Goodbye to a bad year

So farewell 1994 - and as far as personal finance goes, most would say good riddance.

It was a year in which house prices stayed in the doldrums, interest rates paid to savers stayed low, and investing in equities mostly ended in losses.

Those in debt noticed that interest rates began a slow but sure drift upwards, with the last rise yet to impact on mortgage rates for the vast majority of borrowers.

A few themes dominated the year: the increasing disquiet about personal pension sales, rumbles in the building societies, and growing enthusiasm for taking tax-free income from personal equity plans.

The realisation that for many the much-vaunted freedom to take a personal pension was the freedom to get burdened with an expensive albatross led, eventually, to official action. But those who were persuaded to leave perfectly good company schemes or were sold personal pensions where the investment was so small that the charges gnawed away at the returns will have a long wait for recompense.

Savers with the Cheltenham & Gloucester Building Society will see the honey coming their way in 1995 from the takeover by Lloyds Bank. But they had to wait for the outcome of a court case before the exact terms of deal were decided. Now the first named account holder stands to get £500 per account plus more than 10 per cent of the account balance.

The Halifax/Leeds merger planned for 1995 will have to go through before the new society takes the plunge into the stock exchange and delivers the cash locked up in the mutual society to its members.

The leasehold reform law, which has been on the books for just over a year, did not have an immediate impact on leasehold home owners. A few determined people set out to test the law in the tribunals. Once they see how these decisions turn and how much they cost, leaseholders will start to have an impact on housing tenure in this country. But 1994 was too soon.

Rolling settlement - having a regular 10 working days to settle bargains made on the stock exchange rather than working within discrete accounting periods - slipped into place with barely a ripple.

But this is a just a dress rehearsal for squeezing the interval right down to three days. This means that the old-fashioned reliance on the post and cheques will have to make way for electronic trading allied with banking services bolted on to traditional stockbroking.

The Inland Revenue adjudicator got into her stride and took on VAT, while the new, all-encompassing PIA, the personal investment authority, started operating.

The latest disclosure rules, which come into force today, not only mean that investors get to know how much the salesman is making, but also require him to explain the salient points of the product being sold.

The Budget brought in new Pep rules, which mean that bonds and convertibles will qualify from the next tax year. This allows investors looking for income to focus on income-generating bonds and equities and to keep them clear of the taxman.

National Savings' yearly plan, which allows savers to make 12 monthly payments and then roll them up for four years to qualify for the full fixed-rate payment, will be withdrawn on 31 January.

The real success of '94 for National Savings was Premium Bonds, which boosted the highest prize to £1m, ahead of the launch of the National Lottery.

That rather summed up the climate: it seemed hopeless to be quietly optimistic about steady investments, so why not take the high risk?