Drivers are facing accelerating increases in car insurance taking average premiums to £666 as Government compensation rules come into effect, new research from insurance research experts Consumer Intelligence shows.

Average car insurance bills have increased by 15.7% in the past year – more than five times inflation – with nearly half the rise happening in the three months to May.

Action by regulators to cut the discount rate governing payouts in major personal injury claims to minus 0.75% from 2.5% effective from March 20th is driving the rise in bills. June’s Insurance Premium Tax rise will further add to the pressure.

Average motor insurance premiums have increased by 34.6% since October 2013, Consumer Intelligence, whose data is used by the Government’s Office for National Statistics to calculate official inflation statistics, estimates.

Drivers aged between 21 and 24 pay the highest prices at £1,202 but have seen slightly lower annual premium increases at 13.1%. Over-50s motorists are experiencing the biggest rises at 17.9% but pay premiums of £418.

Motorists in London pay the highest average premiums of £1,000 across the country – more than double the £474 bill in Scotland and the South West – and are seeing average increases of 16.7% as claim costs grow.

John Blevins, Consumer Intelligence pricing expert said: “Price rises had been levelling off at the end of last year but are now rising rapidly as the full impact of the discount rate cut comes into effect.

“Government plans to review the Ogden rate have so far taken a backseat following the Election although there is some relief from plans to push ahead with whiplash reforms announced in the Queen’s Speech.

“However with the impact of the latest Insurance Premium Tax rise still to come into effect drivers need to shop around to limit increases in premiums”

Research by Saga Travel Insurance has revealed that 350,000 over 50s have travelled without insurance in the last 5 years.

With reports suggesting that the weakening of the pound is resulting in a rise in so-called ‘staycations’, the survey of almost 12,000 shows that of those not taking out cover almost eight in ten were travelling in the UK (79%) and two in five (43%) said that UK travel was the main reason for not taking out cover.

Almost half of UK trips taken without insurance (47%) included a pre-booked hotel stay and with the average hotel in the UK costing £82 per night2 the losses can add up if people find they are no longer able to travel. Combine this with ever increasing UK rail fares and people could find themselves hundreds of pounds out of pocket should they have to cancel or cut their trip short.

Other popular staycations for people citing a UK trip as the reason for not taking out insurance include coach tours (59%), river cruises (50%), trekking holidays (43%) and city breaks (41%). Many providers of UK breaks will have cancellation charges which range from the loss of a deposit to forfeiting the full cost of a trip.

Analysis of Saga claims data from 20163 shows that almost seven in ten (68%) insurance claims for UK trips were as a result of illness or hospital visits forcing, in many cases, a trip to be cancelled or curtailed with the average claim costing £728.

And whilst the NHS will cover the cost of medical treatment within the UK, it won’t pay for friends or family members to stay by their loved one’s side, or travel to be with them if they fall ill whilst away and require a stay in hospital.

Kevin McMullan, Head of Saga Travel Insurance, commented: 

“Whilst it’s great to see people boosting the economy by experiencing the beauty of the UK as an alternative to going abroad, it is concerning that many think they do not need travel insurance for UK trips. Whilst medical bills will be covered by the NHS it would be wise to make sure you are covered for any pre-paid accommodation and travel costs in case of cancellation and for the costs incurred by friends and family who will want to be by your side if the worst happens and you’re admitted to a hospital many miles from home.”

New research from Santander UK reveals that over seven million adult Brits (14 per cent) have used someone else’s Wi-Fi because they cannot afford their own. The study found that five per cent of people have ‘borrowed’ Wi-Fi from their neighbours because they couldn’t afford their own, Five per cent have spent time in a café or shop with free Wi-Fi without ordering or buying anything and three per cent of people have jumped on an unknown, unsecured Wi-Fi when out and about.

Other key findings from the release include:

  • While data security is a concern for over half (52 per cent) of individuals when using someone else’s Wi-Fi, 17 per cent of those with security concerns are willing to use Wi-Fi hotspots if they ‘need’ to check their social media profiles or download shop or restaurant discount codes and 19 per cent put aside their worries to use an unsecured network for work.
  • Over a quarter (26 per cent) of British adults, and 49 per cent of those in the 18-34 year old age group have carried out financial transactions on their phone using an unsecured Wi-Fi network
  • Over the past ten years, the cost of phone and broadband bills has increased by 24 per cent. Bills are made worse for 30 per cent of Brits who say they go over their data allowance, with six per cent doing so every month.
  • Those topping up data spend an average of £16 per month – a collective £212 million.

The latest data shows UK inflation (CPI) grew by 2.9% in May 2017, up from 2.7% in April. This change in inflation leaves UK households collectively needing to find an extra £21.7bn a year to maintain their standard of living compared to 12 months ago, according to Retirement Advantage.

Each household will typically need to spend an extra £797 a year to maintain their standard of living compared to a year ago.

Andrew Tully from Retirement Advantage commented: ‘Households across the UK will be left reeling from the latest inflation numbers. We are feeling the financial pressure of rising prices and flat wage growth, as evidenced by the slowdown in consumer spending and impact on living standards.’

The cost of living rises can have a significant impact on people with fixed incomes, including retirees who typically live off pension income. Over the course of a 20 year retirement, if inflation averaged 2%, the typical retired household would need to find a further £187 a week to maintain their standard of living.

Tully added: ‘Inflation is the hidden force that can wreak havoc with retirement plans. People thinking about their future need to consider how they can mitigate against losing half or more of their spending power over the course of retirement. The new retirement accounts create the flexibility for people to bank a guaranteed income to pay the bills and can leave money invested to pay for life’s little luxuries and help protect against inflation.

‘A professional financial adviser can help you decide the best course of action for your personal circumstances and ensure you stay on track to enjoy the retirement you have worked hard for.’

Holiday makers will see their money go further this summer after B, the digital banking service powered by Clydesdale and Yorkshire Banks, launched its travel-friendly credit card with no charges for overseas transactions.

The card removes the typical 3% credit card foreign exchange fee for purchases abroad and allows customers to access competitive foreign exchange rates on their holiday spending, without the charges that usually apply. Using the card abroad also enables customers to benefit from the added security and protection that buying with a credit card brings.

In addition to the travel benefits, there is no annual fee for the card, a low interest rate of 9.9% APR and there are no fees for transferring a balance in from another card.

B credit card customers can also take advantage of B’s super smart app, making it easier to manage their money by tagging spending, setting budgets and receiving helpful personalised insights into their spending habits.

Helen Page, Group Innovation and Marketing Director at Clydesdale and Yorkshire Banks, said: “B is all about putting customers back in control of their money and the B credit card does exactly that. It’s a great way to manage holiday spending with no foreign exchange fees, a competitive rate and a super smart app to tag spending at home and abroad.”

Andrew Hagger, Personal Finance Expert from Moneycomms, said: “This is good news for consumers who travel abroad for leisure or business as it will save them a small fortune in foreign transaction charges when compared with most high street credit cards and debit cards”.

One in ten Brits still stash cash under their mattress, according to a new study by pension advice specialist, Portafina.

The research, which polled more than 1,500 UK adults, looked at the average amount of cash carried, and hoarded at home, plus opinions on the impact of becoming a cashless society.

With digital payment methods becoming increasing accessible, it’s no surprise that the average Brit is carrying just £28 in 2017. Men typically carry significantly more money than women (£37 versus £19), and people living in Dublin carry the most (a massive £197 on average) in contrast to people living in Liverpool, who carry the least (£16 on average).

Around eight in ten (82%) of those polled said that digital payments facilitate more effective spend tracking, whilst a third (36%) feel that digital payments are a lot easier overall. PayPal and contactless cards are the most common digital payment options (used by 80% and 52% of those polled, respectively).

Whilst digital payment options may mean there is less need to keep cash to hand, 77% still proactively stash notes or coins at home; with 41% storing loose change in a jar, and 10% even hiding money under their bed or mattress.

Men aged 45-54 are most likely to have £200+ tucked away (23%), whilst people living in Edinburgh are most likely to have £500+ in ‘readies’ at home. The average amount of money kept at home is £110, plus around £20+ in ‘forgotten’ change hidden in coat pockets, suitcases and gym bags.

 

When considering what impact going cashless may have on day-to-day life, two in ten (20%) said it would have a big effect as they are currently paid in cash.

More than a third (37%) admitted they would be less likely to be able to give money to the homeless if we went cashless.

Overall, the perception was that digital payments are often quicker, but cash remains key – both on a practical level (not every transaction can be made digitally) and an emotional one (notes and coins are palpable items of value).

In addition, Portafina asked tomorrow’s earners and spenders (518 children aged 13-172) when they believe we may be living in a cashless society. The average year stated was 2031, but do the experts agree?

Nationwide Building Society’s Director of Payments, Paul Horlock said: “Ever since the advent of the credit card, society has been on a general drive towards a cashless society. This has gathered pace over the last 10 years with the advent of the contactless card which has started to make inroads into traditionally cash based transactions (low value).

“At Nationwide we have seen almost exponential growth in the use of contactless and an unparalleled reduction in ATM usage over the past two years which is a strong indicator of the move towards a cashless society.

“The introduction of digital based payment mechanisms like Apple pay and Android pay are further cementing the move away from cash as the payment method of choice. We have also seen an increasing migration to shopping online for goods previously bought on the high street which also helps drive cash usage down.

“Moving to a cashless society requires core behaviour shifts which in some generations would just not be likely unless it was mandated by the Government. It is unlikely we will see a true cashless society within the next 20 to 30 years but with some Government intervention we could see a real move towards this by 2050.”

Jamie Smith-Thompson, managing director at Portafina, added: “Digital payment methods have undoubtedly become mainstream in the last decade and we are clearly approaching a tipping point where a cashless society becomes a reality for most people in the not too distant future. However, it must work for everyone.

“The internet, direct payments and online buying are enjoyed by the majority of people, but access is still restricted either through age, internet skills, lifestyle or income. If the government and financial institutions are going to back such a move to a truly cashless society, it will need a well-designed infrastructure which is totally inclusive and accessible to allow people to manage their money.

“From a psychological point of view, people still like physical notes and coins because it is tangible wealth and financial security in the palm of their hand. It will take a few years for people to feel comfortable with just a number on a screen – even if ‘going cashless’ in the long run makes tracking spending and completing financial transactions simpler, easier and safer.”

Nine out of 10 Brits have unrealistic expectations of how much money they will need in retirement, reveals a new poll.

The findings from deVere Group, one of the world’s largest independent financial services organisations, come days after a report from the World Economic Forum (WEF) calculated that the UK pension savings gap will rise from £6trillion to £25trillion by 2050.

The three primary reasons for the stark forecasts are increasing life expectancy, lower birth rates and, crucially, not enough being saved for retirement.

Nigel Green, founder and CEO of deVere Group, comments: “Nine out of 10 of all the new clients we have taken on as a firm in 2017 have unrealistic expectations of how much they will need in retirement.

“Typically, when we first meet new clients we discuss their personal financial circumstances and their long-term objectives, namely their retirement goals and aspirations, including at what age they would like to retire and how much they would need and/or like to have as income per year.

“Most people aim to retire at the default retirement age with a pension income of 75 per cent of their pre-retirement earnings, which is generally recommended by the pension industry.

“However, once we first do the sums with our new clients, it becomes alarmingly clear that the overwhelming majority are not yet on course to reach their goals.  Indeed, nine out of 10 of all the new clients we have taken on as a firm in 2017 have had unrealistic expectations of how much they will need for retirement.”

He continues: “The ideal for most people is to retire in their mid 60s and enjoy a fulfilling, financially-secure retirement.  But unless you have the discipline to set money aside whilst you’re working, it is, sadly, likely that you’ll need to quite drastically reconsider your retirement plans.

“Failure to save for your mature years whilst you’re earning will probably mean that you’ll need to work well into your 70s, or that you’ll have to considerably compromise your lifestyle when you retire – neither option is particularly appealing for most people.”

Earlier this year, another deVere Group survey found that a ‘live for today’ attitude means that as many as eight in 10 workers are not saving enough for their old age.

At the time, describing the findings as “very worrying indeed”, Nigel Green, observed: “Just 20 per cent of new clients were putting enough aside to realise their own long-term financial goals of retiring at an age they want and having enough money to last throughout their retirement.

“Too many people have a ‘live for today’ attitude, but what happens when ‘tomorrow’ does come and you want to retire? The ‘head in the sand’ mentality when it comes to saving for retirement is very concerning.

The UK’s six biggest mortgage lenders are penalising customers who slip onto their Standard Variable Rates (SVR) with a £3,242 hike in annual interest repayments – more than a month’s income for the average household – according to a new sector study, the Mortgage Saver Review, from online mortgage broker Trussle.

The research is the first of its kind to compare average SVRs and two-year-fixed rates from 76 lenders over a six-month period. It revealed that borrowers with Lloyds, Nationwide, Santander, RBS, Barclays, and HSBC, which collectively serve 69% of the market, would see their monthly interest rate jump by an average of 2.5% when automatically transferred from a leading two-year fixed rate to an SVR at the end of their fixed period.

A market-wide issue

While most of the UK’s 11.1 million4 mortgage borrowers do successfully remortgage before being moved to a SVR, a vast number fail to do so. Of the three million households currently on a lender’s SVR, around one million5 are ‘mortgage prisoners’, unable to switch, as the introduction of stricter borrowing rules means they’re failing to meet the criteria for a new mortgage. However, close to two million people on SVRs could switch immediately. This group constitutes 18% of the mortgage borrowing population, and they are collectively overpaying lenders by £9.8 billion6 in interest payments every year.

A ‘switching inertia’ crisis

The research 7 found that one of the main reasons so many people languish on SVRs is due to lack of awareness among borrowers. A staggering two thirds (65%) of UK mortgage holders don’t know that a lender’s SVR is typically worse value than a fixed rate, while one in four (24%) have no idea what ‘SVR’ even stands for.

Equally alarming, almost half (48%) of UK mortgage holders don’t know when their fixed rate period comes to an end. Delaying remortgaging by just a month would cost £272.50 for a borrower at one of the UK’s top six lenders.

Another factor contributing to this switching inertia is the negative experience so many people have when securing their first mortgage – which in turn stops people from proactively managing their loan. Two in five (41%) of the borrowers we spoke to in the study recalled the experience of getting their first mortgage negatively and one in ten (8%) even admit to crying during the process.

New research conducted by pension advice specialist, Portafina, has revealed that we are a nation of ‘payday millionaires’ – in other words, we are likely to spend our incomes long before it burns a hole in our pockets! The survey shows that nearly half (43%) of our monthly disposable income is splashed within 24 hours of being paid, and four-fifths (81%) spent within seven days.

Portafina polled a sample of 1,507 UK-based working adults to determine what percentage of our income is ‘disposable’; how much of this available cash is spent within one, seven and 21 days of being paid; and what we are choosing to spend our money on.

With an average of £560 leftover to enjoy each calendar month, many Brits are faced with the tricky decision of whether to spread out their spending evenly (£18 per day) or splash the cash. Rather than taking a trip down Sensible Street, nearly half (43%) of all earners admitted to paying out 13 days-worth (£240) of their leftover wage within just 24 hours of payday. By the last week of the working month, just £67 (or 12% of monthly disposable income) remains.

Spending in numbers:

  • Average take-home salary (of respondents): £1,679
  • Average sum leftover after bills (disposable income): £560
  • Average percentage of disposable income spent within 24 hours: 43% (£240)
  • Average percentage of disposable income spent within seven days: 81% (£454)
  • Average percentage of disposable income left in the week leading up to payday: 12% (£67)

Earners aged 18-24 were guiltiest of living the ‘payday millionaire’ lifestyle; with a third (33%) spending 40% of their pay in 24 hours, and 51% left with just £50 (or 10% of their disposable income) to live on in the last week of the month.