February 5th, 2019 | Andrew Hagger | News

04 Feb 2019 The ‘squeezed middle’ are spending £3.7bn on life insurance before having their policies cancelled by providers because they have fallen into financial difficulties, according to research by Co-op Insurance.

According to the findings, the average 30-60 year old in the UK had paid out £2,050 before their insurance was cancelled after holding policies for 8 years and 4 months paying £20.50 per month.

Only 48% of the ‘squeezed middle’ hold life insurance in the UK. Of those who have life insurance, nearly a third (31%) say they have struggled to pay for their life cover and, of these, two thirds (67%) have missed direct debit payments. This has led to over four fifths (87%) finding themselves in arrears.

78% of life insurance policyholders who found themselves in arrears had their policies cancelled by their insurer either automatically after the first missed payment or after a period of time.

Despite this, 87% of the ‘squeezed middle’ who have found themselves in financial difficulties have missed their own life insurance payments to pay relatives’ bills.

Over a quarter (27%) of the UK adults aged 30-60 with dependents are actually supporting their parents financially, with 78% supporting their children. Parents are depending on the children for the most money every month, an average of £235 whilst dependent children receive £177. Those who support both pay out an average of £186 per month.

Nearly half (49%) of UK adults aged 30-60 feel this is unfair and 80% want to see insurers doing more to help people who end up in arrears after paying for policies for often a prolonged period. Nearly two thirds (63%) think people should be treated on an individual basis and 58% want to see extended payment holiday periods.

Co-op Insurance has re-entered the life market and launched Co-op Life Cover alongside its partner Royal London which will offer a solution designed by Co-op Members, not widely offered in the market, to policyholders who may at times have periods of financial difficulty.

The product offers a level term, decreasing term or family income benefit and:

·         Includes the option to take two six month payment holidays throughout the lifetime of the policy after a 12 month qualifying period, allowing their policy to remain in force

·         Customers can also opt to reduce their cover level rather than pay back any shortfall at the end of the payment holiday window

Charles Offord, Director of Co-op Insurance, said: “There is a clear life insurance gap in the UK, especially for those who are foregoing payments or not taking out cover to support relatives with their day to day finances.

“It just isn’t right that billions of pounds in premiums are being paid by customers on time, every month, for their policies to be cancelled when finances are stretched. At the Co-op we are keen to fill this gap and appreciate that sometimes finances can be stretched and people have to prioritise what gets paid, and what doesn’t.

“All too often, life insurance is seen as the least important payment, when really nothing could be further from the truth if something bad happens. This is why we have created up to six month payment holidays, alongside our partner Royal London, to help policyholders out in their time of need. We’ll also allow customers to reduce their insured amount rather than pay back any shortfalls to further lessen the financial pressure.”

January 30th, 2019 | Andrew Hagger | News

30 Jan 2019 An increasing number of borrowers are choosing five-year fixed rate mortgages as Brexit uncertainty prompts people to seek peace of mind when it comes to their home loan, according to Yorkshire Building Society.

The Yorkshire reported a 44%^[ rise in the number of borrowers choosing the longer-term mortgage rate last month (December 2018) compared to December 2017, which it says could be a result of the looming deadline for the UK to leave the EU.

Janice Barber, Mortgage Manager at Yorkshire Building Society, said: “While homebuyers’ reluctance to purchase a house during these uncertain times is cooling the housing market, borrowers are rushing to secure new deals that will see them through Brexit and beyond. We’re seeing a significant rise in the number of people taking advantage of competitive longer-term fixed rate deals.”

Yorkshire Building Society responded to demand for longer-term fixes last year by launching seven-year and ten-year fixed rate mortgages.

“Five-year fixes, as well as our seven and ten-year fixed rate mortgages, are proving popular as people look for the security of knowing what their monthly repayments will be for a number of years,” Janice added.

The Yorkshire lets would-be borrowers reserve a mortgage deal up to six months in advance^[, meaning those with a home loan due to mature in the coming months can take advantage of today’s deals and secure a rate for the near future should they wish.

Janice said: “Our findings show homeowners clearly value the stability longer-term fixed rate mortgages offer, and may indicate that borrowers are expecting rates to rise.

“Borrowers looking to remortgage this side of summer could start the remortgage process now should they want to take advantage of competitive low rates and get peace of mind that their home loan is arranged regardless of any Brexit outcome.”

January 29th, 2019 | Andrew Hagger | News

29 Jan 2019 The latest first time buyer mortgage deal from Lloyds Bank isn’t a stand alone 100% mortgage, but is supported by a 10% deposit in a separate 3-year fixed rate savings account from a family member.

The mortgage rate is fixed for three years at a competitive
rate of 2.99% – and thankfully from a cash strapped FTB perspective there’s no
product fee payable.

To allow the bank to grant the 100% mortgage a family member
must deposit 10% of the purchase price in a separate savings account.

The savings account is fixed for 3 years and pays a market
leading rate of 2.5% and as long as the mortgage repayments have been made on
time and are up to date at the end of the 3 year term, then the savings balance
is returned to the family member(s).

There are some points
the borrower needs to be aware of as follows:

The mortgage can’t be used for new build properties.

Maximum mortgage is £500k

Either the borrower or family member must open a Club Lloyds
current account before the mortgage is taken out – this account requires the
customer to pay in at least £1500 per month – if not there is a £3 monthly fee
payable.

With the uncertainty of Brexit looming large it’s difficult
to know what will happen the house prices in the next three years. If house
prices stay frozen at their current level, then after 3 years of repayments (on
a 30-year mortgage) the borrower will be left needing a 93.5% LTV mortgage come
2022.

You would hope that Lloyds Bank would provide a follow-on product for such customers with such a high LTV and not leave them trapped and with no other option of moving on to Lloyds Bank Standard Variable Rate which is currently 4.24% and could well be higher if rates rise in the next 36 months.

Verdict

Andrew Hagger, Personal Finance Expert from Moneycomms said: “More needs to be done to help borrowers get on to the housing ladder so it’s good that a high street bank is being creative and offering a different way of buying.”

“Lloyds isn’t the first bank to offer such a scheme as Barclays has been offering its Family Springboard mortgage option for a number of years now.”

Whether would be borrowers or family members will be prepared to open a Lloyds Bank current account to get this mortgage or whether they see it as a step too far remains to be seen.

The family members will like the fact that they can help their children with their first home purchase knowing that they will get it back after 3 years. However, they should be aware that if repayments are not maintained then the bank won’t release the funds back on the third anniversary.

If all repayments are up to date but in three years’ time the borrower is in negative equity because of a fall in house prices, the family member will have their 10% savings stake returned.

“Although Lloyds will lend 100% the applicants will sill need to prove they can meet the bank’s affordability criteria.”

January 29th, 2019 | Andrew Hagger | News

29 Jan 2019 New research released today reveals that over a third (37%) of Britons don’t feel on top of their personal or professional finances.

The survey of 1,550 British workers, commissioned by award-winning cloud accounting software provider FreeAgent, found that 22% of respondents said that they resent having to spend time on household and life admin tasks, including paying bills, waiting in customer service call centre queues and filing their annual tax return. 
 

On average, respondents said they spend 3.6 hours per month paying bills, 2.7 hours per month waiting in queues at call centres for customer service enquiries, and 5.4 hours filing their annual tax return.  

Of the 39% of respondents that have filed a tax return at some point, 79% said they found the self assessment process stressful. FreeAgent found that the top five reasons respondents found the tax return process stressful were:

• Worried about getting the information wrong and getting into trouble (43%)
• Worried about calculating it wrong, and ending up paying too much tax (38%)
• Found the submission process confusing (33%)
• Records not kept up to date, so had to use some guesswork (19%)
• Didn’t receive helpful advice around how to file a tax return (17%)

In addition, 30% of total respondents said that they would feel worried about submitting a tax return, if they had to do so in the future.

Ed Molyneux, CEO and co-founder of award-winning cloud accounting software provider FreeAgent, said: “Every year, hundreds of thousands of people across the UK end up incurring fines for failing to file their tax return on time. Yet, in many cases, these penalties are entirely avoidable provided that people check the tax implications of what they have earned throughout the year and start their Self Assessment in advance of the filing deadline.”

“To avoid the stress of filing tax returns, find an accounting system or bookkeeping method that you can use to stay on top of your finances throughout the year. That way, all of your financial information should be readily accessible. Make sure you include your tax return alongside any other income you’ve earned throughout the year.”

January 25th, 2019 | Andrew Hagger | News

24 Jan 2019 At least a quarter (24%) of Brits will have an account with a digital-only bank within the next five years, according to new research from personal finance comparison website finder.com.

A further 21 percent said they would consider a digital-only bank once they have more information, meaning that almost half of Brits (46%) could end up getting an account within five years.

One year on since Open Banking launched in the UK, almost one in ten (9%) adults say they have already opened an account with a digital challenger bank, equalling 4.5 million Brits.

Over the next five years, 16 percent of the population intend to open an account with a digital-only bank, meaning that almost 13 million people (24%) will have at least one fully digital account by the end of 2023.

The top reason for those who have, or intend to go digital with their banking is that they feel doing everything online is more convenient (33%). A third (31%) of people believe they will get better rates than with traditional banks, while 28 percent want to transfer money more easily.

Despite the quick uptake of digital banking in a short amount of time, finder.com‘s research shows that as well as some educational challenges and issues around awareness, digital banking simply may not be for everyone. The majority of adults in the UK (53%) have no plans to open an account within the next five years, while one in five Brits (20%) don’t know what a digital-only bank is.

Perhaps surprisingly, the main reason for those who don’t intend to open an account with a digital bank is that they feel their current bank has treated them well (61%). Half of us (49%) also like to have the option of speaking to someone in person, while more than one in five (22%) think it would be too much hassle to switch accounts and direct debits.

The region with the lowest uptake so far is the East Midlands, where only five percent of people have a digital-only bank account. In contrast to this, Londoners are almost three times as likely to have one (14%), and they are also the most likely to get an account within the next five years with a quarter (26%) planning to do so.  East Anglians are the least likely to move away from traditional banks (12%) over the next five years.

Despite the uptake of digital banking being very similar across genders so far, a fifth (21%) of men intend to get a digital-only bank account in the next five years, which is significantly more than women (12%).

Younger generations are the most likely to have already gone digital, with one in eight (12%) Millennials having done so, compared to six percent of baby boomers and just two percent of the silent generation (born before 1945).

To see the full research of digital-only banking adoption and intentions, including age, regional and gender breakdowns, visit: https://www.finder.com/uk/digital-bank-adoption

Speaking about the findings, Jon Ostler, CEO at finder.com said: “When you consider how long the banking industry went without any real technological advances or change to the status quo, the speed that digital challenger banks have established themselves has been very impressive. When done right, digital banking can offer customers the speed, convenience and transparency that is becoming increasingly important for consumers in most sectors.

“However, our research also showed that a lot of Brits still aren’t interested in taking all of their finances online. Open banking, for example, is only a year old and some people may not be comfortable with having their data shared between companies yet – the problems that large banks have had with ‘digitalising’ their services also doesn’t help the image of online banking.

“It will be fascinating to see how the sector evolves over the next few years, and if it can cope with the increasing consumer demand that we expect to see.”

January 24th, 2019 | Andrew Hagger | News

23 Jan 2019 UK adults are starting 2019 with outstanding borrowing from 2017, with 3.1 million  people still paying for Christmas 2017.

The new study from Sainsbury’s Bank Credit Cards found more than a quarter (27%) of people have debt remaining from two years ago. This New Year, UK adults still owe money from 2017 shopping (8%), holidays (8%), cars (7%) and Christmas (6%), showing it’s not just the latest festive season which is having an impact on UK household budgets.

On average people hold their debt to one credit or store card. However a significant 28% of spenders have debts on two or more cards. For 2019, two in five (40%) people like the idea of consolidating all their debts together, but only 6% plan to take advantage of this. 

Consolidating borrowing

Consolidating borrowing for example onto one credit card, (particularly a 0% balance transfer card) can be a good way to manage re-payments as it lets people keep track of all their borrowing in one place. It should enable them to stop shelling out on interest payments and allow them to focus on reducing the debt. They should also set up a monthly direct debit for more than the minimum payment to ensure they’re paying off the debt, and they can also top up as and when they can afford to.  It’s important people pick a card with a 0% balance transfer period that’s realistic in terms of how long they think it will take to pay back the borrowing.

Difficulty sticking to budgets is a contributing factor to people’s increasing levels of debt. Whilst many people have great intentions to budget – more than half (54%) of people set a financial plan in 2018 – only 28% managed to stick to it. In fact nearly a quarter (24%) of people admitted going over budget last year and only 1% of the population was under their 2018 financial plan. 

The card spending from 2018 that’s contributing to 2019 card balances are everyday shopping (49%), Christmas (41%) and holidays (30%).  Despite this, only 25% of people intend to set themselves a spending budget for 2019.

Borrowers believe it will take 12 months on average to clear their balance.  One in 10 (12%) of those with outstanding debts think it will take longer than a year to get back into the black, indicating that Christmas 2019 may be an outlay well into 2020.

Jerome Fernandez, Head of Credit Cards at Sainsbury’s Bank, said: “We are committed to providing customers with products which can help them manage their borrowing. Customers can take advantage of 0% on balance transfers for up to 30 months, enabling borrowers to consolidate outstanding debts and focus on clearing their balances.”  

Sainsbury’s Bank offers five top tips on dealing with debt

1.       Make a list of all debts. Understanding the true picture of how much you owe in total is the best start to feeling in control of your outstanding payments.

2.       Check interest rates. Make sure you know how much interest you are paying on each of your debts and consider moving it to a 0% balance transfer credit card so you can focus on paying down the debt.

3.       Consider consolidating debts. If you have debt from more than one lender, consider consolidating these debts into one product. This will be easier to keep track of and should mean you pay less interest on the overall debt.

4.       Check your outgoings. Are there regular items you are paying for that can be reduced while you are focused on paying off your debt? For example a gym membership could be replaced by joining a free fitness boot camp in your local park. The money you save can go towards driving down your debt.

5.       Speak to professionals about debt. Debt can be an emotional issue and there is help available through charities such as StepChange that can help you take the first steps to managing debt.

January 21st, 2019 | Andrew Hagger | News

21 Jan 2019 UK adults are putting their finances at risk by shortcutting powers of attorney and relying on good will from their relatives to manage their finances, according to Co-op, the UK’s leading probate provider.

A quarter (25%) of over 45 year olds have access to a relative’s bank account who isn’t their spouse. Of these adults, almost a tenth (7%) have set up formal joint accounts with a relative, whilst a fifth (18%) have access to a relative’s bank card or internet accounts.

Of those people who have put joint bank accounts in place, a third (35%) said they had access to a parent’s bank account and a fifth (18%) are able to access a sibling’s account. A tenth (11%) can access an aunt or uncle’s accounts and a further tenth (9%) can access the account of a grandparent.

According to the research, which was conducted among 2000 over 45 year olds, the main reasons for the access are to manage their money for them and to pay for groceries and luxuries such as holidays – things, that an appointed attorney could do legally and securely.

Whilst so many over 45 year olds have these informal arrangements in place, over a tenth (11%) admitted that they’d worry about a relative borrowing money if they were short themselves and a further 5% said they had suspicions that their relative may have previously taken money.

Despite this, the research shows that people are opting out of putting a power of attorney in place. Instead, they’re making their own unofficial arrangements to enable relatives to make decisions about their finances. Four fifths (79%) of those surveyed said they do not have a lasting power of attorney in place.

Furthermore, three quarters (74%) of people aged between 65 and 74 and two thirds (67%) of people aged 75 to 84 also do not have a lasting power of attorney in place.

Gavin Holt, Head of Probate at the Co-op said: “It’s concerning that so many people are ignoring, or perhaps are not aware of, the benefits of lasting powers of attorney and are putting these accounts of convenience in place instead.

“Whilst it may seem convenient and safe at the time, in our experience, these informal arrangements can often cause significant problems which only come to light after death. The worst of the problems, and sadly one of the most regular, is where financial abuse is alleged to have taken place.  This can add months, if not years, to the length of the probate process.”

A lasting power of attorney is a secure and formal means of allowing trusted individuals to make decisions about a person’s finances and also about their personal welfare, and they continue to have effect in the event that the person becomes unable to make the decisions themselves.

January 17th, 2019 | Andrew Hagger | News

17 Jan 2019 Christmas may be an expensive time of year but new research by Leeds Building Society found nearly a quarter of people in the UK who celebrate the festive season (24%) don’t save ahead for it at all.

Conversely, 15% of those surveyed start saving in January although 39% tend to leave it much later and start putting money away from September onwards.

As part of its ongoing efforts to understand the savings habits and attitudes of UK adults, the Society ran a national YouGov survey to find out how far people who celebrate Christmas plan ahead.

Of those who save, respondents were split between early starters and the planners who begin organising gifts, festive food and get-togethers from autumn onwards.

Some are thinking about Christmas almost as soon as the cards and wrapping paper have been recycled and the decorations packed away again:

·         2% start asking for gifts or dropping hints in January although most people wait until later in the year, with one in four (25%) placing requests come November.

·         An organised 7% start buying gifts in January but Christmas shopping peaks in November when almost a third (32%) buy their presents. Almost a quarter (24%) wait until December before hitting the shops.

·         5% are deciding in October what to eat on Christmas Day, with 1% starting to think about this as early as September.

·         4% of people put up their Christmas decorations in November.

The research found fewer than one in five (18%) had relied on credit to cover the cost of Christmas – however, the majority of those took more than a month to repay what they’d spent, risking interest and additional charges inflating the final bill.

Of the respondents who had used credit for Christmas spending, 71% % took up to six months to repay this, while 23% needed longer.

“It was good to see plenty of people start saving for Christmas in January,” said Matt Bartle, Leeds Building Society’s Director of Products.

“Similarly, it was positive that nearly three quarters (74%) of the people surveyed don’t take out credit to pay for Christmas. However, it was worrying that those who do use use credit can take months to pay it off, which will incur fees and could end up costing them a lot more.

“When there’s a big annual expenditure – whether that’s Christmas or a holiday – saving little and often helps to spread the cost to make it more manageable and it’s satisfying seeing your savings grow.”

October 19th, 2018 | Andrew Hagger | News

19 Oct 2018 New research from Charter Savings Bank reveals that 40% (over 5.8 million) of grandparents give their families cash handouts every year worth an average of £1,475 each, as well as the equivalent of one month’s free childcare.

Children and stepchildren are the main beneficiaries, receiving £743 a year, while grandchildren collect around £450.

Of those grandparents who gift money, the majority (61%) do so because they want to pass their wealth to their family during their lifetime, while a third extend a helping hand to help family members who are struggling to make ends meet.

Grandparents’ cash is most likely to go towards the younger generation’s living costs (30%), holidays (21%) and home improvements (19%). One in six (15%) say they are helping towards a home deposit, while 12% are clearing university debt.

It’s not just the younger generation receiving a helping hand; the research shows that 5% of grandparents are also providing financial support to their parents too.

On a regional basis, the most generous grandparents are based in Yorkshire and Humberside who donate a whopping £2,298 every year. In a close second are grandparents living in London (£2,043) followed by the East Midlands (£1,929) and the South East (£1,723).

Grandparents contribute one month’s worth of childcare

As well as cash, two-thirds (65%) of grandparents have given up their time to look after grandchildren and great-grandchildren, spending an average of four hours per week. When rolled out over the course of a year, and assuming a 7.5 hour working day, grandparents are providing 28 working days of free childcare annually. Assuming the national minimum wage of £7.83 per hour², grandparents are providing £1,629 of free childcare – collectively worth £4.3 billion.

While most grandparents can afford to be generous, over a third (37%) admit to having to make lifestyle changes including fewer holidays (58%) and postponed or cancelled home improvement plans (37%).

Paul Whitlock, Director of Savings, Charter Savings Bank, said: “Rising living costs and squeezed family incomes mean that grandparents are having to ride to the younger generation’s financial rescue. In many cases grandparents find it hard to say no and while they like being hands-on, the risk is that they compromise their own standard of living.

“Savings accounts play a key role in grandparents’ ability to finance the younger generation, so it’s important to check they’re getting a competitive rate.  Many grandparents have built up sizeable nest eggs thanks to years of saving regularly. Passing this habit down through the family will help to ensure that future generations can also benefit from a financial leg-up.”

 Regional breakdown of financial contributions

Source: Charter Savings Bank, 2018

October 17th, 2018 | Andrew Hagger | News

17 Oct 2018 Today’s publication of the inflation rate for September means that the government now has all the information that it needs to set pension and benefit rates for April 2019.  Under the terms of the pensions ‘triple lock’ policy, the pension has to be increased by the highest of:

–          The growth in earnings, which was 2.7% in August 2018 (based on seasonally adjusted average earnings including bonuses);

–          The growth in prices, measured by the CPI, which is 2.4%;

–          A minimum of 2.5%;

With today’s fall in price inflation, the pension will rise in line with the growth in average earnings (2.7%).   The key figures (rounded to nearest 5p) are:

Pensioners on the old state pension system will see an increase in other elements of their pension, such as the state earnings related pension scheme (SERPS) in line with the increase in the CPI.

The main rate of the Guarantee Credit for the poorest pensioners is linked by law to the growth in average earnings so will also rise by 2.7%.

Commenting, Steve Webb, Director of Policy at Royal London said:

“Whilst the rates of working age benefits have been squeezed for many years, pensioners look set to enjoy another above-inflation increase.   Those receiving the full rate of the new state pension should get an extra £4.45 per week or just over £230 per year”.

ENDS