Money Insider: PPI is not right for everyone, but can offer a valuable safety net
Saturday 12 June 2010
PPI may have a tarnished reputation, but don't dismiss this cover out of hand.
It's not surprising that consumers are apprehensive about signing up for Payment Protection Insurance (PPI) after many reports that people have in the past paid over the odds for unsuitable, inflexible and overpriced cover.
However, there is now the danger that because lenders will soon be prohibited from selling cover at the point of sale, that people who may need this valuable safety net won't even consider it.
With David Cameron warning that we must prepare for painful and unavoidable cuts as he introduces measures to cut the UK budget deficit, people will undoubtedly be concerned about how this will impact on jobs.
To help consumers decide if PPI is a product they should consider, independent insurance provider, BritishInsurance.com has just launched a consumer guide to this much-maligned insurance.
The two page downloadable guide explains how PPI works and most importantly explicitly highlights situations where cover is excluded, something that many people previously didn't find out until after the event.
Despite its tarnished reputation, PPI can still be a valuable safety net and I welcome anything that enables people to easily find out more about the cover, especially in these uncertain times.
PPI will not be right for everyone, but by being upfront about what is and what isn't included under these policies, at least consumers will be able to make a more informed decision when it comes to protecting their financial well-being.
Dozen best buys vanish in just one week
The bad news for British savers seems to go on and on, with record low rates, the axing of Child Trust Funds and changes to Capital Gains Tax potentially threatening those taking advantage of company save as you earn schemes.
This artificially low rate environment has been causing misery for those who rely on an income for their savings for at least 18 months now, and they'll be dismayed to learn that at least a dozen best buy savings deals have been pulled or had rates slashed during the first week of June.
There have been some cuts in the ISA market, however, the bulk of the bad news seems to be with fixed rate bonds, particularly the longer-term products.
The chase for best buy rates continues to be fuelled by people still coming off existing fixed rates of up to 7 per cent and desperate to reinvest at the highest rate possible. This has meant savers increasingly having to opt for longer-term deals than they would have wished.
When you look back to November 2008, just before the MPC embarked on its aggressive rate cutting strategy, you could get 7.20 per cent for a one-year bond and 7.00 per cent for a two-and three-year term, so whilst there are many people locked in to what in hindsight is an excellent deal, they will soon be joining the hoards of other customers chasing a handful of half decent accounts.
Until we see an upward movement from the 0.50 per cent base rate there's little chance that savers will have anything to smile about, in fact with VAT set to rise and inflation taking chunks out of any return they manage to make, it's just more doom and gloom.
With rates at rock bottom there's little incentive to save, and many people are starting to wake up to the fact that the financial rewards are greater if they make overpayments on their mortgage or credit card borrowing.
MBNA set to end negative payment hierarchy
following the review of credit card practices by the Department for Business, Innovation and Skills earlier this year, one of the major players in the British card market has announced that from 1 September, it will change the way customer repayments are appropriated.
MBNA will start contacting customers this month to advise that in future their monthly credit card payments will be allocated to the most expensive debt first, rather than the cheapest.
This change is long overdue as the current system often results in consumers being hit with additional interest charges, purely on the basis that they don't understand the way that the hierarchy of payments works against them.
If a card provider the size of MBNA has managed to implement the necessary systems changes ahead of schedule, then there's no reason why other card providers shouldn't do likewise, rather than squeezing every last drop from customers right up until they are forced to make this change.
Andrew Hagger is a money analyst at Moneynet.co.uk
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