June 6th, 2017 | Andrew Hagger | News

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.

June 2nd, 2017 | Andrew Hagger | News

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.

June 2nd, 2017 | Andrew Hagger | News

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.

May 23rd, 2017 | Andrew Hagger | News

More than one in ten (12%) Britons have had to cancel a credit or debit card in the past year due to online fraud, according to new research by comparethemarket.com. The latest statistics show a worsening state of affairs when it comes to cybercrime, with the number of people cancelling cards rising from 4.5 million to 5.5 million since the research was last conducted in September 2016. These findings further add to concerns that consumers’ money isn’t safe in the bank.

Out of the people who had money stolen because of a hack, the average amount taken rose from £475 to £600 compared to the last survey. Issues of hacking present a real problem for banks’ customer retention, as almost one in four customers who had money stolen changed, or are in the process of changing, bank or credit card provider. However, despite the lack of trust that stems from being hacked, customers are broadly happy with how cyber-attacks are dealt with. 91% of customers who were the victim of a hack being satisfied with the way in which the company handled the issue.

The largest cause of hacking was online payments, which accounted for 46% of those surveyed. Almost one in ten of those who were the victim of a hack had their card duplicated at an ATM, while identity theft accounted for 11% of hacks. 

However, many customers also admitted that they are not doing enough to ensure that their accounts are safe. Almost one in five respondents said that they have the same PIN for all of their cards, while one in ten had the same online password for all of their accounts. When customers are the victim of a hack, attitudes tend to change. 93% of people changed the way in which they managed their money, with 50% looking at their bank accounts more frequently and 28% creating different PINs and passwords for cards and accounts.

May 23rd, 2017 | Andrew Hagger | News

The extras sold at car hire rental desks can often double the price of the original quote, but new research has found that it is possible for the car to end up seven times more expensive than the original quote.

Hiring a compact car with Budget in Faro this May Half Term (27 May to 3 June), costs a very reasonable £79 for the week’s hire, however once extra items at the rental desk are added the price can increase to £588.

These ‘extras’ include £57 for an extra driver, £108 for sat nav hire, £68 for a child’s car seat, £285 for a combined excess / waiver policy – all adding up to £518 and leaving the driver with a final bill of £597, seven times the original quote.

iCarhireinsurance.com looked at the costs to hire a compact car in five European destinations, Tenerife, Nice, Faro, Larnaca and Barcelona, with six hire car companies, Avis, Budget, Europcar, Hertz, Sixt and Enterprise (see table below).  The study found that:

• The average car rental price across Europe for a week’s hire is £151, but the location with the highest average price is Nice at £250.
• ‘Extras’ at the rental desk cost on average £333, this includes £91 for super damage waiver, £34 for super theft waiver, tyre and windscreen excess for £38, £47 for an extra driver, £71 for a sat nav and £53 for a child’s car seat. However the location with the highest average cost of extras is Faro at £509.

Car hire excess (waiver) policies protect drivers from the excess cost, which can be as much as £2,000, if a hire car is stolen or damaged even if it isn’t the hirer’s fault.  Rental companies often sell three excess policies:  Super Damage Waiver, Super Theft Waiver, Tyre and Windscreen Excess, or if available a combination of these.

• The most expensive average excess insurance is in Faro where the average cost for a combined super waiver policy is £232 this half term.
• Individual excess policies in Faro cost on average £106 for super damage waiver, £113 for super theft waiver and £42 for tyre and windscreen excess.

A policy from a specialist insurance provider, like iCarhireinsurance.com, covers damage, theft and tyre and windscreen cover, and starts from £2.99 a day for a European policy or £37.99 for an annual policy, meaning that drivers in Faro could save themselves over £200 if they shop around for excess insurance this half term.

May 23rd, 2017 | Andrew Hagger | News

The traditional summer-time image of stressed out Brits fleeing their screens for a weekend of muddy festival hedonism could be a thing of the past. New research by price comparison and switching service uSwitch.com reveals that the smartphone is very much a festival essential with 35% of revellers hooked on social media apps such as Facebook, Twitter and Instagram while they’re away – despite 25% admitting their phone has suffered a misfortune at a festival.

When it comes to mobile mishaps, millennials (18-34 year olds) are the clumsiest festival-goers, as 14% have dropped their phone and nearly one in 10 (9%) have cracked their phone screens at a festival. Worse still, nearly 400,000 18-34 year olds have dropped their phone down a portaloo or in a portakabin.

Despite this, less than one in 10 Brits (8%) would take a cheaper mobile instead and over half (58%) of festival-goers would still take their regular phone to a festival even if it was not insured.

Recording videos and taking pics (52%) rank amongst the most popular use of mobiles at festivals, which rises to 62% amongst 18-34 year olds. This is on par with using handsets to call/text people not at festivals (52%)^[. Festival-goers love to share the moment, as although Facebook is the app of choice (26%), over one in 10 festival-goers use Instagram (11%) and Snapchat (8%).

Revellers also aren’t prepared to leave love to chance at festivals, as nearly one in five (17%) 18-34 year olds have met someone on a dating app at a festival.

Despite the potential risks, festival-goers continue to be obsessed with their phones – 1.5 million Brits would choose charging their phone over buying food, an alcoholic drink, taking a hot shower or buying toilet paper at a festival.

Ernest Doku, telecoms expert at uSwitch.com, comments: “Festivals are one of the Great British traditions. From Glastonbury to Green Man, there’s a fun-soaked field of fans to suit any music lovers’ needs.

“For those that don’t fancy being faced with a “fish out or flush situation”, it’s worth considering a dedicated festival phone. The newly revived Nokia 3310 is ideal for those happy to sacrifice social media posting in favour of a longer battery life and peace of mind that their main handset is safe at home.

“But if you can’t do without the functionality of your smartphone this festival season, remember to keep it safe – add a lock code or pattern to the home screen. It’s also worth Installing a phone locator like ‘Find My iPhone’ (or Google’s ‘Find My Device’ for Android phone owners) and a sturdy case cover and portable charger are must-haves, if you don’t have them already.”

May 15th, 2017 | Andrew Hagger | News

Nearly one in three households want  verbal support, through face-to-face or phone advice, on how to switch energy suppliers as price rises on gas and electricity bills of up to 18% come into effect, new research from leading independent energy comparison website www.moneyexpert.com shows.

Its nationwide study found 29% of households – the equivalent of 7.9 million customers – would welcome phone or face-to-face support to find the most competitive gas and electricity prices with around two million preferring face-to-face support. That rises to 33% among over-55s with 10% of older households welcoming face-to-face advice.

Nearly half (46%) of those who have never switched, or not moved for five years, admit they do not understand how their energy bill is worked out. By contrast two-thirds (66%) of those who have moved say they understand how their bill is calculated.

Regulator OFGEM  estimates¹ the average household can save around £232 a year by switching ahead of a range of price announcements from the Big Six suppliers which range  from price freezes at British Gas and electricity price increases of 18.1% at EDF.

The research from MoneyExpert.com, which has helped 500,000 customers switch in five years, shows one in five households – around 5.4 million – have never moved supplier while another 18% have not moved for more than five years. Around 58% say they are happy with their current deal but nearly a third (31%) admit they do not understand how to switch.

Despite repeated education campaigns, people aren’t reducing their electricity consumption to save the planet or reduce their bills, 13% of households do not try to keep their bills down by switching off lights and choosing energy saving appliances.

Mike Rowe from MoneyExpert.com said: “Every gas and electricity customer should shop around as price rises are being pushed through by almost all major suppliers but the issue is that millions are not confident about moving.

May 15th, 2017 | Andrew Hagger | News

New research from Retirement Advantage, the retirement specialist, suggests the UK’s property market may receive a welcome boost from retirees moving house in a bid to bolster their income in retirement.

The firm’s survey of over 50s reveals that a quarter (26%) plan to move house when they retire. Of these, almost two thirds (62%) plan to downsize, while four in ten (38%) will move to a different area. The majority (63%) of those looking to move to a smaller property are doing so to generate cash for living expenses in retirement, while one in ten (10%) want to help children with house deposits.

Given over 50s hold more than two thirds of the UK’s overall property wealth, worth around £2,291 billion, their plans will have a significant impact on the housing market. Plans to move are highest in London (32%), followed by Yorkshire (30%) and East Midlands, South West and South East (all 29%).

Andrew Tully, pensions technical director at Retirement Advantage, said: ‘With the UK housing market showing signs of slowing, questions have been raised over how we can find supply to match demand. This research shows retirees may hold the answer.

‘Those approaching retirement are thinking holistically about their finances, and considering property as part of their asset mix. Many will choose to move house so they can use the capital generated to fund the initial stages of retirement, rather than immediately relying on pensions and other savings. It can also make financial sense for retirees given recent regulatory and tax changes around property and pensions.

‘However, moving house is an expensive business and people are often shocked by how little money is left once they’ve paid for their new house as well as the fees and taxes associated with moving. It’s important over 50s understand there are other ways to use their property to fund retirement. Equity release, for example, allows people to access some of the cash stored up in their home, without needing to move. It is vital people get professional financial advice so they are fully aware of all their options and can get the best outcome in retirement.’

May 15th, 2017 | Andrew Hagger | News

New research on behalf of Compare Cover, the life insurance comparison website, has revealed that almost a quarter of UK adults would be more likely to buy life insurance if it was called ‘Family Protection Insurance’ instead.

It seems family really does come first for many Brits after 24 percent of those questioned said they’d be more likely to take out cover if it was retitled accordingly. Seven percent said they would be more inclined to buy if it was called ‘Dependant Cover’, while another seven percent said they would be more likely to buy life insurance if it was packaged more simply as ‘Mortgage Insurance’.

Only five percent would be willing to take the direct approach and take out a policy entitled ‘Death Insurance’, while a fifth (20 percent) said they would not consider buying life insurance. Less than half (44 percent) said the alternatives offered would not make any difference to their buying habits.

Spokesman, Mike Preston, said: “What is perhaps most interesting to note about these results is the level of emotional attachment UK consumers have with regards to all aspects of their domestic set up, even down to the provision of life insurance policies.

“For some, life policies are possibly regarded as a necessity, but a significant proportion appear to find the process of taking out life insurance an emotionally compelling one, reflecting a need for providers within the industry to potentially consider a more family friendly approach.”

May 7th, 2017 | Andrew Hagger | News

Parents are keen to keep control over how any money they leave after they die is spent by their children, new research from Prudential shows.

Rising property prices and pension wealth mean that many of the baby boomer generation plan to pass on significant assets to their heirs – and three-quarters (77 per cent) of over-55s have indicated that they want to have some control of how their legacy is spent.

One in four parents (26 per cent) are concerned that part of an inheritance could end up being given to spouses of their children in the event of a divorce. About a third (30 per cent) say they don’t want their wealth to be squandered by their children, and the same number want to ensure that grandchildren benefit from an inheritance.

One in eight parents (12 per cent) want to specify what their legacy is used for and a similar number (13 per cent) have already sought, or intend to seek, financial and legal advice to help ensure that their legacy is used wisely. One in 10 want to stipulate that their children must receive professional financial advice on receiving their inheritance.

Estates liable for inheritance tax (IHT) in the UK face an average bill of nearly £175,000 each, but more than two-thirds of over-55s (67 per cent) are unaware of what the national average inheritance tax bill is. Just one in 25 UK adults (four per cent) correctly guessed that the average bill was within the range of £100,000 and £200,000.

Despite more than a third of over-55s (35 per cent) being concerned about having to pay inheritance tax on their estate, less than a fifth (19 per cent) have actually taken action to reduce their potential tax bill. Fewer than one in 10 (nine per cent) are seeking financial advice, making gifts to family members (six per cent) and/or setting up trusts (four per cent).

Les Cameron, tax expert at Prudential, said: “Record house prices are one reason why inheritance tax receipts are rising fast. In 2012/13 fewer than 18,000 estates had an IHT bill but the Government says that there will be 41,000 taxpaying estates in 2015/16 and that IHT receipts will hit £6.2bn by 2021/22.

“Reducing inheritance tax bills is relatively straightforward. People need to strike the right balance between giving their wealth away during their lifetime to reduce the size of their estate, and maintaining some form of control after their death over who can access it and when.

“With two in five marriages ending in divorce, it is easy to understand why the problem of  keeping wealth within their family is a growing concern for the bank of mum and dad when they’re planning to leave money to children and grandchildren.

“To help ensure efficient inheritance tax planning, obtaining financial and legal advice should be money well spent.”