Our rate hike campaign will continue, says JEFF PRESTRIDGE
Banks are still failing to fully pass on the benefits of higher interest rates to savings customers, so our rate hike campaign will continue, says JEFF PRESTRIDGE
Interest rates are heading towards 3%, inflation towards 11% and difficult times are ahead. That was the immediate reaction to last week’s increase in the Bank of England’s base rate to 1.25%, the fifth hike in six months. And it’s hard to disagree with that.
Most household budgets will be under extreme pressure in the coming months, especially as temperatures drop, we turn the heating back on and energy bills soar like a SpaceX rocket.
While many homeowners have immunized themselves against mortgage payment shocks by taking out fixed-rate loans, the personal finance numbers of those who don’t have mortgages and are long retired look more precarious today. in days.
Piggy in the middle: Banks have failed to fully pass on the benefits of higher interest rates to customers
Often dependent on interest from savings to supplement their retirement income, their financial situation is not helped by the profiteering banks which continue to give savers a hard time. Although almost all the major banks are now paying better savings rates than in December last year, when the base rate was 0.1%, they have failed to fully pass on the benefit of the higher interest rates on their customers.
A review of 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% interest, or £1 annual interest on £10,000 saved.
Today, for savers with less than £50,000 in the account, they still get the same gross supply. Scandalous. In contrast, Halifax Everyday Saver customers now receive 0.25% interest, up from 0.01% in December. Nationwide Building Society customers with £10,000 in Instant Access Saver were getting 0.03% interest – now 0.13%.
Better, yes, but if they were fair, the banks and Nationwide would have raised rates on these accounts by 1.15 percentage points. They haven’t, so our campaign to give savers a rate hike will continue. Vigorously.
A new dawn for prepaid funeral plans
We are nearing a welcoming new dawn for buyers of prepaid funeral packages – products that are full of promise, sometimes short of promise.
Frankly, the new dawn can’t come fast enough. Two days ago the Financial Conduct Authority released a list of providers it plans to license when it takes over regulation of the industry at the end of next month. Only 26 trade names (24 companies) out of 66 received the regulatory amber light, despite representing 87% of the market by plans sold. Eight other businesses that have filed applications with the regulator could cross the line by July 29 – while 16 intend to transfer their business (or have already transferred it) to a competitor seeking licensing.
Consumers’ greatest concern concerns ten companies whose application for authorization has been withdrawn.
For holders of these plans, the future is uncertain. A few can reapply for authorization and get the green light from the regulator (good); others can be taken over (again, fine); while a few can go on the wall like Safe Hands Plans. If this happens, funeral expenses paid by policyholders may not be honored (bad).
While I’m not a big fan of FCA, its oversight of the industry should be a step up from what’s happened before – which felt like the Wild West, with a minority of vendors getting rich on taking dividends from 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 that they have the protection of the Financial Services Compensation Scheme if their provider goes bankrupt. They will also be able to file complaints with the Financial Ombudsman Service if a plan provider has defaulted.
Yes, better than the Wild West. But only if the FCA takes responsibility and regulates rigorously.
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