Dan White answers your financial questions
A NUMBER of my friends are into spread betting. According to them, spread betting is very simple and they seem to be quite successful at it. They have encouraged me to start spread betting. What precisely is spread betting and should I get into it?
Spread betting is a form of betting on financial instruments including shares, share indices, commodities and currencies.
Basically, with spread betting you bet on the price of these financial instruments rising or falling.
For sophisticated investors, spread betting has many advantages over buying the underlying financial instrument.
If you spread bet on share prices you don't pay the 1pc stamp duty that you would be liable for if you bought the actual shares, while, as spread betting is officially classed as gambling rather than investing, you don't pay any capital gains tax on your winnings.
This could represent a hefty saving, as the current rate of capital gains tax is a not inconsiderable 25pc.That's the good news. The bad news is that spread betting is just that -- betting. This is a high-risk activity.
If you bet on a price rising or falling, and the market moves the other way, then you could end up losing not just a proportion of your money but the lot, and then some.
While many spread-betting firms set what is known as a stop-loss on every one of their customers' bets, which means that the position is automatically closed if losses reach the stop-loss limit, spread betting is still the financial equivalent of a high-wire act -- without the safety net.
Only very sophisticated investors who know exactly what they are doing and can afford to suffer occasional heavy losses should go anywhere near spread betting.
The dangers inherent in spread betting were spelled out in the report of an investigation into spread betting firms published by the Central Bank two weeks ago.
In its investigation the Central Bank found that none of the four firms examined were fully compliant with Markets in Financial Instruments Directive regulations governing spread betting.
Among the breaches of the MFID regulations found by the Central Bank were inadequate client application forms, misleading marketing material, inadequate disclosure to customers of the risks of spread betting by the companies and insufficient screening of new customers to determine whether or not spread betting was appropriate for their needs. So the next time Geoff's friends encourage him to start spread betting, he should run a mile.
I have a large unpaid electricity bill with the ESB which I can’t afford to pay. Now they are threatening to cut me off. Can I switch to another electricity provider or must I clear the outstanding ESB bill first?
So-called "debt hopping", where customers who have run large unpaid electricity or gas bills switch to another supplier before they are cut off, has become a major problem for both the ESB and Bord Gais.
As things stand, Irene can still switch from the ESB to another electricity supplier but not for much longer.
Under new rules, which were published last week by the Commission for Energy Regulation, a "debt flagging" facility will be brought in.
This will alert electricity or gas suppliers who are taking on new customers of any bills for €250 or more which have been unpaid for more than six weeks.
While other electricity or gas suppliers will still be free to take on customers with large unpaid bills, in practice they are unlikely to want to do so.
However, "debt flagging" will only apply for unpaid electricity bills in the case of customers switching electricity supplier and for unpaid gas bills in the case of customers switching gas supplier.
It will not apply in the case of customers with large unpaid electricity bills switching gas supplier, or vice versa.