It has been a long-standing issue: the sale of payment protection insurance (PPI) is a multi-billion pound protection racket that continues apace. More than a year on from the Office of Fair Trading (OFT) referring the market to the Competition Commission, high street names are still found to have PPI failings.

The news that furniture retailer Land of Leather and its chief executive have been fined for improperly selling PPI makes sobering reading. The sector has increasingly come under regulatory pressure since the OFT move in February 2007. The Financial Services Authority has previously fined six firms over poor PPI selling practices: HFC Bank by just over one million pounds; Regency Mortgage Corporation by 56,000 pounds; Loans.co.uk by 455,000 pounds; Redcats (Brands) by 270,000 pounds; GE Capital Bank by 610,000 pounds and Capital One Bank by 175,000 pounds. It has also imposed a public censure on Eastern Wester Motor Group and Cathedral Motor Company.

Three other cases have been concluded where problems relating to PPI also featured — Capital Mortgage Connections was fined 17,500 pounds; Home and County Mortgages by 52,500 pounds and Hadenglen Home Finance by 133,000 pounds for the firm and 49,000 pounds for its chief executive.

But the saga has been well documented by financial journalists for years. The insurance is designed to cover debt repayment for people who fall ill or lose their job, but is often aggressively sold, expensive and unsuitable for most people’s needs. It is an issue that affects millions: many people are paying for this cover that they don’t need, can’t use and may not even know they have. There are more than 20 million PPI policies in place, according the OFT, which has estimated that Britons could save one billion pounds a year with greater competition in the PPI market.

The industry generates 5 billion pounds-worth of premiums per year, but only 20 percent of that is paid out in claims. That figure is shockingly low when you compare the sector to others: 82 percent of car insurance revenues and 54 percent of home insurance premiums are repaid to claimants. These must-have insurance policies are, clearly, far better value than PPI. It, in contrast, is not only expensive, but is often almost impossible to claim against.

A package from consumer group Which? that arrived in the Reuters’ office this morning illustrates the point. The insurance, it says, is as useful as the enclosed: a chocolate teapot.

We are living in uncertain times. House prices are falling, the economy is slowing and consumers are under the cosh from the fall-out from the credit crunch, which is sending borrowing costs higher.

Preparation is the best defence for your finances. As Karen Torson, partnerships business manager at the Cheshire Building Society, says: “An uncertain economy can cause worry for many individuals, but taking the time to ensure you are well prepared can provide peace of mind and make a big difference — whatever the future holds.” Whatever might lay ahead, our top tips should help:

* Protect yourself

There are many different insurance policies on the market offering various levels of cover, so consider what you actually need, be it mortgage protection, income protection or both.

Research cost options and check the small print. In comparison with income protection policies, mortgage payment protection insurance (MPPI) plans can be greatly inferior and might even cost you more, according to protection specialist LifeSearch. Typically, MPPI plans only pay out for one year, include a number of important exclusions and both the premiums and the conditions of the policy can be changed at short notice.

* Don’t stop the music

Read other insurance policies carefully to know what you’re covered for.

For example, music fans should think about protecting downloads. Many of Britain’s big name home insurers are still not paying out for claims on the loss of downloaded music — despite the fact that digital sales now form a massive chunk of consumers’ music purchases. They include Endsleigh, Barclays and Bradford & Bingley, according to price comparison website Moneynet.co.uk.

* Save for a rainy day

Inflows into building societies are on a high — and cash savings are an important cushion against hard times. The rising cost of living has made it more difficult for most to save, but every little helps: try and put a small sum into a high-interest savings account each month.

* Shop economically

Think of ways of cutting down on spending. Supermarkets, for example, usually have reduced-priced goods near the end of the day, while TK Maxx sells designer and high street brands of womenswear, menswear, homeware, gifts and accessories at up to 60 percent less than the recommended retail price.

* Know where to turn

There are many services out there that can help if you fall on hard times or have a financial problem. The Citizens Advice Bureau is a good starting point.

* Keep your CV up to date

Regardless of whether or not you feel secure in your job, take time to update your CV. It will mean one less thing to worry about if you find yourself out of work.

Are there other ways you are easing the financial strain? Share your tips with us.

The “open market option”: it sounds like complex financial jargon. But  it’s certainly worth knowing about. For, when it comes to retirement, it could boost your income by almost 25,000 pounds.

A 65-year-old woman with 100,000 pounds-worth of pension savings could be missing out on a staggering 24,162 pounds by failing to exercise this right; a man by 23,025 pounds, according to numbers crunched by independent financial service provider Hargreaves Lansdown. That is around the same as average annual earnings in the UK last year — 23,764 pounds, according to the Office for National Statistics.

More than 85 percent of savers buy an annuity contract when they retire. This guarantees an income for life in exchange for savings built up in a pension fund. “That’s always been the case and is likely to remain the case, as for most people it really is the right thing to do: they need the certainty of income and haven’t got many other assets,” Nigel Callaghan, a pensions analyst at Hargreaves Lansdown, the largest annuity broker in the UK, tells Reuters.

Some 200-plus companies offer pensions. Yet only a small proportion — a dozen or so — “play” the annuity market. The average difference between the best and worst annuity rates published by the Financial Services Authority is more than 15 percent. Legal & General, Prudential, Axa, Friends Provident and Norwich Union are among those that vie to be competitive.

But did you know that savers need not buy their annuity from the company with which they’ve stashed their retirement savings? This — the “open market option” — became a contractual right in 2002, forcing insurers to send “wake up letters” to those approaching retirement to tell them of their ability to scour the market for the best deal. Despite that, the number of people exercising this right has remained largely static at around a third.

“Consumers are being ripped off right, left and centre when it comes to retirement,” says Callaghan. “Many, if not most, of these letters are the complete antithesis of plain English. Some are six-plus pages and you’ll find the stuff about the open market option embedded at the bottom of page four in small print and written in Latin. That’s why I think the take-up figure is so shockingly low. It’s not working: it wasn’t working back then and it’s not working now; commercial greed is the bottom line.”

If the current trend continues, insurers stand to make even greater sums: the number of pensioners is on course for a boom. Last year, 330,000 people bought annuity contracts with 12 billion pounds-worth of pension savings. By 2012, that figure is set to balloon to 18 billion pounds, as the baby boomer generation retires and the demise of final salary pension schemes continues.

By exercising the open market option, these people and the retirees that come before them can avoid handing insurers telephone-number profits. And, by all accounts, savers should be able to get a good deal: annuity rates are at a four-year high as the capital value of corporate bonds — used by insurers to back annuity contracts — plummets and yields stretch. “There have been 30 movements in annuity rates this year alone — the majority up,” says Callaghan. “It’s largely to do with the credit crisis and the continued spanking of corporate bonds. Annuities are one of the few beneficiaries of the credit crisis.” A beneficiary of the credit crunch? Well, I never.

Labour might appear to have calmed the storm over the scrapping of the 10 percent income tax rate for now. But new research shows the extent to which Britons are peeved about the level of income tax.

When asked what would be their key requests of Chancellor Alistair Darling, the largest proportion of more than 3,000 people polled for Unbiased.co.uk — 31 percent — said they’d like to see a cut in income tax. And, it seems, many Britons feel an obligation to help the less well-heeled: while 12 percent would like to see it reduced for everyone, 19 percent want a cut for less affluent sections of society.

The issue was, perhaps unsurprisingly, found to be the most pressing for younger generations — those with long working lives and greater earning potential ahead of them. Around 44 percent of 18 to 24-year-olds surveyed want a cut, compared to 19 percent of 55 to 64-year-olds and 13 percent of those aged 65 to 74.

But the requests do not stop there: almost a quarter would ask the Chancellor to provide a better level of state pension, 6 percent want increased pay for public sector workers, 5 percent increased support for carers, the same percentage an increase in the inheritance tax threshold to 750,000 pounds (from a current 312,000 pounds), and 2 percent want the stamp duty thresholds to be reviewed.

Others would implore the Chancellor to reconsider public spending: 5 percent want funding for the third generation of nuclear deterrent to be scrapped, 4 percent call for a four billion pound cap on the Olympic budget; and the same proportion want more spending on environmental issues.

It’s easy to see why: soaring house prices have pushed more people into the inheritance tax net and sent stamp duty bills soaring, “fiscal drag” — whereby thresholds fail to rise in line with inflation — is pulling people into new and higher tax brackets, and interest in “green” issues is on an upward trend.

But don’t forget that there are simple things we can all do to keep the taxman’s hands off our cash. The nation is wasting a whopping 9.3 billion pounds in unnecessary tax payments — from the likes of people not making use of their individual savings account allowance (a total 7,200 pounds this year, of which 3,600 pounds can be stashed in cash), wasting tax credits and not taking steps to reduce their taxable estate for inheritance tax purposes.

These days, “keeping up appearances” has less to do with the pompous Hyacinth Bucket (or should that be “Bouquet”?) of the British sitcom of the same name, more to do with “bling” and extravagant spending by the younger generation.

A survey of 1,619 consumers, commissioned by mobile banking service Monilink, found that 71 percent of 16 to 34-year-olds admitted secretly competing with their friends in the purchase of “luxury” products — cosmetics, gadgets, clothes and the like. Image concerns are the key driver of this “bling-itis”. Over half (56 percent) of those questioned say they believe people are judged on appearances and possessions in modern British society, rather than personality.

That has fuelled a level of spending that is problematic at best, severely damaging at worst. More than 60 percent are still paying off credit card debts from “bling-itis”-driven luxury purchases from 2006 and 2007; over a fifth say they have so much debt from non-essential spending that repayments are a “significant” strain; and around the same proportion admit they find it hard to keep track of spending and make ends meet.

Perhaps even more worryingly, young Britons associate spending with personal happiness, and value short-term luxury over longer-term financial security. Some 55 percent of 16 to 34-year-olds purchase goods simply to make themselves happy and “feel down” if they don’t get the opportunity to buy goods regularly. Meanwhile, 72 percent state that a good lifestyle in the short-term is “considerably” more important than making savings in case of an emergency (27 percent). Top areas of spending to achieve this “good lifestyle” are holidays (27 percent), drinking and going out (21 percent), clothes (19 percent), gadgets (12 percent), home improvement (10 percent), cars (8 percent) and jewellery (3 percent).

If only they’d listen to the Janet Jackson and Luther Vandross hit of 1992: the best things in life are free.

Consumers might be one step closer to being able to claim back billions of pounds in bank changes following the High Court ruling this week that paved the way for the Office of Fair Trading (OFT) to assess bank charges for fairness. But it’s not all rosy in the garden for bank customers.

The show is far from over, and dragging the process out is costing consumers 111 pounds per second, according to consumer group Which? Based on the OFT’s estimate that banks make up to 3.5 billion pounds per year from unauthorised overdraft charges, the amount the banks have made since the start of the test case on Jan. 14 at 10 a.m. will hit 1 billion pounds just before 5 p.m. this Sunday. That is the equivalent to 110.98 pounds per second — or 399,600 pounds per hour.

Further High Court hearings will consider a fair amount for bank charges, and the exact timetable will be decided at a hearing on May  22. In the meantime, hundreds of thousands of cases are still on hold: the Financial Services Authority gave banks a waiver from dealing with bank charge reclaiming cases until after the case — meaning they needn’t respond to complaints in the meantime. The clock is ticking: you can only attempt to claim charges over the past six years (five in Scotland), and delaying might mean you lose the ability to get old charges back.

And there could be one even more significant upshot: an end to “free” banking.

As it stands, high street banking is largely free for those who remain in credit and do not flout the rules. Contrary to popular belief — 60 percent of UK consumers believe that Britain’s banks have the highest bank charges in the world — UK bank accounts are, in fact, ranked amongst the top three countries in the world for best value, a survey from EDS shows. This is due to banks and building societies offering free overdraft facilities for student and graduate accounts, credit cards offering 0 percent finance and attractive returns on instant-access savings accounts.

However, those who slip into the red — either an authorised or unauthorised overdraft — are hit with interest or fees. A curb on fees could very well see banks impose annual or monthly banking fees for all customers. That is unlikely to please over half of the population: 51 percent of consumers polled by EDS would prefer charges to come from less transparent means, such as lower interest rates on their current and savings accounts, rather than a monthly charge (37 percent) or per transaction (12 percent). Those banks who start to impose fees first will, of course, haemorrhage customers. But, if rivals follow suit, what choice will consumers have?

Poles coming to Britain have become accustomed to headlines praising the industry of their tradesmen. They work hard, do the jobs many Britons can’t be bothered to do and are inexpensive.

By contrast, dodgy British builders, plumbers, electricians, decorators and other home improvement traders are still rife, if new figures are anything to go by. Consumer Direct, the government advice service, received more than 19,000 complaints about home maintenance traders in the first three months of this year totalling almost 80 million pounds — up by almost 6 million pounds on the same period last year.

Complaints about building work totalled 40 million pounds, problems with fitted kitchens reached 14 million pounds, and central heating installation and servicing complaints topped 5.5 million pounds.

Michele Shambrook, operations manager for Consumer Direct, said: “There’s no foolproof way of avoiding problems, but you need to do your homework before you embark on a project, agree clear terms with the trader, and if things go wrong, check your rights and take prompt action.”

Would you employ a Polish tradesman rather than a local?

Do you think the service builders provide is getting worse?  Have you been left out of pocket by a botched job? 

Borrowers might be under the cosh, but savers have never had it so good. Historically, when the Bank of England (BoE) base rate changes, mortgage and savings rates follow suit. But amidst the current credit crunch, those with spare cash and prepared to move their money around can take advantage of banks’ and building societies’ eagerness to attract retail funds.

The last time the base rate stood at its current level of 5 percent was 17 months ago — in November 2006. And there are huge differences between then and now in fixed savings rates. The top six-month fixed rate bond is now paying 1.59 percent more interest on a 10,000 pound investment, at 6.86 percent. Kaupthing Edge and Icesave top the best buy tables with that rate, Heritable Bank is close behind with its new offering of 6.80 per cent as of this weekend, and Alliance & Leicester this week issued a fixed rate bond with a competitive 6.83 percent. “With many people thinking  that the base rate is likely to fall further this year some of the fixed rate products available now look outstanding value,” says David Black, principal consultant for banking at financial research company Defaqto.

There is no saying, however, how long the good times will roll for savers, and those looking to take advantage of attractive rates should move quickly. Remember, too, that the maximum protection afforded under the Financial Services Compensation Scheme is 35,000 pounds per financial institution; those with more than that in cash reserves should split their pot between different providers.

In contrast, the credit crunch is continuing to hit borrowers and investors: overall, even those with substantial savings might wind up no better, or worse, off. The FTSE 100 index has dropped 9.32 percent over the past six months, according to stocks and shares Web site ADVFN.com. Its data highlights the extent of the volatility that has been hampering markets. Having opened the year at 6450.9, Britain’s blue chip index dropped to its lowest level of 5338.7 points on January 22 — a long way from its six month intraday peak of 6751.7 achieved on October 15. This equates to a 1413-point move — a 21 percent drop from the index’s high to its low. “There are no two ways about it; we are in a bear market,” says chief executive Clem Chambers. “In markets such as these where the underlying trend is down, strong rallies are commonplace, but the day-to-day weakness overcomes moments of strength overall. Breaking back up through psychological barriers such as 6000, unfortunately, does not mean the good times are back. This is bad news for investors but can be profitable for traders.”

And, in mortgage markets the London Inter Bank Offered Rate (Libor) — the most famous barometer for short-term interest rates in the world — continues to loiter stubbornly high in relation to the base rate. Libor, the rate at which lenders borrow money, determines mortgage pricing for consumers, and is now the “hoodie of the finance world” — symbolic of a fallen system, where banks lack the confidence to step out of their houses to trade with each other — according to independent mortgage broker Charcol.

The BoE’s discussions on the mortgage market will not necessarily improve the situation, according to Andrew Townsley, chief executive of Sheffield Mutual and president of the Association of Friendly Societies. “Even if market conditions improve, mortgage lenders are likely to continue to impose relatively high lending rates on mortgage products and the situation won’t necessarily improve for borrowers,” he warns. “Banks will be tempted to improve profit margins, and although lending rates may come back a little we won’t see them revert to the attractive levels borrowers have experienced over the last few years, for some time yet.”

Savings rates could soon take a turn for the worse, too: ”We can expect to see a drop in attractive saving rates as the situation eases, meaning the consumer remains yet again at a disadvantage,” says Townsley.

Not time to crack open the bubbly yet, then.

Long life: it might be seen as a blessing, but increasing longevity poses one of the biggest risks to our financial wellbeing.

A person aged 55 today has a one in two chance of living to 90 and a one in four chance of living to 95, according to acturial consultancy Watson Wyatt. By 2010 the number of pensioners will, for the first time, exceed the number of children in the population, according to the Office for National Statistics, and by 2031 there will be 40,000 people aged 100 or over, compared to just 300 in 1951.

This creates a huge issue for retirement savings: there is an estimated 57 billion pound savings gap in the UK and the government has repeatedly warned that people must increasingly shoulder the responsibility of providing for their own retirement.

“The fact is that the UK’s population is growing older by the day: we are all, on average, living longer — and this has alarming consequences for both society and the individual,” says Mike Lake, chief executive of Help the Aged. “More than ever we need to be aware of the implications of living a long life, and a vital part of this is for people to consider their longevity hand-in-hand with their future finances.”

It is exactly this that a new independent, not-for-profit organisation aims to address. The Life Trust Foundation has been formed to act as a central voice and point of education and research into the financial implications of long life. Chaired by Lord Hunt of Wirral, president of the Chartered Insurance Institute, the organisation also boasts Lake, Fay Goddard, deputy director-general of the Association of Independent Financial Advisers, Anna Bradley, chief executive of the National Consumer Council, and Laurence Heyworth, founder and non-executive director of Life Trust Holdings, on its board.

During its first year, the foundation will work with the Institute of Ageing at Oxford University to analyse a wealth of existing information on longevity; bring together people from the worlds of academia, business and charity to debate the issues; and set up a consumer panel of people aged 60 to 85 to help gain and develop insights into the behaviour and attitudes of those in or nearing retirement. It wants to “understand the delicate relationship between money, lifestyle, relationships, health and happiness”.

It is, certainly, a tricky relationship — and one that few are addressing head-on. A fear of finances is creating a “pensions paralysis” among Britain’s over-40s, according to research by Norwich Union. Over a third of those in their 40s admit they have no financial plan for their retirement, and of those who do, the same proportion (37 percent), say they have no idea what their final settlement will be. A lack of understanding and “complicated” products are the biggest barriers to pension planning, the research shows.

The financial services industry has its part to play in helping people understand the options — and the amount of savings necessary for a retirement in which long life does not equal living on the breadline. And, indeed, the financial services industry is slowly responding to the challenges of longevity.

Earlier this year, Life Trust, a newly formed company, launched a new type of financial product, the longevity income plan. Unlike traditional annuities — whereby insurance companies keep any unused capital when a customer dies — Life Trust will redistribute investment fund growth accruing to funds previously held by deceased policyholders to those still alive.  These “birthday units”, coupled with investment returns, which are also calculated to increase each year, lead to a rising income as the policyholder ages.

But consumers, too, must wake up – living longer means a longer retirement. And that heralds a greater need to tackle retirement planning as early as possible.

Thursday’s cut in interest rates should come as some relief to hard-pressed borrowers, under the cosh from the credit squeeze which has seen lenders raise their rates, cut maximum loan-to-values and tighten lending criteria. Those on tracker rates – that mirror movements in the base rate – will, of course, see a reduction in the amount of interest they pay. Others, though, are at the mercy of their lenders.

A string of high-street names said they’d reduce their standard variable rates following the quarter-point Bank of England (BoE) base rate reduction to 5 percent. That, however, will only partially offset hikes imposed by many of these very lenders in recent times and many commentators argue that the Monetary Policy Committee has failed to go far enough to ease the pain in the mortgage market — and should have acted faster by cutting rates by 0.5 percent.

Nationwide Building Society is raising rates by as much as 0.32 percent on some products and several others — Alliance & Leicester, Chelsea Building Society, Standard Life Bank and Leeds Building Society included — have hiked rates on some of their mortgage products by up to 0.26 percent.

The real problem lies in the gap between the base rate and Libor, the interbank lending rate, which dictates the deals offered to mortgage borrowers: it has ballooned in recent months, despite two cuts in the BoE base — and only a substantial cut in interest rates would have any real impact on narrowing the gap, according to online mortgage company mform.co.uk.

“The crucial factor is the gap between Libor and the base rate; they are massively out of sync and that is dictating terms in the mortgage market,” says chief executive Eamonn Rice. “The 0.25 percent cut will have no effect. The Bank of England has failed to grasp the opportunity to help homeowners and potential borrowers.”