The news that 18,000 people were charged the wrong amount on their mortgage may not seem like that big a deal - at first sight. They weren't mis-sold a financial product or lured into taking out a loan they could not afford and - given the millions of mortgages in existence - the figures seem relatively small.
The reason it ended up getting extensive coverage owed more to the way the Yorkshire and Clydesdale banks handled the aftermath than to the error itself. It seems that the original mistake went back to 2008 when the banks' computer systems made a mistake on some tracker and discount rate mortgages on both repayment an interest-only mortgages, but it took Yorkshire and Clydesdale banks until earlier this year to spot it.
The banks say that around half of the 18,000 borrowers who are affected are being asked for an extra £25 a month - although some are having to pay much more. What's interesting...to me at least...is that they've decided not to automatically write off the shortfall, which they say on a £25 a month extra payment works out at £2 a month - so not exactly a fortune.
This isn't exactly a common problem but the last time this happened, my mortgage spy (SavvyWoman's mortgage expert Ray Boulger) tells me that the lender in question wiped off the shortfall.
Why won't Yorkshire and Clydesdale banks do the same? They say they are treating complaints on an individual basis and that they are offering compensation for those who are having problems making the higher payments. But not - it seems - for those who don't complain.
Having found out that Yorkshire and Clydesdale are happy to compensate some of its customers, I'm sure others will be tempted to complain as well. If they do complain and are not happy with the banks' response they can take their case to the Financial Ombudsman Service.
While the FOS will look at each case individually, it is more sympathetic to complaints where it was the lender's fault (which Yorkshire and Clydesdale have not denied) and where the customer couldn't have realised that a mistake had been made. This is a bit trickier, but customers shouldn't be expected to be mortgage experts (that's the bank's job) and even if your mortgage payment fell quite dramatically, at the time the error happened tracker mortgage rates were plummeting.
In these tough times I can see that it might seem hard to justify offering to pay the shortfall for customers before they'd even thought of complaining. But in terms of goodwill and loyalty, it would have been a relatively small investment. Now it's quite possible that the banks will lose a lot more money. Every case that goes to the Financial Ombudsman Service is free for consumers but costs the banks £500.
And if even 50% of the customers who aren't happy decide to switch mortgage lenders when their deal comes to an end, they could lose thousands of borrowers. It's always said that it's not the mistake, it's how you deal with it that matters. Maybe it's a lesson that the Yorkshire and Clydesdale banks could learn.
Friday 23 July 2010
Tuesday 13 July 2010
Families with disabled children struggle financially
On Saturday I was interviewed on BBC Breakfast about some research carried out by a charity called Contact a Family. It surveyed over 1,100 families with one or more disabled children and found that 23% had gone without heating, 34% were behind with credit card or loan repayments and one in seven went without food.
Most of these figures showed a deterioration from the last time the research was carried out in 2008. They reveal a struggle that many families with disabled children face to arrange child care (which is far harder to access if you have a disabled and often much more expensive), combine caring for a disabled child with work and to do more than survive financially.
No one would pretend that the benefits system is straightfoward, whatever type of state help you want to claim. But disability living allowance (DLA), which is the main benefit disabled children are entitled to, is particularly complex. There are two different components of the benefit (care and mobility components) which can be paid at several different levels. And assessing whether a child needs extra care because they are disabled or because they are a child is not always clear cut.
Add to that the fact that most parents find out about benefits they're entitled to through other parents whose children have the same disability and you can see how hit and miss the system is.
There are no government figures on the number of families with disabled children who claim disability benefits, but charities estimate that as many as 40% of parents don't get the help they're entitled to.
In this period of austerity the government is looking to reduce spending on welfare, not increase it. But if families with disabled children are getting further into debt or going without food and heating, something needs to be done. How about better signposting of benefits so that families are told about the help they may be entitled to when they receive a diagnosis for their child?
And what about encouraging employers to be more flexible? At the moment you only have the right to ask for flexible working once you've been in a job for six months. For families with disabled children who want to get back into work, that six-month 'hurdle' can be an impossible one to clear. Some companies may genuinely struggle to give these employees the flexibility they need. But I bet some could think of more creative ways of working than 9-5. What do you think?
Most of these figures showed a deterioration from the last time the research was carried out in 2008. They reveal a struggle that many families with disabled children face to arrange child care (which is far harder to access if you have a disabled and often much more expensive), combine caring for a disabled child with work and to do more than survive financially.
No one would pretend that the benefits system is straightfoward, whatever type of state help you want to claim. But disability living allowance (DLA), which is the main benefit disabled children are entitled to, is particularly complex. There are two different components of the benefit (care and mobility components) which can be paid at several different levels. And assessing whether a child needs extra care because they are disabled or because they are a child is not always clear cut.
Add to that the fact that most parents find out about benefits they're entitled to through other parents whose children have the same disability and you can see how hit and miss the system is.
There are no government figures on the number of families with disabled children who claim disability benefits, but charities estimate that as many as 40% of parents don't get the help they're entitled to.
In this period of austerity the government is looking to reduce spending on welfare, not increase it. But if families with disabled children are getting further into debt or going without food and heating, something needs to be done. How about better signposting of benefits so that families are told about the help they may be entitled to when they receive a diagnosis for their child?
And what about encouraging employers to be more flexible? At the moment you only have the right to ask for flexible working once you've been in a job for six months. For families with disabled children who want to get back into work, that six-month 'hurdle' can be an impossible one to clear. Some companies may genuinely struggle to give these employees the flexibility they need. But I bet some could think of more creative ways of working than 9-5. What do you think?
Tuesday 6 July 2010
Public Sector Pensions
The government has asked John Hutton to carry out a review of public sector pensions. There's no doubt that the cost of providing a final salary pension for workers in the public sector is rising and, at a time when the UK's finances are in a mess, it's right that public sector pensions, along with other spending, should be looked at.
But it's important that any changes made don't penalise one section of the public sector workforce disproportionately. We don't yet know what the Hutton review will suggest, there is a real danger that cutbacks to public sector pensions across the board could have the effect of penalising women.
We all know that women retire on far less than men. Figures from the Prudential show that 35% women will retire 'in poverty' (as defined by the Joseph Rowntree foundation) this year. If women give up work to have children, retirement saving becomes a luxury.
The one time when women do save for their retirement is when they work in the public sector. 60% of those who join public sector pensions are women; in the private sector the figure is 40%. But we're not talking a 'gold plated' retirement as the average public sector pension is around £7,000 a year and women - generally - receive far less. In local government, the average pension is around £4,400, but for women it's £2,600. Around half of women in the NHS retire on a public sector pension of £3,500 - that's less than £70 a week on top of the state pension.
In a way these figures show the big success of public sector pensions - the fact that they've encouraged people on lower incomes to save for their retirement, which doesn't happen to the same extent in the private sector.
What we do need is long term affordability and sustainability of public sector pensions (and there are some imaginative ways that could reduce the costs while protecting the pensions of those on the lowest incomes). What we don't need are changes that will hit the lowest paid workers - who are mainly women - hard. Reducing their pension benefits could just tip them into means-tested benefits, which hardly seems fair and - ultimately - is unlikely to give the government the savings it's looking for.
But it's important that any changes made don't penalise one section of the public sector workforce disproportionately. We don't yet know what the Hutton review will suggest, there is a real danger that cutbacks to public sector pensions across the board could have the effect of penalising women.
We all know that women retire on far less than men. Figures from the Prudential show that 35% women will retire 'in poverty' (as defined by the Joseph Rowntree foundation) this year. If women give up work to have children, retirement saving becomes a luxury.
The one time when women do save for their retirement is when they work in the public sector. 60% of those who join public sector pensions are women; in the private sector the figure is 40%. But we're not talking a 'gold plated' retirement as the average public sector pension is around £7,000 a year and women - generally - receive far less. In local government, the average pension is around £4,400, but for women it's £2,600. Around half of women in the NHS retire on a public sector pension of £3,500 - that's less than £70 a week on top of the state pension.
In a way these figures show the big success of public sector pensions - the fact that they've encouraged people on lower incomes to save for their retirement, which doesn't happen to the same extent in the private sector.
What we do need is long term affordability and sustainability of public sector pensions (and there are some imaginative ways that could reduce the costs while protecting the pensions of those on the lowest incomes). What we don't need are changes that will hit the lowest paid workers - who are mainly women - hard. Reducing their pension benefits could just tip them into means-tested benefits, which hardly seems fair and - ultimately - is unlikely to give the government the savings it's looking for.
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