold Fund - up nearly 17% since its February launch.
Its nearest gold-fund rival, managed by Investec, achieved a 13.93% rise in the same period, while BlackRock Gold and General returned 11.74%.
The WAY Charteris Gold Fund makes an initial charge of 5.25%, and an annual charge of 1.75%.
: Information: Call 01202 890 895 or visit www.wayinvestments.com.
:: High five savers
Phone No Rate Account Period Deposit Interest paid
ICICI Bank www.hisave.co.uk 4.75%% (F) HiSAVE Fixed Rate Five Year Bond £1,000 Yly
Aldermore 0845 604 2678 4.56% (F) Fixed Rate Account Five Year Bond £1,000 Yly
AA www.theAA.com 4.55% Internet Fixed Rate Five Year Bond £1 Yly
Close Savings 0207 392 1772 3.15% Premium Gold 180 Day 180 days (B) £10,000 Qly
Stroud & Swindon BS 08457 252423 2.90% 90 Day Notice 90 Days £1,000 Yly
:: Top five borrowers
Phone No Rate Period Max% Adv Fee Incentive
First Direct 0845 610 0100 2.29% variable for term 65% £99 Yes
ING Direct (UK) 0845 603 8888 2.55% disc to 31/08/12 70% None Yes
Yorkshire BS 0845 120 0874 2.89% to 31/07/12 75% £995 Yes
Furness BS 0800 220568 3.29% for three years 70% None Yes
Hinckley & Rugby BS 0800 774 499 3.39% for term 75% £795 Yes
Code:
*F - Fixed
*P - Operated by Post
*B - Operated by Post/Telephone
*T - Operated by Telephone
*W - Operated by Internet
*H - Operated by Internet/Telephone
*S - Available only to those aged 50 or over
*R - Available to those aged 60 and over.
:: Source: Money£acts - Tel: 01603 476 476 (All rates subject to change without notice).
