Julian Knight: My mum's PPI mis-selling payout leaves me jealous
Her compensation beats what she could have earned from the stock market or an ISA
Saturday 26 October 2013
I wish I had taken out payment- protection insurance (PPI). Yes, you read that right. I wish I had taken out payment-protection insurance. I almost did, in fact. In 2001 I took out a loan to buy a car with Alliance & Leicester – now part of Santander – and throughout the process the salespeople kept adding a PPI policy onto my monthly repayment figure. I phoned Alliance & Leicester three times and instructed them to take off the ppi as I had no need for it. This was a clear attempt at mis-selling and I was wise to it but wish I hadn't been. My regrets don't stem from the fact that I would have needed to claim, but from the fact that if I had allowed myself to be mis-sold, I would now be awaiting a hefty compensation cheque, just like the one winging its way to my mother.
She was mis-sold PPI by both the Halifax and the Co-op and in the first case – despite intrusive questioning – she has now received her compensation, which seems to be the premiums, plus interest paid on the premiums, topped up to the tune of 8 per cent per year. Because she chose to pursue the claim herself rather than through a claims-management firm, she will keep the lot and I have worked out that she has done better out of being mis-sold PPI than she could have done if she had invested the cash in the stock market or placed it into even the best-paying individual savings account. She deserves this of course and the banks are rightly being punished for it. Yet I can't help but feel a little jealous.
Recently The Independent on Sunday investigated the sharks in the pension-liberation industry. Basically, these fly-by-night firms look to persuade people to deposit their pension with them in a high-risk, offshore-investment scheme with the dubious promise of being able to unlock some cash. Up to 90 per cent of the fund can disappear in charges and investment underperformance and on the whole they are a terrible and legally very dubious idea. Now, it seems, HM Revenue & Customs (HMRC) agrees, and following reports such as ours has announced a raft of measures to put an end to this consumer abuse. The Association of British Insurers is cock-a-hoop that HMRC is getting tough, so let's hope we now have some real, joined-up action between the taxman, the pensions funds and the wider public to put these schemes out to grass.
Last year, when Stephanie Flanders, the departing BBC economics editor, wrote that older workers were "bed-blocking" younger people I got angry. The main reason was that for years I had been urging employers to take a much-better attitude to older workers and to dispense with ageism in the workplace in order to sort out the pensions crisis (it is funny how I got more obsessed with it as my 40th birthday approached). Then we had the widely respected Ms Flanders saying that young people were being thwarted by the nation's older workers. I said this was counterproductive.
Now this week I have been reading a report on the European Labour Market for an organisation called the Conference Board, which clearly shows that Ms Flanders was right. Since the onset of the financial crisis the numbers of people still in the workforce across the EU has risen by nearly 4 million. This is simply because Europeans are staying at work longer rather than opting for early retirement. At the same time, youth unemployment is horrendous throughout much of the EU.
It seems Ms Flanders was correct, but overall we do still need people to stay at work longer and employers to be more open to older workers – genuine labour market flexibility up to the age of 70 if necessary.
In some ways the phrase bed-blocking misses the real point that the difficulties we face are actually getting to integrate young people into the workforce, particularly straight from university which in some cases doesn't equip youngsters well, while at the same time recognising that we need older people to be truly flexible. We still have a very long way to go on both counts.
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