Interest rates are heading towards 3 per cent, inflation to 11 per cent, and difficult times lie ahead. That was the immediate reaction to last week’s increase in the Bank of England base rate to 1.25 per cent, the fifth hike in six months. And it’s difficult to disagree with it.
Most household budgets will come under extreme pressure in the months ahead, especially when temperatures drop, we put the heating back on and energy bills soar like a SpaceX rocket.
While many homeowners have immuned themselves from mortgage payment shocks by taking out fixed-rate loans, the personal finance numbers for those who are mortgage-free and long retired look more precarious by the day.
Piggy in the middle: Banks have failed to pass on the full benefit of higher interest rates to customers
Often dependent upon interest from savings to top up retirement income, their financial situation is not being helped by profiteering banks which continue to give savers a raw deal. Although nearly all high street banks are now paying better savings rates than in December last year when the base rate was 0.1 per cent, they have failed to pass on the full benefit of higher interest rates to customers.
A review of the rates paid on easy access savings accounts, prepared by Savings Champion, makes for shocking reading. Last December, Barclays Everyday Saver was paying customers 0.01 per cent interest, or £1 of annual interest on £10,000 of savings.
Today, for savers with less than £50,000 in the account, they are still getting the same raw deal. Outrageous. By way of contrast, Halifax Everyday Saver customers are now receiving 0.25 per cent interest, compared to 0.01 per cent back in December. Nationwide Building Society customers with £10,000 in Instant Access Saver were getting 0.03 per cent interest – now 0.13 per cent.
Better, yes, but if they were playing fair, the banks and Nationwide would have pushed up rates on these accounts by 1.15 percentage points. They haven’t so our campaign to give savers a rate rise will continue. Vigorously.
New dawn for pre-paid funeral plans
We are edging closer to a new welcoming dawn for buyers of pre-paid funeral plans – products big on promises, sometimes short on delivering them.
Frankly, the new dawn can’t come quickly enough. Two days ago, the Financial Conduct Authority published a list of providers it is minded to authorise when it takes over regulation of the industry at the end of next month. Only 26 trading names (24 companies) out of 66 have been given the regulatory amber light, although they do account for 87 per cent of the market by plans sold. A further eight companies which have applications lodged with the regulator could make it over the line by July 29 – while 16 intend to transfer their business (or have already transferred it) to a rival seeking to be authorised.
The biggest consumer concern centres on ten companies whose application to be authorised has been withdrawn.
For planholders with these, the future is uncertain. A few may reapply for authorisation and get the green light from the regulator (good); others may get taken over (again, good); while a few may go to the wall like Safe Hands Plans. If this happens, the funerals planholders paid for may not be honoured (bad).
While I am not a big FCA fan, its oversight of the industry should represent a step forward on what went before – which was akin to the Wild West, with a minority of providers making themselves rich by taking dividends from the trust funds set up to protect planholders’ money and pay for their funerals.
Those who buy a plan once the FCA takes over will have the comfort of knowing they have the protection of the Financial Services Compensation Scheme if their provider goes bust. They will also be able to make complaints to the Financial Ombudsman Service if a plan provider has fallen short.
Yes, better than the Wild West. But only if the FCA steps up to the plate and regulates rigorously.