THIS TRANSCRIPT IS ISSUED ON THE UNDERSTANDING THAT IT IS TAKEN FROM A LIVE PROGRAMME AS IT WAS BROADCAST. THE NATURE OF LIVE BROADCASTING MEANS THAT NEITHER THE BBC NOR THE PARTICIPANTS IN THE PROGRAMME CAN GUARANTEE THE ACCURACY OF THE INFORMATION PRINTED HERE.

MONEY BOX

Presenter: Paul Lewis

TRANSMISSION 22nd SEPT 2001 1200-1230 BBC RADIO 4

LEWIS: Hello in today's programme stockmarkets had their worst week for nearly thirty years as fears of war grew. Where is our money safe ? Mike Johnson is with me today - Mike

JOHNSON: Yes I'll be looking at how the big banks use call centres to protect their managers from their customers but the customers are none too pleased.

MAN: I feel extremely frustrated and very angry is it too much to ask that we can simply speak to our bank manager when we want to?

LEWIS: Equitable Life seeks a compromise with it's members but they can only be paid with their own money . And EGG leaves it's customers boiling.

But first the markets - the value of our pension funds, ISA's , endowments, Peps and Unit Trusts plunged this week on stock markets around the world. Dealers were taking in the full extent of the damage to business done by the terrorist attacks on America on September 11th. The New York Stock Exchange re-opened on Monday and fell sharply, the Dow Jones industrial average ending the week down fourteen percent since the attack, London followed suit with the Footsie Index of our biggest 100 companies plunging nearly twelve percent. Shares have nearly lost a third of their value since January 1st and now stand where they did in April 1997. But in the USA Alan Greenspan the man who runs the Federal Reserve, the equivalent of our Sir Edward George, Governor of the Bank of England said this week long term prospects are good.

GREENSPAN: The terrorism of September 11th will doubtless have significant effect on the US economy over the short term. But as we struggle to make sense of our profound loss and its immediate consequences for the economy we must not lose sight of our longer run prospects which have not been significantly diminished by these terrible events.

LEWIS: Alan Greenspan speaking earlier this week - well on the line is Brian Tora Director of Gerrards Stockbrokers. Brian is Alan Greenspan right?

TORA: He is right but you have to accept the point he would say that wouldn't he - it's clearly not in his interest to talk the market down. But essentially it's a question of how quickly the American consumer can recover their poise. There's lots of evidence at present that people in America are simply holding back their not going to the theatre they're not buying at the moment and that's something that may extend for a few weeks. I think it's inevitable that we are going to have a recession in America.

LEWIS: But if we're at the start of what the President has called a ten year war it could go on longer than a few weeks- couldn't it ?

TORA: Not necessarily because it's a war that won't impinge upon the American public to any great extent. I think he's really preparing the American public for the fact that there may be no quick wins in this particular war. Wars can themselves be quite good for business they involve a lot of government spending they actually do benefit certain sectors of the economy so that's in itself is not necessarily a bad thing for the American economy and indeed the stock markets.

LEWIS: And are market falling because of unpredictability or is it really fears about the strength of particular companies - like insurance companies, airlines, banks and so on.

TORA: Those are the sectors that have been most hard hit and clearly there are some very real worries about their viability going forward. It's the uncertainty though and if you look in terms of how analysts value shares it's the fact that's it very, very difficult to work out how much profit many companies are going to make for the rest of this year and maybe for quite a bit of 2002. Now history tells us that when it's all dark, when indeed as the original Rothchildes said, when the cannons are thundering, that's probably when you ought to be buying shares but I can tell you it feels pretty uncomfortable in the market at present.

LEWIS: Brian Tora from Gerards Stockbrokers, thanks for talking to us. Many listeners have e-mailed Money Box with their worries about these turbulent and uncertain times, here's a selection.

WOMAN: I have three young grandchildren for whom I save each month fifty pounds, currently invested in premier equity growth funds. I've been wondering whether it would be a good idea to let them lay dormant and save that amount of money in say a building society.

MAN: We have a hundred thousand half of it is in building societies and the other half tied up in a second home - is it better to hang onto that property and derive income from it by renting or indeed to sell it and use the capital in other ways?

WOMAN: I have a with-profit bond that's maturing in November and I don't know whether to keep it in or to withdraw the money. I was worried about it even before the awful happenings in America but now I just don't know what to do to protect myself.

LEWIS: With me I have two independent financial advisors - Amanda Davidson, Director of Holden Meehan Limited and Ian Green group partner with Kilminster. Amanda Davidson worrying times all those listeners wanting to know put money in the market keep it in the market - what can we do?

DAVIDSON: Well if you're in the stock market for instance investing for grandchildren it's usually over a long period of time, this is quite a good opportunity to be buying units pretty cheaply so that when there is the rise in the long term then you can benefit from that. If you've got money in the markets then you should probably keep it there if you can.

LEWIS: So you still believe in the long term rise?

DAVIDSON: Definitely- we've seen dips before, the market will always recover the question mark is when.

LEWIS: We have all become hooked though haven't we on share values rising but many listeners need an income, we used to put money into shares to get the dividends not worry about the capital growth.

DAVIDSON: Yes this can be a problem because if you've got an investment that's volatile and it's dipping and you take income out of it then you're cashing a lot of units in order to be able to do that, but this where things like with-profits bonds,which one of your listeners spoke about come into their own, because they smooth that out. And taking income from a with-profits bond will not exacerbate the downwards trends of the investment.

LEWIS: And Ian Green - Key steps to protect yourself in these worrying and uncertain times.

GREEN: Well I would echo the sentiments of Brian on the telephone there that he's quite right optimism does always follow pessimism so keeping in the market is right there - but to try and maximise your income at the moment one of the first steps is always look at the tax status so if you have got money sitting in cash make sure that you're using your mini cash ISA allowance for the year that would certainly be stage one.

LEWIS: And in an uncertain times should we be looking at debt - to repay that because that can be a big drain if thing go horribly wrong can't it ?

GREEN: Well this is right and there are many products on the market these days often labelled as flexible mortgages which will allow you to pay off more money and especially the higher rate of tax you pay the more beneficial this is because paying off that debt is effectively giving you that rate, the mortgage rate, on your savings and if you're a higher rate tax payer for example grossing up that rate makes it very beneficial indeed.

LEWIS: And if we do want to come out of the market or indeed have money we want to invest what are the alternatives to the market ?

GREEN: Well I think at the moment things like with-profits bonds do give investors access to the market but perhaps let's say at arms length so not a direct investment. And there are other things too, like distribution bonds which are perhaps one more up the risk scale from with-profits, whereby you have a little bit of share investment, market investment but that's tempered with things like fixed interest from the government.

LEWIS: But Amanda Davidson isn't one of the problems with with-profits is that it's supposed to smooth the ups and downs of the stock market, at the moment there are no ups.

DAVIDSON: That's true but bonuses are still being declared and although what's happening is that there is a market value adjustment - which is an adjustment of bonuses if you're cashing, if you're simply taking an income then that's not going to affect the value of the bond.

LEWIS: And Ian Green what about just putting your money on deposit leaving the cash in the bank.

GREEN: Well as we said earlier looking to put it on deposit always go for wrapping it up inside your mini cash ISA to start with. But the other thing about leaving money on deposit is to keep your eye on the rates because we've seen before that companies will often issue what we call a headline rate to attract new money in but then when you're not looking take it away. So keeping your eye on that is the key.

LEWIS: Ian Green form Kilminster thanks very much, and Amanda Davidson from Holden Meehan.

Now the troubled insurance company Equitable Life told it's customers this week that the company was unstable and only a vote for a rescue plan would save it from a turbulent and uncertain future. The deal would give back to members more than a billion pounds but the lion's share would go to a small minority of customers, about one in six who took out their policies before 1988, then they were given guarantees about the level of pension they would get - promises Equitable can no longer afford to meet. They will get their funds increased by an average of seventeen and a half percent but only if they give up the right to those higher pensions. The rest of the customers who bought their policies after 1988 will be offered just two and a half percent extra in exchange they'll have to agree not to sue Equitable for misleading them, forgetting to warn them about the cost of paying those impossible guarantees to the others. But none of the policy holders Money Box has spoken to was happy with the deal. Dave is one of the majority without a guaranteed annuity rate, a non GAR in the jargon of Equitable life. What did he think of the offer of two and a half percent ?

MAN: Derisory - two and a half percent it's not enough to give up a mis-selling claim that potentially is worth the same as the GAR seventeen and a half percent. I can't see the non-GAR's approving this .

LEWIS: As Dave says the minority who have the guarantees, the GAR's, are being offered an average of seventeen and a half percent but they're not happy either. Jeff is one.

MAN: I can't see that the amount being offered in anyway compensates the loss of the guarantee. For somebody like myself it's actually only sixteen percent this is less than the amount we've had removed from our funds in the past few months and I see absolutely no reason whatsoever to vote for a compromise that will just make my position worse.

LEWIS: A fair point - so I went to the headquarters of Equitable Life in the City of London and spoke to Chief Executive Charles Thompson. Wasn't he just giving back the money he'd taken away on July 16th.

THOMPSON: While that's a very common misunderstanding it's mixing up two quite different things. One is investment performance which needs to come through into bonus rates and neither Equitable Life nor any other with-profits company can avoid that. What this compromise scheme is about is trying to resolve the legal uncertainties and what we're doing is saying to both guaranteed annuity rate and non guaranteed annuity rate policy holders that this is a way out of the uncertainty.

LEWIS: Now at least one of our listeners says he wants to vote yes but he wants to know that if he does there won't be further cuts in his policy values, can you give him that guarantee ?

THOMPSON: I can only give guarantees in so far as the policy guarantees are already there.

LEWIS: So there could be further cuts?

THOMPSON: Well it's always a possibility. I hope that what we're seeing in the markets at the moment is a temporary reaction to the appalling events in the United States and that once that has settled, then markets will come back and that will give us a more stable time.

LEWIS: Is there a danger though that people will vote for this increase in their policies and it won't be guaranteed - will all of it be guaranteed ?

THOMPSON: The proposed compromise deal broadly gives a proportionate uplift in guaranteed benefit and non guaranteed benefits so that the policy holders get an increase in both.

LEWIS: So some of it won't be guaranteed - so they could be voting for a pig in a poke?

THOMPSON: The portion which is not guaranteed is not guaranteed, but the intention of spreading it broadly proportionally across the guaranteed and the non guaranteed elements is to increase the guaranteed part so to give added security to policy holders.

LEWIS: Now this deal includes a new element compensating the people without guarantees being mislead about the liability to the ones with guarantees. Do you accept that a large number of your customers where mislead into buying those policies ?

THOMPSON: Well this I'm afraid is the area where I need to direct you to the legal opinions which are published on the web site.

LEWIS: Well they're fairly unanimous all four of them do say some people were misled.

THOMPSON: All four of them say that potentially some people have claims, what they also say is that there is no certainty as to who or why or how much money they might be able to claim, it might be nothing at all. They also generally agree that most of that cost has to be met by the policy holders who don't have guaranteed annuity rate options themselves, they would effectively be suing themselves.

LEWIS: If you're so uncertain about it - why have you offered them anything at all ?

THOMSPON: What we're faced with is a range of values that people think maybe attributable to this and what the board is doing is saying rather than having very extensive legal action over the next few years costing millions of pounds it makes far more sense to take an assessment of what these claims might be worth and to build that into the proposed compromise deal.

LEWIS: You can do that for the people who are still members but there are many of the people who may have been misled who have now already got out. They can still sue can't they ?

THOMPSON: I believe technically that is correct the members of the society I suspect would not be keen that I should spend their money on people who are ex-members of the society. What the legal advice says is that there is no class action available, the conditions are different for every individual so ex-policy holders would need to pursue their own claim on it's own merits and the society of course would have to defend itself against that.

LEWIS: And have you set aside money for those potential claims?

THOMPSON: It is something we have in our mind but there is no explicit provision at this stage for it.

LEWIS: One group who feel very much ignored are with profits annuitants, they are if you like stuck here, they can't leave and they're only been given a small amount of compensation themselves.

THOMPSON: Well the with-profit annuitants are locked in to the society that's absolutely true, it's of annuitants, those who are getting a fixed pensions from every life office and in a sense they have, if you like, more interest in the compromise scheme going through than others because of the stability it will bring back and the improvement then in their position.

LEWIS: And what's plan B ?

THOMPSON: If people do vote no then the second best alternative is where we are today which is this continuing uncertainty, the threat of litigation, that's why we want to move forward.

LEWIS: Charles Thompson, the Chief Executive of Equitable Life. Well Amanda Davidson is still with me- Amanda in a deal both sides should feel they've got something shouldn't they but here both sides seem to feel cheated.

DAVIDSON: Yes I know. I'm speaking to many policy holders in my day to day work and I can understand their frustrations about this and that they feel very aggrieved and almost like the deal seems to be rubbing salt into the wound. But you've got to bear in mind that Equitable is in a very difficult position, for the first time on their web site, they're saying that the society is fundamentally unstable. So the great danger if people don't vote for the compromise deal is that things get much worse and there could be an insolvency.

LEWIS: Yes and Charles Thompson made it quite clear there was no plan B - this was it - it was either the present situation or the deal. How do you think the vote will go ?

DAVIDISON: Well I think it's very difficult to predict how the vote will go. Clearly there are going to be those policy holders who feel they've got a very good case as far as mis-selling is concerned, and if you've got a GAR that's imminent you might want to exercise that. But I hope that policy holders in the main will vote for this deal to go through.

LEWIS: Amanda Davidson from Holden Meehan thanks. Now this a proposal - Equitable Life members can make comments until October 12th details on how to do that are on our web site and with our audience line, those addresses later. And if you want to know more our phone in Money Box live on Monday is on pensions but it will be taking questions on Equitable Life you can call Vincent Duggleby and his guests on Monday or e-mail now on [email protected]

LEWIS: Now these days getting to speak to the right person if you have a problem with your bank account can be time consuming and annoying. Most major banks no longer allow you to call your branch directly with queries, instead you have to go through a call centre, which could be hundreds of miles away and where staff have no authority to take decisions. Several listeners have e-mailed moneybox with complaints about one bank in particular, Lloyds TSB, which has more current accounts than any other bank in the country. Mike Johnson's been talking to them.

JOHNSON: Yes Paul and they all have very similar stories. Musician John Harvey got a letter from Lloyds demanding that he clear an agreed overdraft immediately. Well to find out why he was told he needed to ring his bank manager but Lloyds wouldn't give him the number. Instead he had to ring a national call centre which would only leave a message with his branch on his behalf. It eventually took four days before John could talk to his manager.

HARVEY: I feel extremely frustrated and very angry. Is it too much to ask that we can simply talk to our bank manager when we want to? I'm dealing with this central call centre all the time, they have no compassion, they're faceless people, they are I think ill-equip to deal with the public.

JOHNSON: But John got off lightly compared to another Money Box listener, photographer's agent Nikki Philbin. When she asked Lloyds to set up a new standing order to cover increased mortgage payments the bank failed to cancel the existing standing order, that meant Nikki was paying her mortgage twice over. When she tried to ring her branch she was put through to a call centre and then her problems really began.

PHILBIN: I just kept calling them saying I want to speak to my own bank manager. I asked for a direct line and I asked for a fax so that I could call them and they wouldn't allow me to have it. It was top secret. I ended up calling the call centre, over five weeks, twenty six times. It just got to the point where every time I picked up the phone to call them, you can feel tears pricking at the back of your head saying 'I can't believe I've got to do this yet again'. Why can't I just call my bank?

JOHNSON: But of course it's not that simple as I discovered when I called the number directory inquiries gave me for my local Lloyds branch.

WOMAN: (ring, ring�.) Hello you're through to Rosemary, can I help?

JOHNSON: Hello is that the Lloyds Bank in Windsor..?

WOMAN: No, you've come through on the business line at Reading because they don't have direct lines anymore unfortunately. If it's a balance you want I can help but if it's anything deeper...

JOHNSON: So why when you want to reach your branch direct do you get a call centre instead? Part of the answer lays in the massive recent contraction of the banking industry. Lloyds and TSB for example have shed thirteen per cent of their staff and shut twenty per cent of their branches in the past five years. Over the same time, call centres have mushroomed. Stuart Cliffe of the National Association of Bank Customers says that's hardly a coincidence..

CLIFFE: The original incentive for banks to stop quoting local branch details was the fact that banks were rather intent on closing their local branches down and retiring to a warehouse in a field somewhere. The attraction for the banks is the fact it cuts costs. It can be run by relatively young people supported by a computer system and it does mean that customers find it very difficult to bother the more senior, or the more experienced members of bank staff who can get on with whatever else they would prefer to be doing.

JOHNSON: Lloyds says call centres take the pressure off harassed branch staff who don't have the time to handle routine inquiries. But it does admit that it has a communication problem. The company's call centre manager is Ann Gunter.

GUNTER: What we have done is pick up some cases where there aren't enough phone lines between the call centre and the branches and we're now busy putting extra lines into our branches so we can start to get rid of those problems.

JOHNSON: So how long is it going to take for people to be able to get in touch with the branch, with the people in authority with the power to help them with their problems, it's a very basic thing isn't it??

GUNTER: In the case of the vast majority of branches that's already fine and we're putting in the infrastructure now where we've discovered that we haven't got quite enough.

LEWIS: Ann Gunter of Lloyds. Well Nikki Philbin did win �200 compensation but like other Lloyds customers that we spoke to she's had enough, she's taking her business elsewhere. Mike, any chance that Lloyds will relent and give out branch numbers while they get these communication problems sorted?

JOHNSON: Well in a word no. Lloyds says if they do it's worried that people might use them again in the future.

LEWIS: Yes I expect they would. Thanks Mike.

LEWIS: Now recently some credit cards started giving us money back. For example with one per cent cashback if you spend say �5000 over twelve months on the card you'll get fifty pounds back at the end of the year - it makes a nice change. But the people who run Egg, one of the most popular cashback cards are now slashing the rate in half. From October 11th Egg's one million plus customers will only get half of one per cent cashback instead of one per cent. At the same time the firm plans to introduce a rewards scheme giving discounts off goods but Peter Hughes is just one of many Money Box listeners who told us they feel badly let down..

HUGHES: They told me that they'd been talking to Egg customers and that they had some news for us and they introduced the Egg rewards scheme, told me about thinks that I'm not interested in, and then two thirds of the way down the e-mail it says, oh, by the way, we're also reducing the cash back offer to half a per cent. They've destroyed what I wanted, they've just taken it away, they say they've consulted but they certainly haven't consulted me or anyone I know. I'm very angry with them.

LEWIS: And while Egg is under attack from some of its customers it's also under the spotlight of shareholders after promising it can break even this financial quarter, ending two years of losses. I asked the UK Managing Director of Egg, Jerry Toher, if this change was just a ploy to save money to meet that target..?

TOHER: Well no I wouldn't agree with that. I think if we were no longer clearly the best buy proposition in the market then there may be something behind that argument.

LEWIS: But it's only a best buy if you have a debt isn't it? It's no longer a best buy if you pay it off? First of all cashback has been halved, secondly you have a shorter free interest period than most other cards?

TOHER: Yeah, and as you know from the analysis Paul, half per cent cashback it's still very competitive against the similar cashback cards in the market.

LEWIS: But not against the cards that offer one per cent?

TOHER: To my knowledge there's only one or two cards that offer one per cent, all of those have a significantly higher standard APR, probably five or six per cent, and certainly one of them has an annual fee on there so you actually have to spend quite significantly just to get to a point where you are earning more on a one per cent basis than you would at half a per cent.

LEWIS: Jerry Toher of Egg. Well judging by our e-mails, a lot of Money Box listeners will be thinking of swapping to a card with one per cent cashback and Money Box has been finding out if Jerry was right about how few there are. Mike, who still offers one per cent?

JOHNSON: Well you can get it on all purchases from the outset with the Capital One Circle Rebate card, although it's a Mastercard and not a Visa. Beware though if you go for that one, not to ever make a late payment or exceed your credit limit because Capital One would slap on an immediate �18 penalty, probably wiping out any cashback benefit at a single stroke.

LEWIS: Indeed, any others?

JOHNSON: Well the only other one we found now offering one per cent back on everything from the moment you start using it was the AMEX Blue Card, but it has a �12 annual fee and it can only be used where you see the American Express sign. A compromise could be the Halifax Classic Cashback. That's a Mastercard or a Visa and there's no annual fee. New customers get only a half a per cent cashback on the first �1000 spend in the year. After that it's one per cent cashback up to a maximum spend of �24000. Details of our survey are on our website.

LEWIS: Thanks Mike and elsewhere there's been a mixed reaction hasn't there from mortgage lenders to this week's cut in base interest rates.

JOHNSON: Yes there has. Not all lenders have passed on Tuesday's quarter per cent cut to their customers. Our friends at Lloyds/TSB haven't, neither has the Woolwich, or Barclays, which is part of that group, or the Royal Bank of Scotland, the Nat West, and the Abbey National has only cut by 0.1% - it says it wants to protect savers rates. More details on those changes are with our audience helpline.

LEWIS: Thanks Mike. And that's all we have time for today. If you'd like more information about any of the items on the programme you can call the BBC Actionline. That's 0800 044 044. Calls are free on 0800 044 044 or you can look at our website www.bbc.co.uk/moneybox. Remember our phone in Money Box Live on Monday with Vincent Duggleby on pensions and Equitable Life. The email is [email protected]. I'm back here with Money Box same time next week. Today the reporter was Mike Johnson, the producer was Jennifer Clarke and I'm Paul LEWIS.

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