Wednesday, 26 September 2012
Automatic enrolment - why it's a good idea.
On Monday automatic enrolment will start to be phased in. In case you've missed the adverts or you're not employed by a large company (the phase in will start with the biggest companies first), it will mean that millions of employees will be automatically enrolled into their workplace pension, without them doing anything. But no-one will be forced to stay in if they don't want to - you're free to opt out if you want to.
You'll have to pay in 4% of your salary, your employer will pay 3% and the government will provide 1% in the form of tax relief (contributions are also being phased in so you won't pay this much to start and you can pay more if you want to).
Now, I don't think automatic enrolment is the perfect solution and I think the pensions industry has some real improvements to make in terms of what it offers, how it talks to its customers and how much it charges (particularly on old-style pensions, which people may have taken out years ago).
However, there's no getting away from the fact that the state pension simply isn't enough for most people to live on. It's currently £107.45 a week for the full basic state pension (less than £20 a day). You can retire on more if you earn a higher state pension through SERPS and/or the State Second Pension (S2P), but many people, especially women, don't.
There's a lot of research to back up the fact that while some people genuinely can't afford to save into a pension, many don't do it because they don't get round to it. Morrisons, one of the biggest supermarkets, says that 90% of its workers aren't in its pension scheme. And that figure is not uncommon.
Another major high street retailer found a massive difference in the percentage of (mainly female) workers signing up to its pension scheme, depending on the store they worked in. In some, over 80% of employees were in the pension scheme, in others, the figure was as low as 20%. There was no difference in the salaries earned, and not much difference in the age and income of the workforce in the various stores. What it came down to was how enthusiastic the local manager was for the pension scheme. If he or she joined it and said it was a good idea, others would and vice versa.
Automatic enrolment isn't the answer to the pensions crisis. We need the government to make sure it's always worth saving and not to shift the goalposts, and we need a pensions industry that always puts its customers first. But automatic enrolment is a step in the right direction. And it's quite a big step.
Wednesday, 29 February 2012
Ten tips on surviving the cash ISA season.
With just over a month until the end of the tax year, it's that special time when banks and building societies remember that they sell cash ISAs, and hike the rates so they can secure that much valued top spot in the best buy tables. Sigh.
I know from the emails I receive that many people are reasonably cynical about the way a lot of the banks operate (and who can blame them?). But there's no point in having money sitting in your cash ISA earning next to nothing, or picking an account that's paying a paltry rate of interest. So, are my ten tips on getting a good deal:
1. Know your limits. This tax year (to April 5th) you can pay up to £5,340 into a cash ISA, which worked out at £445 a month. From April 6th you'll be able to pay in £5,640 into a cash ISA (or £470 a month).
2. Look at how much existing ISAs are earning. Many cash ISAs will accept transfers in, which means you can move some or all of the money you've saved in cash ISAs in previous tax years. If you have a cash ISA that you're currently paying into, you have to move all of it (or none at all).
3. Watch out for the bonus rates. Banks love bonus rates because they can pay an eye-catching rate during the ISA season and whisk it away after a year or so. Set up an alert to remind you to shop around when the bonus rate runs out.
4. Compare the comparison sites. Don't look at one comparison site alone because they often assess best buys in different ways: some don't give the top slot to ISAs that tie you to another account, others don't include bonuses that last for less than a year and some have exclusive deals that you have to take out via the site.
5. Look at fixed rate cash ISAs. If you're saving your ISA money for something longer term (i.e. you won't need your money within a year at least), find out how much more you could earn if you take out a fixed rate ISA. Some cash ISAs will let you get at your money before the fixed rate term is up as long as you give a couple of months' notice, but not all will.
6. Find out if you can top up your fixed rate cash ISA. Most fixed rate cash ISAs can't be topped up after a certain period (often 30 or 60 days), but some ISA providers will let you take out a second cash ISA to use up the rest of your allowance if you haven't already done so. If you think you'll have money to spare, check with the ISA provider first. Some will let you take out a fixed rate ISA, others a variable rate.
7. Split your ISA money. It doesn't necessarily have to be a choice between a fixed or a variable rate. Some ISA providers will let you split your money between two or more products they offer.
8. Think ethical. March is move your money month, a big campaign to encourage people to move away from mainstream high street banks to smaller building societies or ethical providers. There isn't much choice if you want an ethical current account but there are a number of ethical cash ISA providers (and as I write this, you'd earn £35 a year less in interest if you went with the best buy ethical cash ISA compared to the best buy non ethical ISA and invested the full allowance of £5,340).
9. Look at taxed accounts. If you're a basic rate taxpayer, look at whether you'd be better off putting your money into a taxable (i.e. ordinary savings) account rather than a cash ISA. Some banks pay better rates on taxable accounts (probably because they know that cash ISAs are so popular).
10. Understand the transfer rules. If you're transferring an ISA, the switch must be done directly from one ISA provider to another (you can normally download a 'transfer' form) - you mustn't close the account and pay the money into an ordinary bank account. You can transfer money you've saved in a cash ISA into a stocks and shares ISA and it won't affect your ISA allowance, but you can't do the transfer the other way round.
I know from the emails I receive that many people are reasonably cynical about the way a lot of the banks operate (and who can blame them?). But there's no point in having money sitting in your cash ISA earning next to nothing, or picking an account that's paying a paltry rate of interest. So, are my ten tips on getting a good deal:
1. Know your limits. This tax year (to April 5th) you can pay up to £5,340 into a cash ISA, which worked out at £445 a month. From April 6th you'll be able to pay in £5,640 into a cash ISA (or £470 a month).
2. Look at how much existing ISAs are earning. Many cash ISAs will accept transfers in, which means you can move some or all of the money you've saved in cash ISAs in previous tax years. If you have a cash ISA that you're currently paying into, you have to move all of it (or none at all).
3. Watch out for the bonus rates. Banks love bonus rates because they can pay an eye-catching rate during the ISA season and whisk it away after a year or so. Set up an alert to remind you to shop around when the bonus rate runs out.
4. Compare the comparison sites. Don't look at one comparison site alone because they often assess best buys in different ways: some don't give the top slot to ISAs that tie you to another account, others don't include bonuses that last for less than a year and some have exclusive deals that you have to take out via the site.
5. Look at fixed rate cash ISAs. If you're saving your ISA money for something longer term (i.e. you won't need your money within a year at least), find out how much more you could earn if you take out a fixed rate ISA. Some cash ISAs will let you get at your money before the fixed rate term is up as long as you give a couple of months' notice, but not all will.
6. Find out if you can top up your fixed rate cash ISA. Most fixed rate cash ISAs can't be topped up after a certain period (often 30 or 60 days), but some ISA providers will let you take out a second cash ISA to use up the rest of your allowance if you haven't already done so. If you think you'll have money to spare, check with the ISA provider first. Some will let you take out a fixed rate ISA, others a variable rate.
7. Split your ISA money. It doesn't necessarily have to be a choice between a fixed or a variable rate. Some ISA providers will let you split your money between two or more products they offer.
8. Think ethical. March is move your money month, a big campaign to encourage people to move away from mainstream high street banks to smaller building societies or ethical providers. There isn't much choice if you want an ethical current account but there are a number of ethical cash ISA providers (and as I write this, you'd earn £35 a year less in interest if you went with the best buy ethical cash ISA compared to the best buy non ethical ISA and invested the full allowance of £5,340).
9. Look at taxed accounts. If you're a basic rate taxpayer, look at whether you'd be better off putting your money into a taxable (i.e. ordinary savings) account rather than a cash ISA. Some banks pay better rates on taxable accounts (probably because they know that cash ISAs are so popular).
10. Understand the transfer rules. If you're transferring an ISA, the switch must be done directly from one ISA provider to another (you can normally download a 'transfer' form) - you mustn't close the account and pay the money into an ordinary bank account. You can transfer money you've saved in a cash ISA into a stocks and shares ISA and it won't affect your ISA allowance, but you can't do the transfer the other way round.
Friday, 14 October 2011
Energy companies profiting at our expense
I was listening to the radio this morning when the interviewee was asked about 'confusion marketing' by energy companies, namely, the idea that they come up with a large number of tariffs and deals so that consumers are confused. With over 400 tariffs on the market, it would seem that it's definitely something they're involved in.
So it's good news that Ofgem is finally putting some pressure on the companies to simplify their tariffs and to give customers a better deal, but it's been a very long time coming. And with estimated profit figures of £125 per customer per year...it's sorely needed.
I'm not an energy expert but I have done my fair share of reporting on energy stories over the years (starting off, ironically, with a programme in the late 90s devoted to the idea that consumers would be baffled by 'confusion marketing' when the energy market was first deregulated). It's been over 12 years since the energy market was opened up to competition and many consumers still aren't getting a good deal.
We've had mis-selling on the doorstep (which has only just been tackled in the last few months), people on pre-payment meters being forced to pay far too much for their energy, energy companies altering people's direct debits without an explanation of why and - in many cases - when their accounts were in credit and, only yesterday, Which? finding that in a third of its mystery phone calls, the energy suppliers' own staff didn't know which deal was the cheapest.
Oh, and I haven't even mentioned the Warm Homes Discount fiasco, where energy companies (British Gas excepted) won't promise that everyone who qualifies for a discount off their energy bill will get it.
If we were talking about a 'luxury purchase' this wouldn't be so serious. But it's not. It's gas and electricity. It's what we need to heat and light our homes.
Ofgem says that we could see simplified tariffs by the winter of 2012 'providing the industry get fully behind our reforms'. I've contacted the energy suppliers' trade body and am awaiting their response. They know that if they decide to fight these reforms, the Competition Commission may have to get involved and, if that happens, any change could take years to come in.
In my view, energy suppliers' customers deserve rather better than that.
So it's good news that Ofgem is finally putting some pressure on the companies to simplify their tariffs and to give customers a better deal, but it's been a very long time coming. And with estimated profit figures of £125 per customer per year...it's sorely needed.
I'm not an energy expert but I have done my fair share of reporting on energy stories over the years (starting off, ironically, with a programme in the late 90s devoted to the idea that consumers would be baffled by 'confusion marketing' when the energy market was first deregulated). It's been over 12 years since the energy market was opened up to competition and many consumers still aren't getting a good deal.
We've had mis-selling on the doorstep (which has only just been tackled in the last few months), people on pre-payment meters being forced to pay far too much for their energy, energy companies altering people's direct debits without an explanation of why and - in many cases - when their accounts were in credit and, only yesterday, Which? finding that in a third of its mystery phone calls, the energy suppliers' own staff didn't know which deal was the cheapest.
Oh, and I haven't even mentioned the Warm Homes Discount fiasco, where energy companies (British Gas excepted) won't promise that everyone who qualifies for a discount off their energy bill will get it.
If we were talking about a 'luxury purchase' this wouldn't be so serious. But it's not. It's gas and electricity. It's what we need to heat and light our homes.
Ofgem says that we could see simplified tariffs by the winter of 2012 'providing the industry get fully behind our reforms'. I've contacted the energy suppliers' trade body and am awaiting their response. They know that if they decide to fight these reforms, the Competition Commission may have to get involved and, if that happens, any change could take years to come in.
In my view, energy suppliers' customers deserve rather better than that.
Monday, 26 September 2011
Insurers make it (a bit) easier to shop around at retirement.
For most normal mortals, what happens to their pension at retirement is a complete mystery. Many people who have a personal, stakeholder or stock market-linked pension through work (as opposed to a final salary scheme) are blissfully unaware that, if they want to turn it into a guaranteed income for life they have to buy an annuity (a product that is designed to produce a monthly income from a lump sum).
Many more don't realise that they have the right to buy an annuity from any pension company they choose, not just the one they've built up their pension with. When I started in financial journalism (quite a long time ago!), pension companies made it pretty hard for people to shop around for their annuity.
They loaded the process with jargon (it's called the 'open market option' - not exactly an everyday phrase) and buried the important information in the small print. Over the last decade or so, mainly as a result of prodding by the regulator, the FSA, insurers are more upfront about the fact that you may be able to get a better deal by going elsewhere; but it's still not foolproof. Fewer than half of those who buy an annuity do so from a different company.
Today the ABI, which represents insurers, said that pension companies wouldn't be able to include an application form with the documents they send out as someone approaches retirement. It means you wouldn't be able to fill in the application form and buy your annuity with your existing pension provider because it was the easiest option. It's another step in the right direction, although there's still more to do.
The point is that if the insurance industry had spent more money and time in the past explaining why it's so important to shop around, more people would be confident of getting the most from their pension fund. Consumers 'get' shopping around. Many now do so, but awareness around pensions - and the decisions you have to make at retirement - is woefully low.
While pensions companies can't be expected to take all the blame, the industry has missed plenty of opportunities to educate its customers and to make sure they really were getting the best deal at retirement.
Many more don't realise that they have the right to buy an annuity from any pension company they choose, not just the one they've built up their pension with. When I started in financial journalism (quite a long time ago!), pension companies made it pretty hard for people to shop around for their annuity.
They loaded the process with jargon (it's called the 'open market option' - not exactly an everyday phrase) and buried the important information in the small print. Over the last decade or so, mainly as a result of prodding by the regulator, the FSA, insurers are more upfront about the fact that you may be able to get a better deal by going elsewhere; but it's still not foolproof. Fewer than half of those who buy an annuity do so from a different company.
Today the ABI, which represents insurers, said that pension companies wouldn't be able to include an application form with the documents they send out as someone approaches retirement. It means you wouldn't be able to fill in the application form and buy your annuity with your existing pension provider because it was the easiest option. It's another step in the right direction, although there's still more to do.
The point is that if the insurance industry had spent more money and time in the past explaining why it's so important to shop around, more people would be confident of getting the most from their pension fund. Consumers 'get' shopping around. Many now do so, but awareness around pensions - and the decisions you have to make at retirement - is woefully low.
While pensions companies can't be expected to take all the blame, the industry has missed plenty of opportunities to educate its customers and to make sure they really were getting the best deal at retirement.
Tuesday, 21 June 2011
What I'd have said in the Pensions Bill debate.
I listened to several hours of the Pensions Bill debate yesterday with a sinking heart and a growing sense of dismay. Not surprisingly, most of the debate was around the issue of speeding up the rise in the state pension age to 66. It would be naive to expect a political debate not to include point scoring but I was surprised at how much of the debate was about the politics and not the substantive issues around raisng the state pension age:
1. This is not about equality. I don't expect to receive my state pension before men and it's right that the state pension age is being equalised to 65. I can also see the case for bringing forward the rise in state pension age to 66 from its current timetable of 2024-2026. However, the plans for raising it to 66 by 2020 would penalise around half a million women in their mid 50s who will experience one increase in their state pension age on top of another.
2. Women in their 50s have not had equal access to state pensions. The previous government's figures showed that only 45% of women reaching state pension age in the tax year 2009-2010 qualified for a full basic state pension. The reforms introduced in April 2010 mean that figure is increasing to 75%. However, this compares with well over 90% of men who receive the full basic state pension - currently worth around £102 a week.
3. Women have missed out for a variety of reasons. This could be because they've had a family (and the crediting system for state pensions for women looking after children, called 'Home Responsibilities Protection' only credited women for entire tax years that they were looking after their children until April 2010). It could be because they've acted as carers - and until April 2010 you had to be eligible for Carer's Allowance to receive credits for the state pension. You could only claim Carer's Allowance if you cared for someone for 35 hours a week or more and they received Attendance Allowance or Disability Living Allowance at the highest rates). Women also missed out if they earned less than the National Insurance limit (currently around £102 a week), perhaps from part-time work. Even if someone has several part time jobs paying less than £102 a week they won't receive any credit towards their state pension.
4. Figures from last year show that only 50% of women aged 50+ are in full time work. That's not because women in their 50s are idling and don't want to work full time, many are taking on caring roles (either of elderly parents or childcare of grandchildren), many haven't been able to get back into full time work since having children because the jobs aren't available and - due to the public sector cutbacks - many thousands have been made redundant.
5. Women in their 50s have not had equal access to work based pensions. Several women in their 50s have got in touch to say that their company pension wouldn't let them join until they reached their mid 20s. Some told me that as soon as they were eligible to join the pension scheme they had to leave because they wanted to have a family.
6. Part time workers (mainly women) had no automatic entitlement to join their company pension scheme until 1990. In 1990 it was ruled that it was illegal to refuse to let a part time worker join their employer's pension scheme. Women were then able to backdate their membership of the scheme - but that assumed they could afford to pay pension contributions for all the missing years.
7. Until December 2000 pensions couldn't be split in divorce. That doesn't mean they were ignored (although frequently they were because solicitors didn't understand their importance), but it means their value couldn't be divided at the time of divorce.
These are just some of the reasons why women who are currently nearing retirement or in their 50s rely more on their state pension than men do. Government figures show that two thirds of pensioners in poverty are female with 1.7 million women claiming Pensions Credit, compared to 1.1 million men. Official figures also show that women receive half the amount from their works pension that men do (£78 a week compared to £143) and that the average 56 year old man has saved £52,100 into his pension whereas the average 56 year old woman has saved £9,100.
That's why the plans to raise the state pension age to 66 by April 2020 are unfair. We don't need 'transitional measures'. We need a complete rethink.
1. This is not about equality. I don't expect to receive my state pension before men and it's right that the state pension age is being equalised to 65. I can also see the case for bringing forward the rise in state pension age to 66 from its current timetable of 2024-2026. However, the plans for raising it to 66 by 2020 would penalise around half a million women in their mid 50s who will experience one increase in their state pension age on top of another.
2. Women in their 50s have not had equal access to state pensions. The previous government's figures showed that only 45% of women reaching state pension age in the tax year 2009-2010 qualified for a full basic state pension. The reforms introduced in April 2010 mean that figure is increasing to 75%. However, this compares with well over 90% of men who receive the full basic state pension - currently worth around £102 a week.
3. Women have missed out for a variety of reasons. This could be because they've had a family (and the crediting system for state pensions for women looking after children, called 'Home Responsibilities Protection' only credited women for entire tax years that they were looking after their children until April 2010). It could be because they've acted as carers - and until April 2010 you had to be eligible for Carer's Allowance to receive credits for the state pension. You could only claim Carer's Allowance if you cared for someone for 35 hours a week or more and they received Attendance Allowance or Disability Living Allowance at the highest rates). Women also missed out if they earned less than the National Insurance limit (currently around £102 a week), perhaps from part-time work. Even if someone has several part time jobs paying less than £102 a week they won't receive any credit towards their state pension.
4. Figures from last year show that only 50% of women aged 50+ are in full time work. That's not because women in their 50s are idling and don't want to work full time, many are taking on caring roles (either of elderly parents or childcare of grandchildren), many haven't been able to get back into full time work since having children because the jobs aren't available and - due to the public sector cutbacks - many thousands have been made redundant.
5. Women in their 50s have not had equal access to work based pensions. Several women in their 50s have got in touch to say that their company pension wouldn't let them join until they reached their mid 20s. Some told me that as soon as they were eligible to join the pension scheme they had to leave because they wanted to have a family.
6. Part time workers (mainly women) had no automatic entitlement to join their company pension scheme until 1990. In 1990 it was ruled that it was illegal to refuse to let a part time worker join their employer's pension scheme. Women were then able to backdate their membership of the scheme - but that assumed they could afford to pay pension contributions for all the missing years.
7. Until December 2000 pensions couldn't be split in divorce. That doesn't mean they were ignored (although frequently they were because solicitors didn't understand their importance), but it means their value couldn't be divided at the time of divorce.
These are just some of the reasons why women who are currently nearing retirement or in their 50s rely more on their state pension than men do. Government figures show that two thirds of pensioners in poverty are female with 1.7 million women claiming Pensions Credit, compared to 1.1 million men. Official figures also show that women receive half the amount from their works pension that men do (£78 a week compared to £143) and that the average 56 year old man has saved £52,100 into his pension whereas the average 56 year old woman has saved £9,100.
That's why the plans to raise the state pension age to 66 by April 2020 are unfair. We don't need 'transitional measures'. We need a complete rethink.
Saturday, 14 May 2011
There will still be losers in the PPI debacle.
The banks' decision not to fight the court ruling on the way they handle payment protection insurance (PPI) complaints is good news for the hundreds of thousands of people who were mis-sold PPI. It's up to the banks to show they can get on and deal with their complaints speedily and fairly.
However, there is one group of people who won't be helped by the court decision - those who've already complained to their bank about a payment protection insurance policy, who had their complaint rejected but who didn't then take their complaint to the free Financial Ombudsman Service.
Under the rules, you have six months from when your bank (or other financial firm) rejects your complaint to take it to the Financial Ombudsman Service. But we know that before the Financial Services Authority told banks to buck up their ideas about how they dealt with complaints about PPI (which happened last August) banks were rejecting PPI complaints that were valid.
Across the financial industry 60% of complaints about PPI have been rejected. But the Financial Ombudsman Service has been finding in favour of consumers in 75% of PPI cases over the last three years. We also know that two thirds of those who had their complaint about PPI rejected by their bank didn't take it any further.
The rules say that you have six months from when your complaint was rejected by your bank to get in touch with the Financial Ombudsman Service. Once that deadline passes you can't complain to ombudsman (except in limited circumstances, such as you weren't told about your rights to go to the ombudsman or you were seriously ill).
Of course, it's ultimately the consumer's responsibility to take their complaint to the Financial Ombudsman Service, but I know that many people didn't do so because they believed their bank. If their bank rejected their complaint, why would someone else say anything different?
That means that thousands - possibly tens of thousands - of people who were mis-sold payment protection insurance and whose complaint was wrongly turned down by their bank can't go back and put in their complaint again.
The banks are being forced by the Financial Services Authority to contact hundrds of thousands of people who were sold PPI but who've not yet complained and to find out if they were wrongly sold a PPI policy. But there's no obligation on them to go back contact people whose complaints they rejected to see whether there was a justified complaint. Of course, there's nothing to stop them from doing that. The question is, will they?
However, there is one group of people who won't be helped by the court decision - those who've already complained to their bank about a payment protection insurance policy, who had their complaint rejected but who didn't then take their complaint to the free Financial Ombudsman Service.
Under the rules, you have six months from when your bank (or other financial firm) rejects your complaint to take it to the Financial Ombudsman Service. But we know that before the Financial Services Authority told banks to buck up their ideas about how they dealt with complaints about PPI (which happened last August) banks were rejecting PPI complaints that were valid.
Across the financial industry 60% of complaints about PPI have been rejected. But the Financial Ombudsman Service has been finding in favour of consumers in 75% of PPI cases over the last three years. We also know that two thirds of those who had their complaint about PPI rejected by their bank didn't take it any further.
The rules say that you have six months from when your complaint was rejected by your bank to get in touch with the Financial Ombudsman Service. Once that deadline passes you can't complain to ombudsman (except in limited circumstances, such as you weren't told about your rights to go to the ombudsman or you were seriously ill).
Of course, it's ultimately the consumer's responsibility to take their complaint to the Financial Ombudsman Service, but I know that many people didn't do so because they believed their bank. If their bank rejected their complaint, why would someone else say anything different?
That means that thousands - possibly tens of thousands - of people who were mis-sold payment protection insurance and whose complaint was wrongly turned down by their bank can't go back and put in their complaint again.
The banks are being forced by the Financial Services Authority to contact hundrds of thousands of people who were sold PPI but who've not yet complained and to find out if they were wrongly sold a PPI policy. But there's no obligation on them to go back contact people whose complaints they rejected to see whether there was a justified complaint. Of course, there's nothing to stop them from doing that. The question is, will they?
Friday, 18 February 2011
Why the government is wrong to penalise women over state pensions
We know that these are tough times. We know we have to reduce the deficit - and fast. But I believe that speeding up the raising of the state pension age to 66 by 2020 is wrong.
It's wrong for several reasons. Firstly, because it will penalise women who make up the largest proportion of pensioners living in poverty (the government's own figures show that two thirds of pensioners living in poverty are women), secondly because it doesn't give those women affected enough time to make alternative plans to plug the gap and thirdly because it would break a coalition agreement promise made last May.
The Pensions Minister, Steve Webb MP, said last year (only half joking) that the state pensions system had been designed at a time when the expectation was that a man had a state pension and a woman had a husband.
Until last April - when the rules were relaxed so you could qualify for a full basic state pension with only 30 years worth of National Insurance payments as opposed to 39 if you were a woman (and 44 if you were a man) - fewer than 50% of women retired on a full basic state pension, compared to well over 90% of men. Now that figure is around 75% and rising.
The government's own figures show that the average 56 year old woman has £9,100 in pensions savings compared to £52,800 for men. And for far more women than men, the state pension is the cornerstone of their retirement income. Around half a million more women than men claim Pension Credit, a benefit paid to pensioners on the lowest income.
The state pension age for women is currently being increased from 60 to 65, which is only fair. It was due to take place over a ten year period and - although it's true that some women didn't know about it - the government decision was made years ago and there was enough time for them to prepare.
By raising the state pension age to 66 - a process that will start to affect women who reach pension age from 2016, it means some of those worst affected have less than 10 years to find £10,000 (two years worth of state pension) unless they're going to continue working until they're 66.
Now, some women may be happy working to 66, but the government's own figures show that just 50% of women aged 50+ are currently in full time employment. I'm sure that if you were to look at women aged 60+ the figure will be much lower. You can't work unless the jobs are there in the first place and as the public sector is a major employer of women, the outlook for jobs is only going to get worse over the next few years.
The Pensions Minister has said that those who can't work and who don't have savings will be provided for by out of work benefits such as Jobseeker's Allowance (currently £65.45 a week). I think that's not good enough, to put it mildly.
As a financial journalist, I've lost count of how many times I've encouraged women to start planning for their retirement in good time - how it shouldn't be left to the last minute etc. But this plan to speed up the raising of the state pension age to 66 seems to show that the government is happy to give hundreds of thousands of women just a few years to save enough to bridge the gap left by missing out on the state pension, or work until they're 66.
I think we all understand that the government has to make tough decisions, but tough decisions should also be fair. The plan to bring forward raising of the state pension age to 66 is not.
It's wrong for several reasons. Firstly, because it will penalise women who make up the largest proportion of pensioners living in poverty (the government's own figures show that two thirds of pensioners living in poverty are women), secondly because it doesn't give those women affected enough time to make alternative plans to plug the gap and thirdly because it would break a coalition agreement promise made last May.
The Pensions Minister, Steve Webb MP, said last year (only half joking) that the state pensions system had been designed at a time when the expectation was that a man had a state pension and a woman had a husband.
Until last April - when the rules were relaxed so you could qualify for a full basic state pension with only 30 years worth of National Insurance payments as opposed to 39 if you were a woman (and 44 if you were a man) - fewer than 50% of women retired on a full basic state pension, compared to well over 90% of men. Now that figure is around 75% and rising.
The government's own figures show that the average 56 year old woman has £9,100 in pensions savings compared to £52,800 for men. And for far more women than men, the state pension is the cornerstone of their retirement income. Around half a million more women than men claim Pension Credit, a benefit paid to pensioners on the lowest income.
The state pension age for women is currently being increased from 60 to 65, which is only fair. It was due to take place over a ten year period and - although it's true that some women didn't know about it - the government decision was made years ago and there was enough time for them to prepare.
By raising the state pension age to 66 - a process that will start to affect women who reach pension age from 2016, it means some of those worst affected have less than 10 years to find £10,000 (two years worth of state pension) unless they're going to continue working until they're 66.
Now, some women may be happy working to 66, but the government's own figures show that just 50% of women aged 50+ are currently in full time employment. I'm sure that if you were to look at women aged 60+ the figure will be much lower. You can't work unless the jobs are there in the first place and as the public sector is a major employer of women, the outlook for jobs is only going to get worse over the next few years.
The Pensions Minister has said that those who can't work and who don't have savings will be provided for by out of work benefits such as Jobseeker's Allowance (currently £65.45 a week). I think that's not good enough, to put it mildly.
As a financial journalist, I've lost count of how many times I've encouraged women to start planning for their retirement in good time - how it shouldn't be left to the last minute etc. But this plan to speed up the raising of the state pension age to 66 seems to show that the government is happy to give hundreds of thousands of women just a few years to save enough to bridge the gap left by missing out on the state pension, or work until they're 66.
I think we all understand that the government has to make tough decisions, but tough decisions should also be fair. The plan to bring forward raising of the state pension age to 66 is not.
Wednesday, 19 January 2011
Why don't more companies love their customers?
Last week I was emailed by a SavvyWoman user, Lucy, about a problem she and her husband were having with their local branch of a well known retailer. Shortly after Christmas, Lucy's husband bought a Wii console and accessories set; at least he thought he had. The problem was that when they opened the box, the accessories weren't there.
Needless to say they headed straight back to the shop, only to be told by the retailer's head of security that it was impossible for the Wii to have been sold without the accessories. According to him, the boxed set must have contained everything it was supposed to. He was so sure that he implied Lucy's husband was lying if he said anything else.
Hmm.. accusing your customers of lying as an opening gambit. What would Mary Portas have to say? Lucy and her husband decided to get in touch with their local Trading Standards who told them they were in the right and the onus was on the shop to prove the boxed set had all the items in it, not for Lucy and her husband to prove they didn't.
Funnily enough this didn't appear to cut much ice with the retailer. It was only after I got in touch that the retailer contacted the couple and offered to replace the missing items. It's not that much of a surprise, but it is a bit of a disappointment (to say the least) that only the prospect of media exposure seems able to bring about such a speedy change of heart.
Sure, sometimes there are complicated cases where the judgement may be fine as to who's in the right and who's not and I'm equally sure there are customers who are never happy, no matter what the shop does. But in this case - and many others like it - it must have been obvious from the outset that it was at least possible that all was not as it should be.
What's more, the law was clearly on the couples' side. And even if you did think it was unlikely that the Wii set had been sold without the accessories, isn't that something you should keep to yourself until you were absolutely sure?
Even before the advent of social media, a disgruntled customer could spread the word - good or bad - to dozens of prospective customers. Now they can do so to hundreds, thousands or even millions of others. Maybe this particular retailer doesn't value repeat business. It does make you wonder.
Needless to say they headed straight back to the shop, only to be told by the retailer's head of security that it was impossible for the Wii to have been sold without the accessories. According to him, the boxed set must have contained everything it was supposed to. He was so sure that he implied Lucy's husband was lying if he said anything else.
Hmm.. accusing your customers of lying as an opening gambit. What would Mary Portas have to say? Lucy and her husband decided to get in touch with their local Trading Standards who told them they were in the right and the onus was on the shop to prove the boxed set had all the items in it, not for Lucy and her husband to prove they didn't.
Funnily enough this didn't appear to cut much ice with the retailer. It was only after I got in touch that the retailer contacted the couple and offered to replace the missing items. It's not that much of a surprise, but it is a bit of a disappointment (to say the least) that only the prospect of media exposure seems able to bring about such a speedy change of heart.
Sure, sometimes there are complicated cases where the judgement may be fine as to who's in the right and who's not and I'm equally sure there are customers who are never happy, no matter what the shop does. But in this case - and many others like it - it must have been obvious from the outset that it was at least possible that all was not as it should be.
What's more, the law was clearly on the couples' side. And even if you did think it was unlikely that the Wii set had been sold without the accessories, isn't that something you should keep to yourself until you were absolutely sure?
Even before the advent of social media, a disgruntled customer could spread the word - good or bad - to dozens of prospective customers. Now they can do so to hundreds, thousands or even millions of others. Maybe this particular retailer doesn't value repeat business. It does make you wonder.
Tuesday, 4 January 2011
Savings compensation limit goes up.
With interest rates so low it's not very often that savers get good news but the increase in the savings compensation scheme limits from £50,000 to £85,000 from December 31st is to be welcomed.
This means that if a bank or building society goes bust in most cases savers will be eligible for up to £85,000 in compensation from the Financial Services Compensation Scheme (and up to £170,000 is protected if it's held in a joint account). I say 'in most cases' because there are some non UK banks that are members of their own country's compensation scheme which may pay slightly different amounts.
Not only is the compensation limit rising but there are other improvements as well. Payouts will be faster with many receiving compensation within seven working days. Those who can't be compensated within seven days will get their money within 20 days.
And if you have both a mortgage (or other debt) and savings with the same bank or building society and it fails, you'll now recieve your savings compensation in full. Previously the amount you owed would have been deducted from your savings first. It wasn't exactly fair - it's not likely you'd have been planning to pay off your mortgage in one fell swoop - and it would have undoubtedly been a bit of a shock for those savers who were also borrowers.
So, with all that good news there has to be some bad news, right? There is. What hasn't been changed by the Financial Services Authority is the basis on which the compensation limits apply. So these new, higher limits don't necessarily mean you can have £85,000 in a bank or building society and be protected by the compensation scheme, they only mean that you can have up to £85,000 in a bank or group of banks depending on how they're authorised by the FSA.
So, to take an example, NatWest, which merged with RBS some time ago has its own banking licence, as does RBS. This means if you have savings with NatWest and RBS you're protected for up to £85,000 in each bank. However, Halifax, which merged with Bank of Scotland around a decade ago, share a banking licence. That means the £85,000 limit applies to savings in both the Halifax and the Bank of Scotland.
In fact, Bank of Scotland's authorisation also covers Birmingham Midshires, Saga, the AA and Intelligent Finance so your £85,000 limit would be split between accounts you had with any or all of these organisations.
And in another change, whereas savers with building societies that had merged in the last couple of years had dual protection (they could claim up to £50,000 from each building society), that has now been reduced. The new limit - post December 31st - is £85,000 spread between the building societies that have merged. Confused? You're not the only one.
The changes to the compensation scheme do mean that banks and building societies now have to tell customers how they are authorised and whether they are part of a larger group (worryingly until the start of this year it was information that could be pretty hard to come by) but I don't think that's good enough.
For savers to have confidence in the compensation scheme it needs to be easy to understand and easy to explain. At the moment - despite the recent improvements - our own savings compensation scheme is neither.
This means that if a bank or building society goes bust in most cases savers will be eligible for up to £85,000 in compensation from the Financial Services Compensation Scheme (and up to £170,000 is protected if it's held in a joint account). I say 'in most cases' because there are some non UK banks that are members of their own country's compensation scheme which may pay slightly different amounts.
Not only is the compensation limit rising but there are other improvements as well. Payouts will be faster with many receiving compensation within seven working days. Those who can't be compensated within seven days will get their money within 20 days.
And if you have both a mortgage (or other debt) and savings with the same bank or building society and it fails, you'll now recieve your savings compensation in full. Previously the amount you owed would have been deducted from your savings first. It wasn't exactly fair - it's not likely you'd have been planning to pay off your mortgage in one fell swoop - and it would have undoubtedly been a bit of a shock for those savers who were also borrowers.
So, with all that good news there has to be some bad news, right? There is. What hasn't been changed by the Financial Services Authority is the basis on which the compensation limits apply. So these new, higher limits don't necessarily mean you can have £85,000 in a bank or building society and be protected by the compensation scheme, they only mean that you can have up to £85,000 in a bank or group of banks depending on how they're authorised by the FSA.
So, to take an example, NatWest, which merged with RBS some time ago has its own banking licence, as does RBS. This means if you have savings with NatWest and RBS you're protected for up to £85,000 in each bank. However, Halifax, which merged with Bank of Scotland around a decade ago, share a banking licence. That means the £85,000 limit applies to savings in both the Halifax and the Bank of Scotland.
In fact, Bank of Scotland's authorisation also covers Birmingham Midshires, Saga, the AA and Intelligent Finance so your £85,000 limit would be split between accounts you had with any or all of these organisations.
And in another change, whereas savers with building societies that had merged in the last couple of years had dual protection (they could claim up to £50,000 from each building society), that has now been reduced. The new limit - post December 31st - is £85,000 spread between the building societies that have merged. Confused? You're not the only one.
The changes to the compensation scheme do mean that banks and building societies now have to tell customers how they are authorised and whether they are part of a larger group (worryingly until the start of this year it was information that could be pretty hard to come by) but I don't think that's good enough.
For savers to have confidence in the compensation scheme it needs to be easy to understand and easy to explain. At the moment - despite the recent improvements - our own savings compensation scheme is neither.
Wednesday, 22 December 2010
Christmas deliveries....or lack of
The snow may be melting in some parts of the country but thousands of customers are still waiting for their online deliveries. The last couple of weeks have undoubtedly made life difficult for online retailers and delivery companies. But it seems that some of them aren't sticking by the law when it comes to consumer rights. Worse still, a number of them appear to think it's acceptable to fob off their customers when they try and find out what's going on.
I did an interview about online delivery problems on TV at the weekend and the programme received dozens of emails and texts from people who'd had problems. One was from a woman who'd ordered over £300 worth of jewellery from an online retailer. The order had gone missing and the jewellery retailer told her it wasn't their problem and that her only option was to claim against the postal service.
Well that's just plain wrong. I spent more time than is probably healthy reading the Distance Selling Regulations on Friday and Saturday but - although there's a lot of information there - it's all quite clear. If an order goes astry it's the retailer's responsibility to replace it or refund the cost (including delivery). And if you decide you no longer want the items you've ordered you can cancel your order at any time up to seven working days from the day after they arrive. There are some exceptions to this (you can't cancel an order if it's been customised or if it's for fresh food or flowers - all sensible stuff).
But even if consumers didn't have such good protection in law, why would the retailer think it's acceptable to tell someone who's spent £300 with them that it's not their problem? Don't they want any repeat business?
I do have some sympathy for some of the retailers that have been put in a very difficult position. In some cases their chosen delivery company has just withdrawn service and refused to deliver in certain areas. The rules of one postal service say that if a parcel goes astray the shop can't lodge a complaint to find out what's happened to it for 14 days.
I'm also aware that some consumers are probably being unreasonable. Does it really matter if some of the presents you've ordered don't arrive on time? Delivery companies aren't miracle workers and it's fair to say that if you can't travel much further than your doorstep it's unlikely they will be able to get anywhere near you. However, that doesn't mean that retailers should ignore what the law says. The rules are clear and they should abide by them and treat their customers fairly.
I did an interview about online delivery problems on TV at the weekend and the programme received dozens of emails and texts from people who'd had problems. One was from a woman who'd ordered over £300 worth of jewellery from an online retailer. The order had gone missing and the jewellery retailer told her it wasn't their problem and that her only option was to claim against the postal service.
Well that's just plain wrong. I spent more time than is probably healthy reading the Distance Selling Regulations on Friday and Saturday but - although there's a lot of information there - it's all quite clear. If an order goes astry it's the retailer's responsibility to replace it or refund the cost (including delivery). And if you decide you no longer want the items you've ordered you can cancel your order at any time up to seven working days from the day after they arrive. There are some exceptions to this (you can't cancel an order if it's been customised or if it's for fresh food or flowers - all sensible stuff).
But even if consumers didn't have such good protection in law, why would the retailer think it's acceptable to tell someone who's spent £300 with them that it's not their problem? Don't they want any repeat business?
I do have some sympathy for some of the retailers that have been put in a very difficult position. In some cases their chosen delivery company has just withdrawn service and refused to deliver in certain areas. The rules of one postal service say that if a parcel goes astray the shop can't lodge a complaint to find out what's happened to it for 14 days.
I'm also aware that some consumers are probably being unreasonable. Does it really matter if some of the presents you've ordered don't arrive on time? Delivery companies aren't miracle workers and it's fair to say that if you can't travel much further than your doorstep it's unlikely they will be able to get anywhere near you. However, that doesn't mean that retailers should ignore what the law says. The rules are clear and they should abide by them and treat their customers fairly.
Friday, 3 December 2010
It's time to simplify gas and electricity deals
The news that Consumer Focus wants OFGEM to investigate complex and confusing gas and electricity deals is to be welcomed. The number of different price tariffs available and the way some of the energy companies present their information does little to help most ordinary consumers get a good deal.
I've been interested in the way energy companies operate ever since the gas and electrcity market was deregulated in 1998. At the time I interviewed a marketing expert who warned about the dangers of confusion or complexity marketing - where companies design and market their deals in a way that will confuse customers.
Twelve years on and what's the evidence that the market is working for consumers? Well, the energy companies would point to the fact that millions of people benefit from cheaper deals as a result of being able to shop around. But many others don't engage in the process or switch without being convinced they'll be better off.
And OFGEM's own research in 2008 showed that over half of people who switched to a new deal did so on the doorstep (and 40% of those ended up on a worse tariff than the one they were originally on).
Consumer Focus's letter makes interesting reading. It includes examples of advertised discounts that are nigh on impossible for many consumers to qualify for, exit fees that customers don't realise they'll end up paying and a baffling array of deals that most ordinary mortals find impossible to compare.
No one's saying that companies should only be allowed to have one tariff or that they shouldn't compete against each other for customers. But gas and electricity are basic commodities - not luxuries - so is it really too much to ask that we can understand the information energy companies produce, work out whether we're on a good deal and, if not, get a better one?
I've been interested in the way energy companies operate ever since the gas and electrcity market was deregulated in 1998. At the time I interviewed a marketing expert who warned about the dangers of confusion or complexity marketing - where companies design and market their deals in a way that will confuse customers.
Twelve years on and what's the evidence that the market is working for consumers? Well, the energy companies would point to the fact that millions of people benefit from cheaper deals as a result of being able to shop around. But many others don't engage in the process or switch without being convinced they'll be better off.
And OFGEM's own research in 2008 showed that over half of people who switched to a new deal did so on the doorstep (and 40% of those ended up on a worse tariff than the one they were originally on).
Consumer Focus's letter makes interesting reading. It includes examples of advertised discounts that are nigh on impossible for many consumers to qualify for, exit fees that customers don't realise they'll end up paying and a baffling array of deals that most ordinary mortals find impossible to compare.
No one's saying that companies should only be allowed to have one tariff or that they shouldn't compete against each other for customers. But gas and electricity are basic commodities - not luxuries - so is it really too much to ask that we can understand the information energy companies produce, work out whether we're on a good deal and, if not, get a better one?
Tuesday, 26 October 2010
State pensions and women
Women have been second class citizens for some time when it comes to pensions. Those aren't my words (although I agree with the sentiment) it's what the Pensions Minister Steve Webb said last week at the House of Lords when he was speaking at the launch of a report about women and pensions.
If a flat rate basic state pension is introduced it will be a huge improvement for both men and women - but especially women - in the future. Last year only 45% of women who reached state pension age received the full basic state pension (currently worth £97.65 a week).
The fact is that even after changes introduced by the previous government in April it will be 2025 before 90% of women qualify for a full basic state pension. I know that there are means tested benefits such as the pension credit which top up pensions for those on the lowest incomes, but they're not really the answer.
Introducing a flat rate pension of around £140 a week - which is the figure the government is rumoured to be thinking of - is not without its problems. The main one is whether or not it's affordable but there are others as well, such as how do you 'sell' the idea of paying National Insurance if you don't get an obvious benefit from it?
As soon as you make changes there will always be winners and losers and while it's not a reason to leave things as they are, I do feel for women who are caught up in the current increase in the state pension age and who have had little or no time to prepare. Although the rise in state pension age from 60 to 65, which is currently being implemented, was announced some time ago it didn't get a huge amount of publicity. I know from feedback I've received to the website that many women were caught out by the fact that they wouldn't get their state pension at 60.
We may be able to understand - from a mathematical point of view - that the state pension age has to rise once again. It's one of the less welcome consequences of the 'good news' story of our increased longevity. What's harder to accept is that women born in the mid 1950s (after April 6th 1953) will have had their state pension age increased twice by successive governments.
And while £140 a week is definitely better than £97 a week and even better news if you have a patchy National Insurance record, it means some women - and men - will have to find £5,000 a year if they want to retire before they qualify for their state pension. If they can't find the money, they're likely to face the prospect of working later than they'd planned. Assuming - of course - they're able to find a job.
If a flat rate basic state pension is introduced it will be a huge improvement for both men and women - but especially women - in the future. Last year only 45% of women who reached state pension age received the full basic state pension (currently worth £97.65 a week).
The fact is that even after changes introduced by the previous government in April it will be 2025 before 90% of women qualify for a full basic state pension. I know that there are means tested benefits such as the pension credit which top up pensions for those on the lowest incomes, but they're not really the answer.
Introducing a flat rate pension of around £140 a week - which is the figure the government is rumoured to be thinking of - is not without its problems. The main one is whether or not it's affordable but there are others as well, such as how do you 'sell' the idea of paying National Insurance if you don't get an obvious benefit from it?
As soon as you make changes there will always be winners and losers and while it's not a reason to leave things as they are, I do feel for women who are caught up in the current increase in the state pension age and who have had little or no time to prepare. Although the rise in state pension age from 60 to 65, which is currently being implemented, was announced some time ago it didn't get a huge amount of publicity. I know from feedback I've received to the website that many women were caught out by the fact that they wouldn't get their state pension at 60.
We may be able to understand - from a mathematical point of view - that the state pension age has to rise once again. It's one of the less welcome consequences of the 'good news' story of our increased longevity. What's harder to accept is that women born in the mid 1950s (after April 6th 1953) will have had their state pension age increased twice by successive governments.
And while £140 a week is definitely better than £97 a week and even better news if you have a patchy National Insurance record, it means some women - and men - will have to find £5,000 a year if they want to retire before they qualify for their state pension. If they can't find the money, they're likely to face the prospect of working later than they'd planned. Assuming - of course - they're able to find a job.
Friday, 1 October 2010
Clampdown on debt management companies
The news that the Office of Fair Trading has decided to take action against debt management companies that have been flouting the law is very welcome and its findings were nothing short of shocking. Out of the 150 or so debt management companies it checked up on over 90% were flouting the law.
It wasn't just the case that they fell down on some minor administrative matter, they were giving people 'advice' when they hadn't found out the most basic information about their financial position, the firms weren't telling them how they were paid and - in some cases - were making out that the free alternative of debt advice charities weren't worth bothering with.
The debt management industry mushroomed a few years ago when companies realised they could push IVAs (individual voluntary arrangements), which would earn them a healthy fee of, sometimes, several thousand pounds a time. IVAs offer people who owe money the chance to have the majority of their debts written off, but they're not without risks and they're certainly not suitable for everyone.
I've always recommended that people who have debt problems go and see one of the debt advice charities such as CCCS, National Debtline or Citizens Advice. The debt management companies say there's a demand for their services because the debt advice charities can't cope with demand. That may well be the case as the number of people seeking debt advice over the last couple of years has risen sharply.
However, it's been obvious for several years that there's a massive problem in the industry with some companies aggressively pushing their services and - it now emerges - a distinct lack of openness about how they operate and widespread flouting of the law.
The action by the OFT is long overdue but - on the positive side - it pulled no punches. It's said that if 128 of the debt management companies it's looked at don't improve their practices in three months, they could be shut down. What the OFT must do now is to make sure it regulates this sector much more closely in the future. Allowing over 100 companies to have so little regard for the law when they are dealing with people who are often at their wits' end and desperate for help is something that must not be allowed to happen in the future.
It wasn't just the case that they fell down on some minor administrative matter, they were giving people 'advice' when they hadn't found out the most basic information about their financial position, the firms weren't telling them how they were paid and - in some cases - were making out that the free alternative of debt advice charities weren't worth bothering with.
The debt management industry mushroomed a few years ago when companies realised they could push IVAs (individual voluntary arrangements), which would earn them a healthy fee of, sometimes, several thousand pounds a time. IVAs offer people who owe money the chance to have the majority of their debts written off, but they're not without risks and they're certainly not suitable for everyone.
I've always recommended that people who have debt problems go and see one of the debt advice charities such as CCCS, National Debtline or Citizens Advice. The debt management companies say there's a demand for their services because the debt advice charities can't cope with demand. That may well be the case as the number of people seeking debt advice over the last couple of years has risen sharply.
However, it's been obvious for several years that there's a massive problem in the industry with some companies aggressively pushing their services and - it now emerges - a distinct lack of openness about how they operate and widespread flouting of the law.
The action by the OFT is long overdue but - on the positive side - it pulled no punches. It's said that if 128 of the debt management companies it's looked at don't improve their practices in three months, they could be shut down. What the OFT must do now is to make sure it regulates this sector much more closely in the future. Allowing over 100 companies to have so little regard for the law when they are dealing with people who are often at their wits' end and desperate for help is something that must not be allowed to happen in the future.
Saturday, 11 September 2010
Why can't shops get it right?
Why is it that some shops seem to know less about our rights than most consumers? I was in a bookshop last weekend when someone in the next queue complained about an e-book reader she'd bought a few months earlier. The shop assistant told her to contact the manufacturer - and this was after she'd checked with the manager.
The Office of Fair Trading has recently published information for retailers so they get it right and don't end up fobbing off consumers. In my view this can't come a moment too soon. OK so our consumer laws may not be the simplest in the world, but they're not rocket science.
And if you're a retailer, trader or supplier, it's down to you to get it right. A couple of years ago when I was still working as a freelance reporter for the BBC I did a report into the issue of shops giving people duff information about their rights and and pushing them to the manufacturer to get faulty goods replaced or repaired.
I interviewed several experts who thought that - while retailers may not be deliberately setting out to mislead - the fact that they didn't seem to think it was important that their shop staff knew the law and gave consumers the right information said something about their priorities.
The fact is that your contract is with the retailer or trader, so if you have a legitimate complaint, it's down to them to put it right. That's what the Sale of Goods Act is there for.
I hope that the OFT carries out some mystery shopping once the online advice hub has been up and running for a while and comes down hard on those retailers that are dodging their obligations.
The Office of Fair Trading has recently published information for retailers so they get it right and don't end up fobbing off consumers. In my view this can't come a moment too soon. OK so our consumer laws may not be the simplest in the world, but they're not rocket science.
And if you're a retailer, trader or supplier, it's down to you to get it right. A couple of years ago when I was still working as a freelance reporter for the BBC I did a report into the issue of shops giving people duff information about their rights and and pushing them to the manufacturer to get faulty goods replaced or repaired.
I interviewed several experts who thought that - while retailers may not be deliberately setting out to mislead - the fact that they didn't seem to think it was important that their shop staff knew the law and gave consumers the right information said something about their priorities.
The fact is that your contract is with the retailer or trader, so if you have a legitimate complaint, it's down to them to put it right. That's what the Sale of Goods Act is there for.
I hope that the OFT carries out some mystery shopping once the online advice hub has been up and running for a while and comes down hard on those retailers that are dodging their obligations.
Friday, 13 August 2010
Could the PPI debacle finally be resolved? Not quite...
So, the Financial Services Authority has got tough with banks, brokers and insurance companies over payment protection insurance - and not a moment too soon. There's no doubt that the financial services industry can sometimes take the flak for things that aren't actually its fault. But with PPI mis-selling, I think they deserve everything that's being thrown at them.
OK, so not every single financial insitution was trying to fleece its customers by selling them a payment protection insurance policy they couldn't claim on, weren't told the price of or didn't even know they were being sold in the first place. But there were enough companies active in this market (and I don't mean that as a compliment) for this to be an issue for the whole industry.
What would have been nice - and would possibly have given consumers some hope that banks, brokers and insurers aren't out to squeeze them for every last penny, is if companies could have a) sold these policies properly in the first place and not behaved like they were operating in the Wild West or, if that was mission impossible, b) compensated people who had a genuine case straight away without fobbing them off and without dragging their heels.
As it is they've plainly been turning down legitimate complaints, otherwise why would the Financial Ombudsman Service find in favour of the consumer in over 80% of PPI cases? What's particularly galling is that only 30% of people whose complaints were rejected by their bank or insurer actually pursued it further by going to the ombudsman service. Presumably they thought that, as the bank/broker/insurer thought they had no cause for complaint, they genuinely didn't have - rather than that the financial company might be trying to pull a fast one.
Either that or they may have missed the deadline that means that once you've received your 'final letter' from a financial company rejecting your complaint you only have six months to go to the Financial Ombudsman Service.
The FSA's latest move is a welcome one. It means that companies will have to improve the way they deal with consumers who complain. More than that they'll have to look at how they've sold PPI policies in the first place. But, because it can't - yet - force companies to open old cases where people have complained of mis-selling and had their complaint rejected, hundreds of thousands of others will have been turned down for compensation when they shouldn't have been.
OK, so not every single financial insitution was trying to fleece its customers by selling them a payment protection insurance policy they couldn't claim on, weren't told the price of or didn't even know they were being sold in the first place. But there were enough companies active in this market (and I don't mean that as a compliment) for this to be an issue for the whole industry.
What would have been nice - and would possibly have given consumers some hope that banks, brokers and insurers aren't out to squeeze them for every last penny, is if companies could have a) sold these policies properly in the first place and not behaved like they were operating in the Wild West or, if that was mission impossible, b) compensated people who had a genuine case straight away without fobbing them off and without dragging their heels.
As it is they've plainly been turning down legitimate complaints, otherwise why would the Financial Ombudsman Service find in favour of the consumer in over 80% of PPI cases? What's particularly galling is that only 30% of people whose complaints were rejected by their bank or insurer actually pursued it further by going to the ombudsman service. Presumably they thought that, as the bank/broker/insurer thought they had no cause for complaint, they genuinely didn't have - rather than that the financial company might be trying to pull a fast one.
Either that or they may have missed the deadline that means that once you've received your 'final letter' from a financial company rejecting your complaint you only have six months to go to the Financial Ombudsman Service.
The FSA's latest move is a welcome one. It means that companies will have to improve the way they deal with consumers who complain. More than that they'll have to look at how they've sold PPI policies in the first place. But, because it can't - yet - force companies to open old cases where people have complained of mis-selling and had their complaint rejected, hundreds of thousands of others will have been turned down for compensation when they shouldn't have been.
Tuesday, 3 August 2010
The complexity of savings accounts
A few days ago I wrote an article about finding a fixed rate savings account with a competitive rate of interest. Not rocket science, you'd have thought - but it's certainly not that straightforward either.
For a start, some price comparison websites are fond of listing 'best sellers' or 'sponsored products' above the best buys and they don't always compare like with like (some websites exclude deals that come with short term bonus rates while others don't etc). The upshot is that you have to take the time to look at two or three different price comparison sites to be sure of getting the best deal.
Next you have to look at the catches - are you tied into taking out a bank account or investment product with the bank or building society in question? For example, Santander has one year bond paying 4.5%, which is head and shoulders above the rest. Look a little closer and you'll see that you have to invest the same amount as you put into the bond into a 'qualifying investment product'.
It might be the case that Santander's investment is the right one for you, but you shouldn't take out an investment product on the basis of a good rate on a linked savings account - not unless you've checked out the investment product thoroughly.
But it's not just the conditions and catches that you have to watch out for - there's the issue of safety as well. After the shock of the credit crisis most of us a bit a wary about chasing the highest rate without knowing how our savings are protected but finding out how you might be compensated should the bank fail isn't exactly straightforward either. I was trying to cut the explanation down to a couple of short sentences, but it was a struggle.
There is one set of rules for banks based or operating in the UK, another for those headquartered in the EEA, which means that banks based in the EEA can top up so that they offer the same level of protection as banks based in the UK if they want to but they don't have to.
And what about banks in the UK that are owned by the same parent company? Well, in some cases they may share a banking licence with the parent company in others they may not and the amount of your savings that are protected by the Financial Services Compensation Scheme are linked to the way the bank is licensed, not its brand name(your savings are covered up to a limit of £50,000 per banking licence).
I appreciate that banks and building societies will want to compete with each other for market share and that the savings safety scheme was put together when the banking landscape was far simpler. But the fact is that many people feel - understandably - bewildered about making what should be a relatively straightforward decision.
Financial services companies often bemoan the fact that people in the UK aren't very engaged with their finances - particularly long term savings. Perhaps it would be easier if the process of picking a savings account wasn't so complicated.
For a start, some price comparison websites are fond of listing 'best sellers' or 'sponsored products' above the best buys and they don't always compare like with like (some websites exclude deals that come with short term bonus rates while others don't etc). The upshot is that you have to take the time to look at two or three different price comparison sites to be sure of getting the best deal.
Next you have to look at the catches - are you tied into taking out a bank account or investment product with the bank or building society in question? For example, Santander has one year bond paying 4.5%, which is head and shoulders above the rest. Look a little closer and you'll see that you have to invest the same amount as you put into the bond into a 'qualifying investment product'.
It might be the case that Santander's investment is the right one for you, but you shouldn't take out an investment product on the basis of a good rate on a linked savings account - not unless you've checked out the investment product thoroughly.
But it's not just the conditions and catches that you have to watch out for - there's the issue of safety as well. After the shock of the credit crisis most of us a bit a wary about chasing the highest rate without knowing how our savings are protected but finding out how you might be compensated should the bank fail isn't exactly straightforward either. I was trying to cut the explanation down to a couple of short sentences, but it was a struggle.
There is one set of rules for banks based or operating in the UK, another for those headquartered in the EEA, which means that banks based in the EEA can top up so that they offer the same level of protection as banks based in the UK if they want to but they don't have to.
And what about banks in the UK that are owned by the same parent company? Well, in some cases they may share a banking licence with the parent company in others they may not and the amount of your savings that are protected by the Financial Services Compensation Scheme are linked to the way the bank is licensed, not its brand name(your savings are covered up to a limit of £50,000 per banking licence).
I appreciate that banks and building societies will want to compete with each other for market share and that the savings safety scheme was put together when the banking landscape was far simpler. But the fact is that many people feel - understandably - bewildered about making what should be a relatively straightforward decision.
Financial services companies often bemoan the fact that people in the UK aren't very engaged with their finances - particularly long term savings. Perhaps it would be easier if the process of picking a savings account wasn't so complicated.
Friday, 23 July 2010
Mortgage errors
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.
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.
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.
Tuesday, 11 May 2010
Who's cashing in on ISA rates?
A few weeks ago I wrote an article for SavvyWoman about switching cash ISAs and - knowing how fond banks and building societies are of changing rates - last weekend I checked that the rates were up to date.
What was interesting, no, let me rephrase that, somewhat shocking, was how low some cash ISA rates were. Did you know that some ISA providers will take your money and give you a tax-free return of 0.10%. Yup, a tenth of one percent.
That means even if you paid in the current tax year's maximum amount of £5,100 you'd still only earn just over a fiver in interest after a year. That's enough for a fish and chip supper or a bottle of nail varnish, but it's not much to show for saving several thousand pounds for 12 months.
OK so let's name some names - Santander, which - rightly - got lots of publicity for its market-leading cash ISA earlier this year also has an 'easy ISA' paying 0.1%. Oh, but if you've got £27,000 or more you'll get 0.3%. That's OK then.
The Dunfermline building society has a Soccersaver Cash ISA for Celtic fans, but scores an own goal with its 0.1% interest rate.
Meanwhile Barclays has announced that it will keep its market leading cash ISA (paying a healthy 3.1%) open to new customers until June 1st. That's the good news. The bad news is that this ISA won't accept transfers in from existing ISAs, it will only take new money. If you want to transfer your ISA to Barclays, you can transfer it to an account paying 0.1%. Hmmm. I'll get back to you on that one.
I appreciate that banks and building societies have to make a profit and that the Bank of England rates are low. But the grand game of snakes and ladders that cash ISA savers seem to have unwittingly signed up for isn't the answer. Someone's laughing all the way to the bank, but it's not the majority of cash ISA savers.
What was interesting, no, let me rephrase that, somewhat shocking, was how low some cash ISA rates were. Did you know that some ISA providers will take your money and give you a tax-free return of 0.10%. Yup, a tenth of one percent.
That means even if you paid in the current tax year's maximum amount of £5,100 you'd still only earn just over a fiver in interest after a year. That's enough for a fish and chip supper or a bottle of nail varnish, but it's not much to show for saving several thousand pounds for 12 months.
OK so let's name some names - Santander, which - rightly - got lots of publicity for its market-leading cash ISA earlier this year also has an 'easy ISA' paying 0.1%. Oh, but if you've got £27,000 or more you'll get 0.3%. That's OK then.
The Dunfermline building society has a Soccersaver Cash ISA for Celtic fans, but scores an own goal with its 0.1% interest rate.
Meanwhile Barclays has announced that it will keep its market leading cash ISA (paying a healthy 3.1%) open to new customers until June 1st. That's the good news. The bad news is that this ISA won't accept transfers in from existing ISAs, it will only take new money. If you want to transfer your ISA to Barclays, you can transfer it to an account paying 0.1%. Hmmm. I'll get back to you on that one.
I appreciate that banks and building societies have to make a profit and that the Bank of England rates are low. But the grand game of snakes and ladders that cash ISA savers seem to have unwittingly signed up for isn't the answer. Someone's laughing all the way to the bank, but it's not the majority of cash ISA savers.
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