April 7th, 2016 | Andrew Hagger | News

Research carried out by Skipton Building Society has revealed that many savers are missing out due to not understanding the rules and financial jargon that are associated with the new PSA and existing types of savings accounts.

Of the 2,000 people surveyed, almost half (47%) said they are confused by the rules associated with ISA accounts, over two fifths (44%) said they didn’t know what the maximum amount is they could put into an ISA and over a third (36%) didn’t know what the new Personal Savings Allowance (PSA) was.

The research revealed a clear lack of understanding on the savings landscape, one in five people admitted they didn’t save at all (19%), with one in ten of this group stating it is because they don’t understand enough about the different types of savings products (10%).

The research also shows that it’s not just savings rules that are confusing the nation, a fifth (22%) stated they didn’t know how ISA differed from standard savings accounts, and surprisingly one in ten (10%) said they didn’t even know what the acronyms ISA or PSA stood for.

April 6th, 2016 | Andrew Hagger | News

Research released today by HSBC indicates the UK public may be missing out on financial reward by not seeking professional advice.

Of the investments made to-date in 2016, two thirds were arranged without any financial consultation (68%). Over half of respondents planning to make an investment during the remainder of the year are unlikely to seek any advice (51%) and almost a quarter (23%) of those asked felt it was too expensive.

With a fifth (18%) of customers we spoke to during our research telling us that they are looking to make an investment during 2016, HSBC has launched Stand-alone Investment Advice following a successful trial period. The service is designed to provide financial advice for customers looking to invest single lump sums of cash from £15k.

One in five adults in the UK (22%) has £15K or more to invest. Despite this, there is currently a gap in the UK advice market where customers who have smaller amounts of money to invest can’t access the appropriate advice. This could mean customers leave their long-term savings in cash, sitting in bank accounts as seen by almost half of the respondents (47%).

With the introduction of Stand-alone Investment Advice at a 30% discount to full financial advice, HSBC says it is providing a more affordable service to customers as and when they need it, helping them to make the most of their money.

April 1st, 2016 | Andrew Hagger | News

The Personal Savings Allowance (PSA) comes into force from the start of the 2016/17 tax year and will reduce the amount of tax paid on savings interest for most people.

It is a radical new government scheme designed to encourage people to save more, it is conscious that it needs to incentivise savers at a time when interest rates are historically very low.

Up until the introduction of the PSA all bank and building society interest was paid net – i.e. after 20% has been deducted at source by your account provider (apart from ISAs).

The tax treatment of savings interest changes from 6^th April 2016 when everybody will receive their interest payments gross – i.e. without any tax deductions.

The PSA applies to interest earned on all non-ISA cash savings ,current accounts and Peer to Peer lending and will allow savers to receive a generous portion of their interest totally free of tax.

As a result of this move it’s expected that around 95 per cent of savers will receive their interest tax free – a change that gives the vast majority of savers an instant boost of 20% on their savings income.

The amount of tax free interest you will be entitled to under PSA will be based on your annual taxable income as follows:

• If you earn less than £43,000, i.e. a basic rate taxpayer, there will be no tax payable on the first £1,000 of savings interest earned each year.
• The tax free allowance if you are the higher rate tax bracket (earning between £43,001 and £150,000) has been set at reduced limit of £500.
• People in the 45% tax band, i.e. those with an income above £150,001 are currently not entitled to the PSA.

It’s a positive move that will see lower earners benefit from the largest allowance giving a welcome but long overdue instant boost to UK savers.

April 1st, 2016 | Andrew Hagger | News

Saving for retirement to ensure a decent standard of living in later life should be one of the most important financial decisions we adopt from a relatively early age, but people are being put off because pensions have become too confusing.

While rock bottom interest rates hasn’t helped our attitude towards savings, the constant meddling with pension rules and regulations means people simply don’t understand what they should be saving or what they are entitled to when they finally give up work.

Recent research from The Open University Business School (OUBS) highlights the level of confusion particularly around the new state pension.

According to OUBS findings 60% of employees aren’t aware that people who have been contracted out may not get the full amount of the new state pension and even more worrying is that almost a quarter of working people don’t know whether they’ve ever been contracted out.

The persistent meddling with rules and regulations has created too much uncertainty amongst would be savers and is a major reason why people are not putting sufficient monies aside for their retirement.

How can people be expected to plan for the future if the goal posts are constantly being moved? – until it’s clearer who gets what and how much people should be saving then the situation will not improve.

March 31st, 2016 | Andrew Hagger | News

Thousands of low-income households across England and Wales are being urged by the Consumer Council for Water (CCWater) not to miss out on a raft of schemes which could stop water bills from draining their finances.

Eighteen out of 21 water companies will have social tariffs in place from April 1, with the potential over time to significantly reduce water bills for almost half a million customers who are struggling to pay.

South Staffs Water, Cambridge Water and Dee Valley Water will become the latest companies to launch their own schemes next month, when the average water and sewerage bill across England and Wales is set to rise by £2 to £389. Portsmouth Water will also have a new tariff in place to help those on low incomes from July.

CCWater has welcomed the roll out of social tariffs, having worked with companies on their development, but warned that many households are missing out on the help available to them due to a lack of awareness or reluctance to ask for help.

Andy White, Senior Policy Manager at CCWater, said: “We know from our research that one in eight households feel their water bill is not affordable. Help is waiting for thousands of customers, but many simply don’t expect to be able to get assistance from their water company.

“Our message is very simple – don’t suffer in silence, ask your water company if you qualify for help. Social tariffs can reduce bills by more than 50 per cent in some cases, and are usually just one of the ways companies can help those facing financial difficulties.”

Wessex Water and Bristol Water already operate social tariffs but are both adding new schemes from April 1, targeted at helping those who receive Pension Credit.

The other water companies with social tariffs are Affinity Water, Anglian Water, Dŵr Cymru Welsh Water, Essex and Suffolk Water, Northumbrian Water, Severn Trent Water, South East Water, South West Water, Southern Water, Sutton and East Surrey Water, Thames Water and Yorkshire Water.

CCWater has produced a quick and easy-to-use online guide for households to check whether they might qualify for a social tariff which is available at www.ccwater.org.uk

The water watchdog has also teamed up with poverty relief charity Turn2Us to launch a Benefits Calculator and Grants Search tool on its website to help consumers work out if they could be entitled to additional financial support.

March 24th, 2016 | Andrew Hagger | News

Figures from Bacs reveal that more than a quarter of a million people moved banks in the last 3 months of 2015.

This means that 2.5 million customers have now used the official Current Account Switching Service to transfer to a new provider.

Santander, Halifax and Nationwide Building Society are still winning the biggest share of current account movers whilst Barclays and NatWest are losing the most customers to rival providers.

One of the biggest problems is that even with the new faster switching rules and switch guarantee in place, people don’t know which account to choose and are scared that they may end up with a product that isn’t any better than the one they already have.

Although each bank and building society has its own tariff and rate details clearly displayed on its website and marketing literature, working out which account is best can prove a big headache.

The dilemma for consumers is that no two accounts are the same, and difficulty in trying to compare the different rates and charging structures is probably one of the major reasons that customers have remained loyal and put up with a below average service.

There is not one bank account that’s the perfect fit for everybody, it’s more about weighing up the individual elements of an account that are most important to you.

For some people a low cost overdraft will be the priority, while for others interest payable on credit balances or a debit card offering low cost transactions abroad will be key.

I’ve carried out some research to try and establish which accounts are strongest in each of the different areas.

If it’s a cheap overdraft that’s most important, then it’s worth considering First Direct (first £250 interest free) or M&S Bank (first £100 free).

For those seeking interest on credit balances or reward for their custom, for balances of £2000 or less consider Halifax Reward or TSB Classic Plus and for £3,000 take a look at Tesco Bank.

Lloyds Bank and Santander 123 are tops for those with balances of £3,000 plus, with the latter being the market leader for balances over £5,000 – paying a very competitive 3% gross up to balances of £20,000.

Whilst some people may be put off the Santander 123 account because of the monthly £5 fee, remember it also pays cashback on your utilities direct debits, which in many cases will more than offset the cost.

If you’re seeking a cheap debit card for use overseas then Norwich & Peterborough Building Society offers this facility for free worldwide whilst Nationwide Building Society and Metro Bank are much cheaper than the main banks in this area.

Picking the wrong bank when it comes to debit card costs overseas can cost you a lot more than you’d imagine.

For many people there’s more money to be saved in this area than any other element of a bank account. Your two week summer holiday could easily see you shelling out an extra £50 or more in charges – for many customers that can save you far more than the amount interest you’ll earn on your bank account in a whole year.

Yet for others it’s not the nuts and bolts of the account that concerns them, all they want is the ability to be able to talk to a human being at a UK call centre 24×7 and to receive a good level of customer service, day in, day out. Consistently top performers for service continue to be First Direct and The Co-operative bank.

If you think it’s time you gave your bank the elbow, pick an account that reflects the way you run your finances rather than being swayed by a cash sweetener.

March 23rd, 2016 | Andrew Hagger | News

New research reveals that 9 out of 10 people don’t know their own credit score and of those that do, the average score is “poor” sitting at 567.

The study by Amigo loans, which surveyed 2,000 UK adults, paints a gloomy picture of the UK’s credit landscape and shows those aged under 24 are the worst affected with an average score of just 300, classed as ‘very poor’. This means that they are likely to struggle to secure the best deals on mortgages, credit cards or a mobile phone contract.

45-54 years olds, who have had the time to build a good history of borrowing and paying off debt, come out on top with an average of 659. However, this is still classed as a “poor” credit score under UK guidelines.

Industry research claims half of UK adults are likely to be refused credit. From accessing a mortgage to getting the best tariff from energy providers, consumers often need to pass a credit check. Poor credit ratings are not only confined to those with a poor financial past – even missing one payment or dipping into an unauthorised overdraft can have a huge impact.

With such a significant proportion of the UK population not even knowing their credit score, it highlights that credit scores are inherently misunderstood or ignored by general consumers.

Glen Crawford, CEO at Amigo Loans, which commissioned the study said:

“There is a huge lack of understanding about credit scores; it’s a complete myth that we have one universal ‘score’. It’s crucial that people, who believe they do have a chequered financial history, take positive actions to improve their credit file, so they will be more likely to be accepted for mainstream financial products in the future, such as a mortgage. Borrowing with Amigo is one way of doing this.”

 Amigo loans has collated top tips for improving your credit score:

• Make sure you are on the electoral register. Lenders use the electoral register to help fight identity fraud and confirm a person is who they say they are and that they reside at that address.
• Pay bills on time or ahead of schedule, a good credit score needs to be built up over time – lenders will look favourably on this.
• If you notice anything on your credit report that could be incorrect or you think you might be the victim of identity fraud, i.e. you think someone has applied for credit in your name, contact the credit reference agency who will work with the lender to try and resolve the issue.
• Avoid keeping a high balance on your credit card. Lenders may view it as excessive debt and be concerned about your ability to repay.
• Only apply for products when you really need them – applying for more than four forms of credit in a year can lower your credit score.
• Do not make multiple applications for credit as this can have a negative impact on a credit record.
• Close down out of date credit cards and make sure you cancel old agreements, such as store cards you never use, as these will still appear on your file. Lenders may be wary about the potential size of your debt.
• Sever old financial relationships if you are divorced or separated, making sure your former partner’s details are removed from any joint accounts. The credit history of all financial associations such as a spouse or anyone else you have a joint bank account or loan with can affect your credit rating.

March 23rd, 2016 | Andrew Hagger | News

Banking jargon continues to confuse savers and many are failing to understand common phrases, according to new research released by Aldermore today.

Aldermore asked savers to correctly identify the meaning of everyday savings acronyms. Almost six in ten (59%) failed to identify AER as Annual Equivalent Rate, while only half (54%) correctly identified the ISA as an Individual Savings Account.

Savers were also asked to identify the correct amount of gross interest earnt from placing £100 into a two-year fixed rate savings account paying 3% per annum. Just under a third (32%) worked out they would earn £6.09. Almost three-in-ten suggested it was £6.

The research also highlights what effect this lack of understanding has on their ability to save. While just under a third (32%) said they fully understood how savings account work and what they’re likely to earn, 31 per cent said they put money away because they think it’s important, but don’t fully understand the terminology.

When it comes to finding out more information, two-thirds say finance websites are the most likely source they would turn to if they wanted to understand savings accounts better. While almost two-fifths (37%) would go to their local bank or building society branch, just under a third (31%) suggested they would speak to friends or family.

Interestingly, almost four in ten (38%) savers said in the event of them being unable to find sufficient information they would move their savings elsewhere. Only four per cent said it would stop them from saving altogether.

Simon Healy, Aldermore’s Group Managing Director, Savings, said:

“Savings products should be easy to understand and easy to open. This research shows that many savers don’t fully understand all the language around their accounts and could ultimately be missing out on better returns. It is pleasing to see many are turning to online personal finance websites who not only provide a great resource, but highlight the best deals in the savings market too.

“As part of our aim to help customers realise their ambitions, we have put together a ‘Savings Glossary’ to help them understand what things mean and to help ensure they get the most from their money.”

March 12th, 2016 | Andrew Hagger | News

With just a few weeks to go until the personal savings allowance (PSA) comes into effect, new research from AA Financial Services reveals that 90% of savers don’t know what the allowance is and are struggling to determine where to put their savings after April.

Once the PSA was explained to survey respondents, almost half (49%) said they didn’t know what to do with their money come April, with the choice between ISAs and savings accounts causing most confusion.

One in six (16%) savers said they would only pay into a savings account  from April, and one in 14 (7%) said they would move money out of their ISA and into a savings account.

A spokesman for AA Financial Services, said, “The personal savings allowance is good news for savers, but widespread confusion about what it means for people’s money risks undoing the benefits.

“There will continue to be many differences between savings accounts and ISAs and the decision on what to do with your money isn’t as simple as comparing rates between saving accounts and ISAs.”

Important considerations for savers include:

• How an increase in interest rates will affect them.  For example, a basic rate taxpayer with £50,000 in a savings account earning 2% will generate £1000 interest – meaning all interest is protected by their PSA.  However, on the same balance, if rates increase to 3% they’ll generate £1500 – meaning £500 worth of interest will become liable to tax.
• How a pay rise could affect the value of their PSA.  A pay rise that takes you from a basic rate tax bracket to a higher rate tax bracket would halve your PSA from £1000 to £500.
• How they’d like to build their savings over the longer term.   For example, each tax year savers get an ISA allowance (currently £15,240 in 2015/16).  Consistently using your full ISA allowance over many years means you could build a substantial savings pot protected from both income and capital gains tax.
• How ISA allowances can now be inherited. A deceased spouse can now pass on their ISA allowance to their surviving partner, which they can use on top of their usual ISA allowance.

In spite of the confusion, there is a general willingness to save, with almost one in four (23%) people expecting it to be easier to save over the next few months.

March 11th, 2016 | Andrew Hagger | News

New research from Sainsbury’s Bank reveals that when it comes to their finances, the majority of people don’t feel better off than last year, and their main financial worry is the cost of living going up.

Key findings from the research include:

• 47% of people claim they feel no better about their finances this year than they did in 2015, 26% feel less confident about their finances, compared to 24% who feel more up-beat
• Only 19% of women believe they will be better off this year than in 2015, with 28% believing they will be worse off. The corresponding figures for men are 29% and 25%
• On a regional basis, 40% of people in London and 30% of adults in the South West feel better off than last year, compared to 16% and 27% who feel worse off. In the North West for example, 31% feel less confident, compared to just 19% who feel more confident
• In total, 73% of us admit to having some financial concerns and for 26% of people, their biggest money worry is the cost of living, this is followed by 13% who cited changes to their family’s income. Nearly one in ten (9%) said their main financial concern was not receiving a good enough return on their savings