Has anyone had issues with this? My daughter has been able to spend £26 on bloody gold bars and rubbish from games even though I have a pin set up to prevent this. The pin simply blocks purchasing paid apps but in app purchases are going through fine.

I contacted Microsoft about this who said yep the feature isn't working but they can't refund me as its billed automactically to my operator O2. They suggested contacting O2 which I did, who told me to turn the internet of and ask them to stop doing it I mean really! But thats O2 for you anyway, Useless.

Is it Microsoft's faulty PIN control that cost you money? Or O2's billing system? Or your fault for not supervising?

I think it's Microsoft - they have even admitted it. They should compensate you for the cost of their mistake.

There's Kid's Corner on the phone where you can set up what is accessible. If they have any common sense they disabled in app purchases there. Best you try it out first though before you rely on it.