Personal Finance News / Money Saving News << eComparison UK

Poorest families in debt

Martyn Shaw — Tue, 15 May 2012 10:50:16 +0000

A financial report has stated 10% of UK households are outspending their incomes. This has continued for the last decade. Britain is vulnerable to another financial crisis unless more residents seek debt management techniques to solve their debt problems. There are issues with a rise in inequality of class systems wherein the poorest households have to continue to borrow in order to survive. These families are in a debt cycle that is hard to get out of even with debt management.

Low and middle income families are spending more than they make, but those in lower income brackets are more exposed to troubles as they are typically renters with their rental payments increasing without income increasing.

Debt management can include a myriad of answers, such as how to spend less to stay within the monthly income budget, to consolidating debts to make monthly payments more affordable. Those looking towards resolutions are hoping to find a way to increase the savings by examining past decades to see how it is possible to decrease the debts families suffer from in the lower income brackets.

The last economic crisis that the UK suffered is on the mend, but it is still in a tenuous situation. Those in the lower income classes are still suffering greatly from a lack of funds and high levels of debt, while the economy is recovering with an influx of cash from bailouts and investors with money to spend. If household expenses continue to rise it may be difficult for families in a low income situation to survive.

Personal Finance News / Money Saving News

Poorest families in debt

SSE to pay large fine for misleading energy customers

Martyn Shaw — Tue, 08 May 2012 09:59:09 +0000

It is difficult enough in these trying economic times for consumers to exercise prudence in their spending and debt management practices. It can become impossible when the companies they must deal with are not behaving in a manner that is completely above board. Such appears to be the case with the energy firm SSE, which has recently been given a fine in excess of £1.2 million for misleading customers.

Salespeople working for the company would visit a homeowner and claim that the household could save a significant amount of money by switching from their current energy provider to SSE instead. While this may seem on the surface to be an innocuous sales tactic, in fact, the sales force did not know what consumers were currently paying since they had no access to the contract governing those transactions. In effect, it would be like a financial company claiming to do a credit card comparison without knowing for certain the rates and terms that applied to a particular individual.

Steve Playle, who serves as an investigator for Trading Standards, characterised the fine in broad terms, claiming that “This was a real David versus Goliath battle which resulted in a victory for consumers everywhere.” Mr Playle added that the large fine “should send a message to the energy industry that deceptive, misleading and illegal sales tactics are not acceptable.”

According to Mr Playle, additional energy suppliers are currently under investigation regarding their sales practices. These include Scottish Power, E.On and npower. SSE has indicated that it will pay the fine without disputing the particulars of the case.

Personal Finance News / Money Saving News

SSE to pay large fine for misleading energy customers

Gas price increases fuel unrest

Martyn Shaw — Tue, 01 May 2012 10:18:47 +0000

According to Greenpeace, the average energy bill increased by about £150 during the past year. Two-thirds of this increase can be attributed to higher gas prices. Now, some consumers are making their displeasure known. Several dozen protestors converged on the road to the Berkshire headquarters of Centrica and blocked traffic by means of an oversized energy bill that measured more than 250 square feet in all. A parallel protest attempted to close down the HQ offices themselves using energy bills pasted onto wood, which was used to barricade office doors.

The protestors were expressing outrage at Centrica’s use of imported gas sources, which tend to be more expensive than domestic sources. Lawrence Carter, speaking for the Greenpeace environmental group, focused on the need for Centrica to begin relying more on renewable sources of energy: “Centrica have got to get off gas . . . If Centrica instead invested in clean, cutting-edge renewable energy and energy efficiency, they would help to bring both household bills under control and to tackle climate change.”

Indeed, UK Prime Minister David Cameron just last week recommended renewable energy, referring to it as “vital” for the future of the nation.

A Centrica spokesperson responded to the protests but had little to say about renewable energy, instead focusing on the measures that British Gas has taken to help customers deal with higher bills. These measures included offers of free insulation and a reduction in the cost of electricity to offset the higher prices being charged for gas.

Personal Finance News / Money Saving News

Gas price increases fuel unrest

Fixed-rate mortgages continue to fall

Jessica Haynes — Tue, 24 Apr 2012 10:10:24 +0000

Britons contending with issues of debt management have a basic decision to make whenever they decide to purchase a house. They need to decide which of the two main types of mortgages is better suited to meeting their current and future needs. A fixed-rate mortgage can provide borrowers with the security of knowing that their monthly payment will not rise over time. On the other hand, an adjustable-rate mortgage allows borrowers to see their monthly obligations decline should interest rates in the general economy fall in any significant way.

Deciding which type of mortgage to arrange is a vital consideration since the results of this choice will have financial implications for years to come, or even decades.

Fortunately for British home borrowers, the decision is currently getting easier due to fixed-rate mortgages that are offered at low rates that are declining. According to official data, the average rate for a five-year mortgage of the fixed rate variety has been on the decline for at least two full years. Currently, such mortgages can be obtained at interest rates that are less than 5%, a level considered quite low in historic terms. Moreover, industry analysts are predicting that the status quo will hold steady for some time to come.

An adjustable rate mortgage is usually more affordable than a fixed rate one but when fixed rate terms fall to such low levels, consumers have less need to be able to adjust them downwards in future. This means that an excellent choice for home buyers in the current market is to take advantage of a fixed rate home loan.

Personal Finance News / Money Saving News

Fixed-rate mortgages continue to fall

Britons growing more cautious of debt

Martyn Shaw — Tue, 17 Apr 2012 10:30:11 +0000

Insurance firm Bright Grey has released their annual “Financial Safety Net” report, revealing that Britons are beginning to become more aware of the importance of effective debt management. According to the report, UK residents consider debt levels above about £14,500 to be problematic. A year ago, Britons were somewhat more tolerant of large debt loads; they only considered people to be in danger of default once they owed in excess of £16,000.

Such high debt levels make it more likely that individuals will no longer be able to meet their regular obligations such as mortgages or a car loan. Bright Grey’s Proposition Director, Roger Edwards, commented on the survey’s findings: “Over the past 12 months, Britons are sitting up and taking greater notice of the wider economic environment. People are more wary about getting themselves into serious levels of personal debt, but over £14,000 is still clearly a cause for concern. As a result, Britons need to keep control of their finances and have contingency plans in place to be able to continue to pay for their essential monthly outgoings.”

People with high debt levels can take a number of steps to get their finances under control. These include seeking out additional employment in the form of a second job – though that strategy is difficult at present due to high unemployment levels in the nation. Other powerful strategies include developing a strict budget for expenditures, and more importantly, sticking to it. The funds freed up from more prudent spending can be used to make larger debt payments. Another option is to purchase income protection insurance, which can provide funding in cases of redundancy or a serious illness that can take a worker off the job.

Personal Finance News / Money Saving News

Britons growing more cautious of debt

New plans on the horizon for private pensions

Martyn Shaw — Tue, 10 Apr 2012 09:22:14 +0000

Changes to private sector pension schemes are currently being contemplated by Steve Webbs, who currently serves as the nation’s Pensions Minister. The plans put forth by Webbs will require older workers in some cases to work longer before they can draw a fixed income that will continue throughout their retirement years. As an alternative, older workers could retire with a “pension pot” or fixed sum that must last them through their golden years. In either imagined scenario, pensioners are likely to need improved debt management skills in order to stretch their means far enough to cover the ordinary expenses of life as well as items such as mortgages or a car loan.

The new plans would have the effect of eliminating once and for all the concept of the “final salary” pension. However, these types of pensions have largely vanished from the private sector already; they are still available to some workers who hold public sector employment. The new schemes are currently being called “defined ambition” plans, a turn of phrase that calls to mind the concept of the “defined contribution” plan in which workers know how much they pay in contributions to a pension, but not necessarily how much they will eventually be able to reap from their pension.

According to Webb: “If we can get the framework right, we can make sure that the demise of final salary schemes does not mark the end of certainty in pensions but is replaced by a new model which offers greater flexibility to firms without loading all of the uncertainty on employees.”

Personal Finance News / Money Saving News

New plans on the horizon for private pensions

Few Britons are switching energy providers

Jessica Haynes — Tue, 03 Apr 2012 09:40:16 +0000

The Department of Energy and Climate Change (DECC) has released new figures demonstrating that more Britons than usual are staying with their current providers of utilities such as gas and electricity. In fact, this year represents nearly a ten-year low in the number of UK residents seeking an electricity transfer. The situation in the gas market is very nearly parallel; the first quarter of 2003 was the only time in the past decade when more Britons than today sought to change the company providing them with gas service.

According to energy analyst Tom Lyons, who works for uSwitch, the figures reveal a telling story about the current state of the utilities markets. “The number of people switching,” explains Lyons “is a simple acid test that tells us the current state of health of the market. What we can see today is that it is on the critical list, with trust and confidence at an all-time low. Ofgem now has no choice – its Retail Market Review has to deliver. And with switching at a record low it’s not enough just to stop the rot.” Lyons added that it is Ofgem’s responsibility to reverse this trend so that consumers see the energy markets as a truly competitive environment.

Consumers exercise rational judgement skills when they evaluate their purchasing decisions, so this low point in utility switching probably indicates, as Lyon assumes, that Britons see little point in comparison shopping at the moment. This would indicate little price difference from one provider to the next, an unfortunate situation at a time when so many Britons are unemployed or underemployed.

Personal Finance News / Money Saving News

Few Britons are switching energy providers

Vouchers lose validity when a business goes under

Martyn Shaw — Tue, 27 Mar 2012 11:46:41 +0000

During difficult economic times, bad news for one group of people can often cascade through the economy to affect many others. Such is the situation when a company goes into administration. The most obvious group affected are the employees who will lose their jobs; their reduced spending power will in turn lower overall demand in the economy, which can set off a chain reaction as additional stores reduce employee hours to compensate for lost sales.

In the case of Game Group, the cascade effect will also impact another group of individuals: those who hold voucher codes for the store. During normal times, such codes can be used to purchase merchandise or to effectively create a discount on merchandise. Gift vouchers are a popular way to provide a friend or loved one with store credit so they can choose for themselves the exact game or other merchandise they prefer.

With Game Group going into administration, however, such vouchers have lost all value. PricewaterhouseCoopers, who is administering the chain’s insolvency, have announced that gift vouchers will not be redeemed for cash – and since the stores that make up the chain have closed, neither can they be traded for merchandise.

Good debt management means thinking ahead and being aware of possible scenarios that may crop up. These skills are transferable to the Game Group’s situation, which highlights one of the potential problems with using voucher codes as a gift item. Had the individuals holding the vouchers been given cash instead, they would not be in the same position.

Personal Finance News / Money Saving News

Vouchers lose validity when a business goes under

Britons’ debt management practices during austerity

Martyn Shaw — Tue, 13 Mar 2012 11:53:29 +0000

The challenging economic times have taken their toll on both wages and hours for many families. The extent of the impact may have been underestimated, however; unemployment and inflation figures do not tell the whole story. New data emerging from the banking sector is shedding additional light on the financial plight in which many Britons find themselves. According to recent figures, as many as 30% of British consumers have needed to access the overdraft on their accounts during the last year. Many of these are dipping into overdrafts to pay routine bills such as a car loan.

An occasional overdraft may not be a problem for the average consumer, but when using an account’s overdraft feature becomes a routine solution for pressing financial needs, it can mean that an alarming amount of money is routed into paying the fees associated with overdrawing an account. Research has indicated that a relatively small overdraft – £500, for example – can easily result in £100 or even £200 in fees if it is constantly accessed over the course of a year. This, of course, is money that could have gone elsewhere. Those who are having trouble meeting their obligations should certainly strive to improve their debt management so that overdraft fees are minimised or even eliminated.

One way for such Britons to improve their financial position is to look for an account that better suits their needs. Lower overdraft fees would be a start, but over time, consumers should strive to arrange their finances so that they will not need to go into the red to meet their regular obligations.

Personal Finance News / Money Saving News

Britons’ debt management practices during austerity

Frugal habits for rich and poor alike

Jessica Haynes — Tue, 06 Mar 2012 14:25:10 +0000

A few years ago, a bestselling book entitled The Millionaire Next Door revealed startling information about the attitudes that rich people have towards money. Now, an interview with Jim McCarthy, head of Poundland, reveals that his own attitudes are similar to the ones revealed in the book. McCarthy has no real need to economise these days, yet he admits that he is still careful to watch his spending. In part, this is how wealthy people get and stay that way – they know how to conserve money rather than waste it.

Mr McCarthy commented that he is “more a saver than a spender,” attributing his frugality to the discipline that he learned as a child when money was tight. He carried this attitude forward into his adulthood. It is this same attitude that equips people to be careful with their debt management and look for the lowest interest rates on mortgages.

Mr McCarthy also discussed the current recession, revealing that he has seen first-hand the changes in the buying patterns of Britons. The main change he has seen is a shift toward those purchases that are truly essential, such as food items, personal care items and household cleaning products. At the same time, purchases of luxuries have declined, a phenomenon that is entirely expected when people have less discretionary income in general.

What some Britons may find surprising is that these same habits of mind will stand them in good stead during boom times as well. Like Mr McCarthy, they may decide to follow the sound financial practice of paying off their credit cards in full each month.

Personal Finance News / Money Saving News

Frugal habits for rich and poor alike