Weekly Money: the stories we noticed 7 to 11 September

The personal finance news that may help you save this week

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The Independent Online

PPI scandal a decade on and the bill still rises; remember a charity in your will; firms urged to help workers prepare for retirement; problem debt soars 28%; cheap mortgages disappearing; school fees outstrip inflation

11 September

Thousands of people ripped off by the PPI mis-selling scandal are still seeking help from Citizens Advice about – a decade after the charity first launched a super-complaint about payment protection insurance.

Gillian Guy, chief executive of Citizens Advice, said: “After dragging its feet when we first raised concern about PPI the industry is paying the price for not taking action sooner.

Sunday 13 September marks 10 years since the charity launched its complaint. It acted after receiving a huge number of queries.

Since the problem erupted, banks have been forced to shell out more than £20bn in compensation and the figure is expected to grow to £25bn as complaints continue to be raised.

* * *

It’s time for a ‘protected energy tariff’ to end over-charging said Caroline Flint Labour’s shadow energy secretary. “Everyone should be charged a fair price for energy whether or not they switch,” she said. “A ‘protected tariff’ would make sure no household is ripped off on bills.”

The Competition and Markets Authority has said households are being overcharged by a billion pounds a year “but the only action the Government have taken is to write the Big Six a letter,” she added.

* * *

Private school fees have outstripped inflation by climbing 20 per cent in the last five years compared to a 17 per cent increase in the Retail Price Index. Since 2010 the average annual private school fee for day pupils has increased from £10,686 to £12,864, reports Lloyds Bank.

School fees have also climbed four times faster than the 5 per cent rise in full time gross annual earnings since 2010. In the last year the average fee grew 3 per cent while inflation and earnings climbed 1 per cent.

10 September

One of the fastest-growing challenger banks yesterday opened its 200th branch in the UK. Handelsbanken’s latest branch is in Chippenham. The Swedish-owned bank opened its first British bank in the 1980s and now has more than 800 branches in 25 countries.

Unlike the main banks, it allows branch staff to make decisions about lending to customers and is more focused on customer satisfaction and prudent financial management.

Uniquely it only accepts customers who live locally so if you’re not in Inverness or Truro, Colwyn Bay or Canterbury, or one of 200 locations, you won’t be able to open an account. You can find out more about the bank at www.handelsbanken.co.uk

* * *

A new website promises to simplify car maintenance services and offers a breakdown of costs per garage. Bookmygarage.com has a guide to help you work out what service a car needs so you can avoid being hoodwinked by devious mechanics. It also offers quotes from a range of preferred local garages.

* * *

Remember A Charity in your Will Week runs until Sunday. Its aim is to encourage more people to consider leaving a gift to charity in their will.

Three quarters of us regularly give to charity, yet just 7.3 per include a charity when writing a will. Without legacies, many charities would not exist and others would have to cut crucial services. Find out more at rememberacharity.org.uk

9 September

 

With fresh fears emerging that almost a million people are sleep-walking into financial disaster because they have interest-only mortgages and no way to pay them off, why has the number of lenders offering them almost doubled in the past two years?

To be fair, there are very few lenders offering interest-only deals compared to the height of their popularity before the credit crunch. Then there were 75 according to Moneyfacts’ statistics. By 2013 there were just 12, but now there are 22.

Does that mean anyone thinking about taking an interest-only deal now is simply heading for trouble? No, say mortgage experts. Charlotte Nelson, of Moneyfacts, said: “Interest-only is a controversial topic but the launch of tough new mortgage lending rules has caused lenders to tighten their policy on who they offer these deals to.”

***

Companies should do more to help people prepare for their financial future, says Scottish Widows. Its research found that automatic enrolment into workplace pensions, the government-backed scheme that began three years ago, has helped workers feel more positive about their retirement savings. But many also want employers to provide practical financial education and support.

Almost quarter of those working in larger companies - with more than 250 workers - think employers should pay for full independent advice, while two out of five reckon firms should provide more information on how to budget for retirement.

“Businesses need to ask themselves whether they are providing enough ongoing support to encourage staff to be more engaged with longer-term savings,” said Lynn Graves of Scottish Widows.

* * *

Understanding the value of money is the main barrier to children learning more about financial common sense, warned Newcastle Building Society, after it talked to teachers.

One head teacher said: “My 13 year old son has an iPhone and does not understand how long it takes to earn and save the money that you need to buy such an item, and I bet that’s the case with a lot of children nowadays.

“This generation of teenagers are used to owning expensive items and not truly understanding the value of the money that was used to purchase them.”

* * *

When will it end! We’re being plagued by nuisance texts and calls from claims managers despite official efforts to clamp down on their activities, warns the Association of British Insurers.

At the end of last month nearly half of us had been contacted by a claims manager within the last week with the annoying callers trying to encourage them to claim for mis-sold PPI that they had never taken out or an accident that they had never had.

8 September

The number of households with problem debt has soared 28 per cent in the last three years leaving 3.2million struggling, compared to just 2.5million in 2012. A new report published today by the TUC and Unison sends out a warning that the economic recovery is not yet reaching vulnerable people.

‘Britain In The Red’ reveals that 700,000 more households have falling into problem debt since 2012 leaving them forced to spend a quarter of their monthly gross income repaying credit cards, loans and overdrafts. And the hardest hit have been young people, the self-employed and low-income families.

***

Primary school children will learn about the dangers of illegal money lenders in new teaching modules launched as part of financial education by Experian and the England Illegal Money Lending Team.

The loan-shark lessons will help five to 11 year olds explore the practical and emotional aspects of money. Lesson plans can be downloaded free from www.birmingham.gov.uk/stoploansharks

* * *

Cheap mortgage deals are beginning to disappear.  Moneyfacts warned that the lowest five-year fixed rate offers are already a thing of the past.

“Speculation of a base rate rise has affected wholesale costs so lenders have raised their rates,” reports Charlotte Nelson of Moneyfacts. “Five-year fixed rates have been particularly affected as the likelihood of a base rate rise within the next five years is high.”

The average five-year fixed rate at 60 per cent loan-to-value has climbed from 2.54 per cent to 2.66 per cent in the last two months.

Meanwhile Equifax warned that homeowners are unprepared for interest rate rises. Its research shows three out of four homeowners on a variable rate mortgage aren’t budgeting for an increase in mortgage payments, which means they could face a rate shock when rates rise.

* * *

A new battle in the current account market is seeing high street banks trying to outdo each other.

Halifax has raised its cash bribe to new customers from £100 to £125, but you’ll have to close your old account elsewhere. First Direct has increased its handout from £125 to £150 to anyone who switches through Moneysupermarket. Meanwhile TSB has launched an account paying 5 per cent on credit balances plus cashback.

7 September

At what point do people start ignoring their debts? It’s when they climb to above £20,000, according to debt manager PayPlan.

The average debt of its customers over the past year is just over the tipping point at £21,670. But its research suggests that 1 in 6 people who owe more than this still think it is a low or insignificant debt.

The tipping point figure does not take into account mortgage or property-related finance, and instead cites credit cards, personal loan repayments and bank or overdraft charges as the key reasons for getting into financial difficulty.

Jane Clack, a money adviser at PayPlan, was once in serious debt herself and knows first-hand just how much of a struggle it can be. “We live in a society of debt denial,” she said.

“Rather than throwing overdue letters away we put them to one side, under the microwave to collect dust. But the point where many people think ‘Oh well, I’m in this deep, what difference will another credit card make?’ is actually dangerously high.”

* * *

First time home buyers are facing increasingly difficult decisions across Europe, with four out of five saying it is now more difficult to buy a home.

New research published today by ING revealed that the toughest first time buyer conditions are in the UK, Spain, Luxembourg and Turkey.  In fact the picture is starkest in the UK, with nine out of 10 people questioning how first time buyers will ever get on the housing ladder.

And the report suggests things are getting worse for prospective British homeowners as UK house prices climbed 8 per cent in the UK between 2014-15, eight times the European average. ING senior economist, Ian Bright warned: “First time buyers are at risk of having the door to home ownership slammed in their face.”

 

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