Your Money: Turning back state benefits

LITTLE by little, signs are pointing towards a dismantling of the welfare state. Retirement for men and women at 67, the taxing of invalidity benefit, and a cut to six months (from a year) in the maximum payment period for unemployment benefit are among proposals put forward by the No Turning Back Group of Tory MPs. The implication of all this is that people can make private insurance arrangements for unemployment and the other inconveniences life serves up. But in areas where cover exists for malady and misfortune, there are big gaps between individuals' expectations and the help the policies actually deliver. Health insurance policies exclude chronic illness. Redundancy insurance, designed to pay a mortgage during unemployment, has proved woefully inadequate because of exclusions. Contracts for permanent health insurance, which pays a benefit for the sick and disabled, are also becoming more tightly drawn and the price is rising (see page 18).

Friendly societies are trying to open a debate with the Government about the way they could mesh in with a reorganised welfare state. Some insurers have also sought discussions. They realise that without some kind of subsidy, the cost of meaningful cover puts it beyond many people.

Consumers, meanwhile, should not fall for scare stories from sales people about the state benefit system without first combing through the fine print.

SEVEN MILLION people will be asked to vote on whether the Leeds Permanent and National & Provincial building societies should merge to form one pounds 32bn organisation. Since the general meetings will not be held before the autumn, customers of the two societies need be in no hurry to make their minds up, and they will first want to know if they are to be offered bonuses as part of the deal. The societies say they cannot say yet. Financial analysts suggest their reserves probably do not justify pay-outs. Cynical members might wonder whether directors will hold the promise of sweeteners in reserve in case members react badly to the plan?

There are some sound financial arguments for the link-up. But mergers do not always work in members' interests. Witness the experience of Nationwide customers, many of whom feel service deteriorated because of the problems arising from its marriage with the Anglia.

An early clue to the likely success of the Leeds/N&P deal will be the manner in which directors field investors' concerns. A delay in a decision over bonuses would not go down well.

FINANCIAL advisers have taken another drubbing from the consumer movement following an investigation into the way 28 of them advised researchers on how to deal with a pounds 25,000 redundancy pay-off.

The research team from the Consumers' Association visited a mixture of independent firms, insurance company representatives, and bank and building society branches. The people in this last category will mainly have been agents for insurers. The overall conclusion was that advisers were far too quick to recommend commission- rich products such as bonds and personal equity plans.

However, there was an unwritten conclusion. The Consumers' Association did not publish the list of advisers that it deemed to have given good advice. Nine names were applauded and two, National Westminster Bank and Royal Life, also appeared on the blacklist - researchers had visited different branches. Only one independent firm, Towers Rockall of Northampton, made it into the charmed circle.

The Consumers' Association is not the final arbiter on good advice. But this exercise suggests that obtaining it is a matter of luck rather than judgement. Getting a second opinion, even if this means walking down the high street to another branch of the same bank or building society, cannot be a bad idea.

Vivien Goldsmith is on holiday