So, the Financial Services Authority has finally decided to act and is proposing new rules to stop mortgage lenders from piling charges and interest on borrowers who get into arrears. It's good that the FSA is acting, but shouldn't it have put these rules into place when repossession wasn't such a real threat to thousands of borrowers?
A few years ago I filmed a story for TV about a woman aged 62 who had been diagnosed with bipolar disorder. She owned her property and had paid her mortgage every month without fail. But after she went on a spending spree during one of her 'highs' she was left with debts of around £25,000.
She was advised by a broker to take out a second mortgage with a sub prime lender, which she would have to pay until she was 85 (the broker helpfully filled in her application form for her and stated that she was a self-employed cleaner, rather than the retired civil servant she actually was).
Not surprisingly she couldn't make the mortgage payments, but she did make an arrangement to pay £200 of the £300 she owed every month by standing order. And what did the lender do? They charged her a £50 arrears fee every single month (plus interest plus other random assorted fees).
I won't even begin to tell you the extraordinary way the sub prime lender tried to justify the fact that a 62-year-old 'self-employed cleaner' had mortgage that would last for 22 years. What became clear was that the lender was charging her £50 a month for no reason at all. The company didn't have to do anything to chase up the payment - it arrived on the same day every month.
As if that wasn't enough, once the arrears (largely made up of charges, interest and fees) reached around £750, they wrote to her threatening her with repossession.
If the FSA's planned rule change means people won't be treated like this in the future, it can only be a good thing. But I bet there are many others who've had similar experiences and for whom help is coming too late....
Tuesday, 26 January 2010
Wednesday, 20 January 2010
When is cash not cash....?
So, the Financial Services Authority has flexed its muscles for the first time in 2010 and this time it's Standard Life that has caught its attention. Not some two bit company we've never heard of, but Standard Life, which has been around for absolutely donkeys' years.
In case you missed the original story, around a year ago it emerged that a so-called 'cash fund', aimed at investors who had put money into a Standard Life pension, but who didn't want to risk it by investing in shares, was itself investing in an ...erm... interesting range of products (including mortgage-backed securities) and consequently, had fallen in value.
I'm not an expert in the kinds of financial instruments that Standard Life's pension cash fund invested in, but it appears that some of them were pretty risky. And - whatever the risks - they were not made clear to investors.
What's so frustrating about the whole affair is that Standard Life initially said it didn't believe it needed to compensate any of those who'd lost money - although it did have a change of heart (which seemed to coincide with a flurry of articles focusing on people who'd lost money).
The industry tightened up the rules last year up so that firms can no longer describe funds that invest in riskier financial products as 'cash' and Standard Life says it has learned important lessons from its mistake. But this sorry incident will do little to reassure consumers - most of whom have little trust in financial companies in the first place - that they really are in tune with their customers' needs and that, when things do go wrong, they will be quick to own up to their mistakes and put things right as speedily as possible.
In case you missed the original story, around a year ago it emerged that a so-called 'cash fund', aimed at investors who had put money into a Standard Life pension, but who didn't want to risk it by investing in shares, was itself investing in an ...erm... interesting range of products (including mortgage-backed securities) and consequently, had fallen in value.
I'm not an expert in the kinds of financial instruments that Standard Life's pension cash fund invested in, but it appears that some of them were pretty risky. And - whatever the risks - they were not made clear to investors.
What's so frustrating about the whole affair is that Standard Life initially said it didn't believe it needed to compensate any of those who'd lost money - although it did have a change of heart (which seemed to coincide with a flurry of articles focusing on people who'd lost money).
The industry tightened up the rules last year up so that firms can no longer describe funds that invest in riskier financial products as 'cash' and Standard Life says it has learned important lessons from its mistake. But this sorry incident will do little to reassure consumers - most of whom have little trust in financial companies in the first place - that they really are in tune with their customers' needs and that, when things do go wrong, they will be quick to own up to their mistakes and put things right as speedily as possible.
Tuesday, 12 January 2010
Can you have a good divorce?
There's so much in the papers about how couples rush to divorce in January that you may feel like you can't bear to read another article about breaking up. But I promise I won't overwhelm you with statistics about how many marriages break up at this time of year - I'm interested in how couples break up, not how many do so.
It's been a long time coming, but it seems that less confrontational methods of divorce are becoming more popular. For years it felt like the only option available if you wanted to get divorced was to hire a lawyer to 'fight your corner'. The reality may have been different, but the choices were certainly more limited than they are today.
These days, some couples are splitting up without using a lawyer at all and an increasing number of those who are using legal help are choosing 'friendlier' divorce methods, such as collaborative law or mediation. In 2003 only 12 lawyers in England and Wales were trained in collaborative family law. By last February the figure had reached 1200. Yes, it's still a minority who use collaborative law or mediation, but many of those find it's a more positive experience than the traditional lawyer-led negotiations.
The main benefit is that couples each get a real say in what happens (even if the eventual agreement involves a lot of compromise). Although many divorces don't get as far as the courts, a number of couples are effectively forced to agree to settlements because they're told that it's what a court would be likely to do.
Collaborative family law, which involves round-table meetings with you and your ex and your respective lawyers, is not necessarily a cut-price option. But it can mean both parties are less emotionally scarred by the process and - when it comes to sorting out the money - that finance doesn't become such a battle ground. The downside is that if the process breaks down, you each have to hire new lawyers, which can raise the cost considerably. But for an increasing number of couples, it's a risk worth taking.
Do you agree?
I am hosting a free divorce advice surgery on Thursday January 28th from 4pm to 8pm in Covent Garden, central London. David Allison, who's a trained mediator and collaborative family lawyer with Family Law in Partnership and Karen Ritchie, from independent financial advisers
Financial Planning for Women will be giving free advice on a one-to-one basis. It will cover a range of financial issues. Places are limited and available on a first come, first served basis. Email sarah@savvywoman.co.uk if you'd like to find out more.
It's been a long time coming, but it seems that less confrontational methods of divorce are becoming more popular. For years it felt like the only option available if you wanted to get divorced was to hire a lawyer to 'fight your corner'. The reality may have been different, but the choices were certainly more limited than they are today.
These days, some couples are splitting up without using a lawyer at all and an increasing number of those who are using legal help are choosing 'friendlier' divorce methods, such as collaborative law or mediation. In 2003 only 12 lawyers in England and Wales were trained in collaborative family law. By last February the figure had reached 1200. Yes, it's still a minority who use collaborative law or mediation, but many of those find it's a more positive experience than the traditional lawyer-led negotiations.
The main benefit is that couples each get a real say in what happens (even if the eventual agreement involves a lot of compromise). Although many divorces don't get as far as the courts, a number of couples are effectively forced to agree to settlements because they're told that it's what a court would be likely to do.
Collaborative family law, which involves round-table meetings with you and your ex and your respective lawyers, is not necessarily a cut-price option. But it can mean both parties are less emotionally scarred by the process and - when it comes to sorting out the money - that finance doesn't become such a battle ground. The downside is that if the process breaks down, you each have to hire new lawyers, which can raise the cost considerably. But for an increasing number of couples, it's a risk worth taking.
Do you agree?
I am hosting a free divorce advice surgery on Thursday January 28th from 4pm to 8pm in Covent Garden, central London. David Allison, who's a trained mediator and collaborative family lawyer with Family Law in Partnership and Karen Ritchie, from independent financial advisers
Financial Planning for Women will be giving free advice on a one-to-one basis. It will cover a range of financial issues. Places are limited and available on a first come, first served basis. Email sarah@savvywoman.co.uk if you'd like to find out more.
Monday, 4 January 2010
New rules on savings accounts
If you have savings, do you know whether your bank has its own banking licence or shares it with another bank? No? I didn't think so. But, until January 1st this year, that's what you'd have to know (or be able to find out) before you could work out how your savings would be covered by the compensation scheme, should the worst happen and your bank go bust.
When the credit crunch was - frankly - scaring the socks off all of us and high street banking names looked like they might melt into a puddle, the government raised the limits for the UK's savings compensation scheme so that the first £50,000 of an individual's savings would be protected.
A good move. But what it didn't do at the same time was simplify the scheme so that the £50,000 limit applied to each bank (or banking brand). Instead, it stuck with the existing and unnecessarily complicated system of the £50,000 limit applying to each banking licence. This seemed absurd because there's no logic or pattern to which banks have their own licence (for example, NatWest and Royal Bank of Scotland) and which share a licence (Halifax, Bank of Scotland and Birmingham Midshires).
From the beginning of this year, bank, building societies and anyone else offering savings accounts will have to tell consumers how their money is covered by the compensation scheme. That means you should know whether you'd be able to claim the full £50,000 from each bank or building society that you have savings with or whether that total is spread across several different brands within the same group.
If you've saved with a bank based within the European Economic Area (the 27 EU member states plus Iceland, Norway and Lichtenstein), you'll also be told whether you're only covered by their country's own scheme or whether you may also be able to claim some compensation from the UK's scheme.
It's good that banks will actually be forced to tell consumers how their money will be protected. But it seems extraordinary that the scheme was set up in such a consumer-unfriendly way in the first place and that it's taken until now - well over a year after the credit crisis was at its worst - for banks to even be obliged to explain the rules to their own customers.
What do you think?
When the credit crunch was - frankly - scaring the socks off all of us and high street banking names looked like they might melt into a puddle, the government raised the limits for the UK's savings compensation scheme so that the first £50,000 of an individual's savings would be protected.
A good move. But what it didn't do at the same time was simplify the scheme so that the £50,000 limit applied to each bank (or banking brand). Instead, it stuck with the existing and unnecessarily complicated system of the £50,000 limit applying to each banking licence. This seemed absurd because there's no logic or pattern to which banks have their own licence (for example, NatWest and Royal Bank of Scotland) and which share a licence (Halifax, Bank of Scotland and Birmingham Midshires).
From the beginning of this year, bank, building societies and anyone else offering savings accounts will have to tell consumers how their money is covered by the compensation scheme. That means you should know whether you'd be able to claim the full £50,000 from each bank or building society that you have savings with or whether that total is spread across several different brands within the same group.
If you've saved with a bank based within the European Economic Area (the 27 EU member states plus Iceland, Norway and Lichtenstein), you'll also be told whether you're only covered by their country's own scheme or whether you may also be able to claim some compensation from the UK's scheme.
It's good that banks will actually be forced to tell consumers how their money will be protected. But it seems extraordinary that the scheme was set up in such a consumer-unfriendly way in the first place and that it's taken until now - well over a year after the credit crisis was at its worst - for banks to even be obliged to explain the rules to their own customers.
What do you think?
Tuesday, 8 December 2009
You, your partner and money...
How many are there in your relationship? Call me conventional, but I'm guessing it's just you and your partner. But maybe there are times when you feel that other issues - things you don't want to talk about - make their presence felt in an almost tangible way.
Christmas can be a difficult time both for your relationship and your finances. There are so many expectations - from the time you spend together (when doing what you normally do for the rest of the year doesn't seem enough) to how much you'll spend (in general, on yourself and on each other) - that it's not surprising it can all feel like a bit of a let-down.
Minor rows about spending and cash can easily become magnified. And if you're worried about debts that you haven't told your partner about, it will only make things worse.
There's no shortcut to non-stop peace and goodwill, but it's important to acknowledge that people who are close to you may have different ideas about money. If your partner was influenced by how he (or she) saw money being managed by their parents, they may not even question why they view money in the way they do.
It's not often that you get together with someone who has the same views about life as you do. In fact, if you do, it can be a bit dull. And you certainly don't have the same ideas about money for your relationship or your finances to thrive.
But it's important that you're able to deal with your differences and that means that you have to be able to talk about them. It's the only way you can work out what's important to each of you financially and what you need to do - together and separately - to reach keep your finances on track while keeping disagreements to a minimum. Just make sure you don't start a conversation about your financial future following an afternoon of working your way through a bottle of Baileys...
Christmas can be a difficult time both for your relationship and your finances. There are so many expectations - from the time you spend together (when doing what you normally do for the rest of the year doesn't seem enough) to how much you'll spend (in general, on yourself and on each other) - that it's not surprising it can all feel like a bit of a let-down.
Minor rows about spending and cash can easily become magnified. And if you're worried about debts that you haven't told your partner about, it will only make things worse.
There's no shortcut to non-stop peace and goodwill, but it's important to acknowledge that people who are close to you may have different ideas about money. If your partner was influenced by how he (or she) saw money being managed by their parents, they may not even question why they view money in the way they do.
It's not often that you get together with someone who has the same views about life as you do. In fact, if you do, it can be a bit dull. And you certainly don't have the same ideas about money for your relationship or your finances to thrive.
But it's important that you're able to deal with your differences and that means that you have to be able to talk about them. It's the only way you can work out what's important to each of you financially and what you need to do - together and separately - to reach keep your finances on track while keeping disagreements to a minimum. Just make sure you don't start a conversation about your financial future following an afternoon of working your way through a bottle of Baileys...
Wednesday, 21 October 2009
The long arm of the law
Have you been convicted of a crime? Well, if you haven't, someone you know probably has. The word 'crime' probably makes you think of the serious stuff like armed robbery or GBH, but there are around 7 million people in the UK with an unspent conviction, many of them for minor offences. But even if it is minor and it happened some time ago, your insurance company will want to know about it. The only time you don't have to tell insurers about convictions is once they become 'spent'. Failure to declare a conviction could mean your cover is invalid.
Insurers say they make it clear that they want to know about previous convictions, but I'm not convinced they do. I can understand why they would want to know about someone who has a fondness for arson before they offer to insure their home (likewise fraud). But I do believe that a number of insurers don't spell out clearly what information they require.
Whizzing around a few household insurers' websites this week, some listed a number of 'assumptions' on screen that they make about someone (for example, that you wouldn't leave the house empty for more than 30 days a year, didn't run a business from your home and didn't have any convictions), others asked you to click on a box to find out what those assumptions were. Is that clear? Hmm, I'm not sure it is.
If you renew your insurance every year with the same company, you won't even be asked about this issue specifically. Instead, there will be a 'catch-all' question about whether your circumstances have changed. Well, yes, probably many things in my life have changed in the last 12 months. Do you want me to list them all?
Then there's the lack of consistency. I rang around a few insurers to find out which convictions they'd want to know about and which they'd ignore. The official line sounds quite reasonable; many minor convictions may result in higher premiums to reflect the increased risk, although convictions for more serious - or relevant - offences (such as arson if it's household insurance and dangerous driving if it's car insurance) could mean you won't be insured.
But, when you talk to brokers, a slightly different picture emerges; it seems some insurers have a 'no convictions' rule. So it doesn't matter what the conviction is for or how long ago it took place (as long as it's unspent), the insurer may refuse to cover you or - and this is where it gets worrying - declare your cover void.
The fact is that insurers have the right to decide how risky they think someone is and whether or not they want to take on that risk and, clearly, insurers can't put everything that's important in bold type. But, bearing in mind that millions of people have unspent convictions (not just a few thousand), you'd think this would be something that insurers would make sure they explain so clearly that no-one's in any doubt about what they're supposed to do. Doutbless, some people do deliberately withhold information when they take out insurance, but far more are likely to be innocent victims of rules they don't understand.
Insurers say they make it clear that they want to know about previous convictions, but I'm not convinced they do. I can understand why they would want to know about someone who has a fondness for arson before they offer to insure their home (likewise fraud). But I do believe that a number of insurers don't spell out clearly what information they require.
Whizzing around a few household insurers' websites this week, some listed a number of 'assumptions' on screen that they make about someone (for example, that you wouldn't leave the house empty for more than 30 days a year, didn't run a business from your home and didn't have any convictions), others asked you to click on a box to find out what those assumptions were. Is that clear? Hmm, I'm not sure it is.
If you renew your insurance every year with the same company, you won't even be asked about this issue specifically. Instead, there will be a 'catch-all' question about whether your circumstances have changed. Well, yes, probably many things in my life have changed in the last 12 months. Do you want me to list them all?
Then there's the lack of consistency. I rang around a few insurers to find out which convictions they'd want to know about and which they'd ignore. The official line sounds quite reasonable; many minor convictions may result in higher premiums to reflect the increased risk, although convictions for more serious - or relevant - offences (such as arson if it's household insurance and dangerous driving if it's car insurance) could mean you won't be insured.
But, when you talk to brokers, a slightly different picture emerges; it seems some insurers have a 'no convictions' rule. So it doesn't matter what the conviction is for or how long ago it took place (as long as it's unspent), the insurer may refuse to cover you or - and this is where it gets worrying - declare your cover void.
The fact is that insurers have the right to decide how risky they think someone is and whether or not they want to take on that risk and, clearly, insurers can't put everything that's important in bold type. But, bearing in mind that millions of people have unspent convictions (not just a few thousand), you'd think this would be something that insurers would make sure they explain so clearly that no-one's in any doubt about what they're supposed to do. Doutbless, some people do deliberately withhold information when they take out insurance, but far more are likely to be innocent victims of rules they don't understand.
Tuesday, 13 October 2009
When I retire I want to...
Last weekend I was on BBC Breakfast, talking about state pensions and - in particular - about women who won't have built up an entitlement to a state pension, even though they may have had one or more jobs. I've also written about this on SavvyWoman http://www.savvywoman.co.uk/c7-pages/c7s0.php?art_id=108. There's a lot of research that shows we're not saving enough for our retirement and women generally retire on far less than men. The state pension isn't a lot of money (approx £95 a week for a single pensioner), but for many people, especially women, it's the bedrock of their retirement income.
A new report by Scottish Widows shows that only 47% of women are saving enough for their retirement, compared to almost 60% of men. Well, you might expect a pensions company to say that we should all be saving more. But the fact is, retirement could last for 20 years or more, and unless you plan on working into your 70s or 80s, the money will have to come from somewhere.
I find it frustrating that the state pension system is so complicated that - even after a major shake-up next April - only 75% of women will qualify for a full basic state pension. That means one in every four women will lose out. The complex benefits system means that for some people who can't save much, it's actually not worth taking out a private pension; but who knows whether the same benefits will be there when they retire?
Add into the mix the fact that the pensions industry hasn't had a great track record of putting customers first, which means few people trust pensions providers. On top of that, women tend to be more wary than men of locking their money away for a long time; something you have to do when you take out a pension. It all means that women, who currently retire on less than men, are likely to do so for some years to come.
I don't know what your retirement plans are and - for you - retirement may be a long way off. But whatever you see yourself doing once you retire, you'll have to find a way of paying for it. I'm not about the bang the drum for pensions companies, but I do believe that we all have to think about what we'll live on when we stop working. As many women are discovering as they approach retirement, you really can't assume that you'll be looked after financially once your working life is over.
A new report by Scottish Widows shows that only 47% of women are saving enough for their retirement, compared to almost 60% of men. Well, you might expect a pensions company to say that we should all be saving more. But the fact is, retirement could last for 20 years or more, and unless you plan on working into your 70s or 80s, the money will have to come from somewhere.
I find it frustrating that the state pension system is so complicated that - even after a major shake-up next April - only 75% of women will qualify for a full basic state pension. That means one in every four women will lose out. The complex benefits system means that for some people who can't save much, it's actually not worth taking out a private pension; but who knows whether the same benefits will be there when they retire?
Add into the mix the fact that the pensions industry hasn't had a great track record of putting customers first, which means few people trust pensions providers. On top of that, women tend to be more wary than men of locking their money away for a long time; something you have to do when you take out a pension. It all means that women, who currently retire on less than men, are likely to do so for some years to come.
I don't know what your retirement plans are and - for you - retirement may be a long way off. But whatever you see yourself doing once you retire, you'll have to find a way of paying for it. I'm not about the bang the drum for pensions companies, but I do believe that we all have to think about what we'll live on when we stop working. As many women are discovering as they approach retirement, you really can't assume that you'll be looked after financially once your working life is over.
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