The PPI Guide

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PPI stands for ‘Payment Protection Insurance’. It’s designed to cover your loan or credit card repayments for a year in the event of an accident, sickness or, in some cases, unemployment. But it’s been widely mis-sold and now, in itself, it isn’t a bad product because of a new ruling called Plevin, even just having had it means you’re likely due some cash back. But it’s been widely mis-sold and now even just having had it means you’re likely due some cash back. The original mis-selling has left many paying thousands for potentially worthless cover – and you could even have it without.

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A major problem was that sales staff were hugely incentivised to sell PPI whenever possible. Many were under so much pressure, they strayed far from the truth. The sellers were often trusted financial institutions, so sadly, many were left with mis-sold PPI. The mis-selling's scale has meant that many have no idea how much they're owed – and are often staggered by the sums, often £1000s, they get back.

The Plevin rules mean if over 50% of your PPI’s cost went as commission to the lender, and that wasn’t explained to you, you are due back the extra above that. For this to count your PPI had to still be active at some point since 2008.

Staggeringly, with loan PPI, on average 67% of what you paid was pocketed by banks as commission from insurers, and banks almost never mentioned it – so millions more people are owed possibly billions more pounds. On a £10,000 loan over 5 years, your 'Plevin' compensation would typically be £500.

It's now official: the Financial Conduct Authority has put in place a deadline for making a claim – 29 August 2019. This means if you've got a mis-selling claim over how PPI was sold, it MUST be received by the firm you're complaining to on or by 29 August 2019. Miss it, and the complaint won't be considered.

There's another factor to take into consideration: many people previously mis-sold PPI or at high risk of PPI mis-selling may not be bound by this deadline.

Between 2013 and 2015, after pressure from the FCA, many firms pro-actively contacted some 5.5 million people deemed at high risk of having being mis-sold PPI but who had not yet claimed

Top 5 Business Bank Accounts

One of the first steps after starting a business is working out how it’s going to bank and what you and your company need from a current account. Business bank accounts work differently to personal current accounts in that they often charge a fee for transactions, plus monthly account fees.

When taking out a business bank account, think about how you want to use your account and what you want it to do for you and your business. That might include the services you need, whether you want to bank in a branch or online or whether you care about additional services like a committed business banking support team.

Using a personal current account for your business is possible if you’re a sole trader or partnership, but it’s not possible for a limited company.

Some accounts pay quite good interest rates on in-credit balances, which could be very advantageous if you usually keep your business finances in the black. Opting for a business bank account also gives you the option of taking out a business overdraft, which could be helpful from a cashflow point of view. Accounting software is another feature which could come with a business account, but added extras like this usually mean paying more per month for the account.

While most business accounts come with a charge-free introductory period, after that has ended you’ll probably have to pay monthly fees, as well as fees for each transaction. Therefore, if there’s a fee for each transaction, the more transactions you make, the more fees you’ll have to pay. Monthly fees can vary greatly depending on the type of account you want to take out – the more services attached to the account, the more you’re likely to pay.

Top 5 Business Bank Accounts:

Bank Account Fee Annual Turnover Accepted Availability Interest Rate
Tide N/A No Limit LTDs, Partnerships, Sole Traders & Charities 0% AER
HSBC £5.50 p/m Up to £2million LTDs, Partnerships, Sole Traders & Charities 0% AER
Cashplus £69 p/a No Limit LTDs, Partnerships, Sole Traders & Charities 0% AER
Santander N/A No Limit LTDs, Partnerships, Sole Traders & Charities 0.1% AER
Clydesdale £5 p/m Up to £2million LTDs, Partnerships, Sole Traders & Charities 0% AER

 

Sources: money.co.uk, Money Super Market, Go Compare

Savings

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  • You now get £85,000 protection per UK-regulated financial institution – up from £75,000. All UK-regulated current or savings accounts and cash ISAs in banks, building societies and credit unions are covered by the Financial Services Compensation Scheme (FSCS). This limit used to be £75,000 but from 30 January 2017 it increased to £85,000 after the pound’s post-Brexit fall prompted a review by the Bank of England. But this doesn’t mean you’ll get £85,000 for every account – the £85,000 is per financial institution.
  • Rules introduced in July 2015 mean that savings of up to £1m may be protected for a six-month period if your savings provider goes bust. The increase is to cover life events such as selling your home (though not a buy-to-let or second home), inheritances, redundancy, and insurance or compensation pay-outs that could lead to you having a temporarily-high savings balance. The extra cover will apply from the date on which the money is transferred into the account, or the date on which the depositor becomes entitled to the amount, whichever is later. You’ll need to prove where the funds came from in the event of a claim – and be prepared to wait up to three months for any cash over £85,000.
  • Most banks, including foreign-owned ones such as Spain’s Santander, are UK-regulated. Yet a few EU-owned banks opt for a ‘passport scheme’ where you rely on protection primarily from their HOME government.
  • Cash in joint accounts counts as half each, so together you’ve £170,000 protection. If you’ve an individual account with the same bank, half the joint savings count for your total exposure, and any amount over £85,000 isn’t protected. The protection’s per institution, not account. So four accounts with one bank still only get £85,000. The definition of ‘institution’ depends on a bank’s licence and giant banking conglomerates make it complex. For example, sister banks Halifax and Bank of Scotland’s accounts are only covered up to £85,000 combined. RBS and NatWest are also sisters, but their limits are separate.
  • For perfect safety, save no more than £83,000 per institution (the extra £2,000 gives room for interest). Spreading can be worth it even if you’ve under £85,000; if your bank went bust, the money could be inaccessible for a spell. Using two accounts mitigates the risk.

ISA’s: A guide to help you understand them:

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  • An ISA is a savings account you never pay tax on, it’s as simple as that. You can save up to a maximum of £20,000 in 2017-2018, and this can be in a cash ISA, a stocks & shares ISA, an innovative finance ISA, a Help to Buy ISA, a Lifetime ISA or a mixture of all of them.
  • Each tax year, you get an ISA allowance which sets the maximum you can save within the tax-free wrapper from April to April. The previous ISA system used to limit how much you could put into each pot – you’d get half your allowance in cash and half in shares, or you could choose to put it all in cash or all in shares.
  • In July 2015, however, the rules were almost completely relaxed. Although the amount you can save is limited – £20,000 from 6 April 2017 – you now get to choose whether you want to split this between stocks & shares ISAs, cash ISAs, innovative finance ISAs, Help to Buy ISAs and the new Lifetime ISA, and how you do so.
  • Yet do note, there’s a limit to how much you can put in the last two. For example, you can only put £4,000 in the Lifetime ISA every year, which means you could put the remaining £16,000 into any of the other options.
  • The gain from putting cash into a cash ISA or innovative finance ISA is simple: you never get taxed on the interest. The gain from putting money into a LISA is also simple: you get a 25% bonus. But with investing, whether you actually gain from putting it in an ISA depends on your circumstances.
  • On 6 April 2016 the new personal savings allowance (PSA) was launched. It means all savings are now automatically paid tax-free. Basic 20% rate taxpayers can earn up to £1,000 interest a year without needing to pay tax on it, higher 40% rate taxpayers £500 (top 45% taxpayers will always pay tax on savings). For most people that will be enough to make all their savings tax-free, and therefore the question is simply “what pays the highest rate?” The answer to that isn’t cash ISAs. So for most people with under about £20,000 of total savings, cash ISAs won’t be a winner.
  • You need to be a UK resident aged 16 or over to open a cash ISA, or aged 18 or over to open a stocks & shares ISA or innovative finance ISA. You can’t open an account with someone else, or on behalf of someone else.
  • There’s also a mini version for kids, called a junior ISA, which works in a similar way. One little anomaly is that 16-18-year-olds can open a cash ISA and a junior ISA in the same year, meaning they’re able to save up to £24,128 a year (in cash) tax-free.

Insurance

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Home

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  • The type of cover you need to buy depends on whether you rent or you own your home. Homeowners and landlords usually need both buildings (in fact, it’s often a condition of your mortgage agreement) and contents insurance. Those who rent typically only need tenants contents cover but the way to buy depends on your circumstances.

  • For the buildings element of house insurance, a common mistake is to cover the home’s market value (the amount it might sell for), instead of the rebuild value – the cost of rebuilding the property if it was knocked down. The key is the cost of materials, labour and architects for your area. However, buildings policies should also cover the cost of somewhere for you to stay while your home’s rebuilt or is uninhabitable.

  • For contents insurance, under-insuring could lead to you getting less than the value of your items if you need when you claim. Add up everything, including smaller items such as clothes, on a ‘new-for-old’ basis.

  • Don’t know your five-lever mortise deadlock from your rim automatic dead latch? Well you should, as getting the right lock on your doors could massively lower your contents premium. Insurers ask what type of lock you have, so you risk invalidating your cover if you put down the wrong type.

  • House insurance policies come with a compulsory excess (the amount you have to pay towards any claim – see excesses for more). If you have an excess of £100, but make a claim for damaged or stolen goods worth £400, your insurer will give you £300.

  • You can also choose to pay a voluntary excess on top, which will bring the cost of your premium down. The more you pay, the lower your premium will be. You need to be realistic, though. Make sure the total excess is affordable, in case you do have to make a claim.

Car

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  • At its most simple, car insurance covers you if your car is stolen or involved in a road accident. It also protects other road users if you cause damage to their vehicle or property.

  • The cost of insurance – your premium – is based on how much of a risk insurers perceive you to be. For example, if you are a youngster ready to hit the highway after just passing your test, or you have had more than a prang or two, you will pay more.

  • However, if you can prove you are not a risk by keeping accident-free and storing your car safely, you will pay much less.

  • Not to be confused with living the high life during the festive period or a long afternoon at the local all-you-can-eat buffet, an excess – in the insurance sense – is the amount you pay towards any claims you make.

  • For example, if your excess is £250 and you have an accident that causes £1,000 worth of damage to your vehicle, you will pay £250 and the insurer will stump up the rest.

  • Car insurance will cover you to drive your own vehicle (you have insured) but some comprehensive policies insure you (not the named drivers) – if you’re driving the cars of your friends and family – with their permission of course. Check with your insurer that you definitely have this extension of cover.

Pensions

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A pension is not necessarily what people think it is, and it most certainly isn’t only for old people. At retirement, you can draw money from your pension pot or sell the cash to an insurance company in return for a regular income until death, called an annuity. Since the 2014 Budget you’ve been able to access your pension once you turn 55, taking as much or as little as you like, whenever you like. But it’s important to understand how a pension affects your income. Effectively you’re losing disposable income now in exchange for a future pay rise.

Before starting, it’s worth noting those in debt, especially at high rates of interest, should consider whether it’d be better to get rid of that before starting a pension. Plus, a pension’s only one form of retirement planning. Combining it with other methods is often a good plan. If you opt for a pension, the simple answer of how much to put in is as much as possible, as early as possible.

There’s technically no limit as to how much you can put in a pension. But, there are limits on how much tax relief you’ll get for doing so, and there are three different limits you need to be aware of:

 

  • An earnings limit. You get tax relief on contributions up to your annual earnings. Imagine you earned £20,000 each year, but had £30,000 in savings, and decided one day to put all your savings into a pension. In this situation, you would only earn tax relief on the first £20,000 of your contributions.
  • An annual limit. This limit only applies to higher earners. You can only get tax relief up to your current annual allowance, made up of the current year’s allowance (currently £40,000) and any unused allowance from the previous three tax years.
  • Since April 2016, anyone whose total income, pension contributions and employer pension contributions is over £150,000 in a year will get a reduced allowance, with the very highest earners allowed just £10,000 of tax relief. For every £2 earned over £150,000, the allowance tapers down by £1, meaning anyone earning a total income of £210,000 or more will only get £10,000 tax relief annually.
  • Those whose income (excluding pension contributions) is under £110,000 will be unaffected by these changes, even if pension contributions take them over.
  • A lifetime limit. Again, this is only relevant to the highest earners. In the 2017/18 tax year, this is £1 million. What this basically means is that if your total pension savings (including gains/interest) are over this amount, you won’t receive tax relief on further contributions.

For many years, your company may have set up and contributed to a workplace pension. Not all companies offer workplace pension schemes and currently fewer than one in three UK adults are contributing to a pension, auto-enrolment is designed to address this.

The auto-enrolment rules mean that if you’re an employee, your employer will be forced to offer you a pension scheme. By 2018 all employers by law will have to contribute to their employees’ pensions, but to start with only larger firms will offer this. If you’re employed, your employer may top up your pension as part of your benefits package, so absolutely consider it. This is effectively a pay rise, so don’t give that away, plus there’s no tax to pay on that contribution (subject to annual allowances, above). It may not be going into your pay packet, but it is cash going towards your future. Of course, you may not have the cash to afford the compulsory contributions, and there’s no point getting into costly debt if that’s the case.

Under the new rules, many people will end up in a company pension so all they need to do is go ahead with what their employer offers. To pocket any contributions your employer makes, you need to agree to be part of its scheme. If you opt for your own pension (where only you contribute) then you will need to scour the market for the best deals. Unless you are a financial expert, it’s usually best to get advice from an independent financial adviser (IFA), given there are a whole host of charges to watch out for. Since January 2013, IFAs can no longer be paid in commission, so you’ll have to pay a fee for advice.

Once the money is in a pension, it can’t be withdrawn at any point. It must stay there until you’re at least 55. At that point, you can take 25% of it as a tax-free lump sum, with the rest ideally providing an income for the rest of your life. If you get approached before you’re 55, it’s a scam known as pension liberation.

There are other advantages to pensions, though. If you lose your job, and need to then claim benefits, pension pots aren’t counted as part of your wealth. However, ISA savings are and would be, so you may have to use a decent proportion of the savings before you’d be eligible for means-tested benefits. Similarly, Lifetime ISAs could be forfeit to creditors in bankruptcy, whereas pensions are protected.

Top 5 Current Bank Accounts

A current account is a bank account that permits you to access a variety of banking services, such as getting money (like your salary, pension or benefits payments), paying bills, and setting up direct debits and standing orders to make regular payments.

A current account will characteristically give you a cash card and a debit card (which will probably be combined), a cheque book and guarantee card, and may allow you to have an overdraft.

Particular current accounts propose a high interest rate, but it’s usually only allocated on the first few thousand pounds in the account and will need a specific amount of money to be paid in per month.

Most accounts can be opened in various ways, such as in branch, via internet, by post and by telephone. Other accounts can also be accessed at the Post Office and many can now be functioned via smartphone app.

A current account suits anybody who needs or wishes full access to the banking system. People with either no credit rating, or who have had credit problems, may not be approved a current account but should be able to get a basic bank account.

If you don’t think you’ll ever go overdrawn, then the interest rate on the credit balance may be the most significant factor in deciding which account is best; nevertheless, if you are likely to, then go for an account with a low overdraft interest rate.

Top 5 Current Bank Accounts:

Bank Account Fees/Requirements Arranged Overdraft Interest Rate
TSB No monthly fee, pay in £500+ per month £25 interest free with a £10 buffer then £6 per month & 19.84% EAR variable 3% AER (on up to £1,500)
Barclays N/A £15 buffer, following that up to £3 per day 0% AER
NatWest N/A £10 buffer, following that £6 per month & 19.89% EAR variable 0% AER
Santander N/A £12 buffer, following that £3 per day 0% AER
First Direct No monthly fee, pay in £1,000+ per month £250 interest rate free with a £10 buffer, following that 15.9% EAR variable 0% AER

 

Sources: Money Facts, Money.co.uk, TSB, Barclays, NatWest, Santander and First Direct

Travel

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  • Almost one in five Brits jet off without travel insurance, risking £1,000s in medical bills. If you’ve booked a trip but not insurance, do it NOW – it can cost as little as £9 for annual cover.
  • But it’s not just about finding the best price, in this guide we also explain how travel insurance works and what to watch out for when you buy.
  • The aim of travel insurance is to cover the cost of the unforeseen, such as illness and injury or theft of your personal possessions while you are on holiday. It’s also designed to cover you if you have to cancel your trip, or need to return early due to an emergency. But before you buy, here are 16 things you should know.
  • While choosing a travel insurance policy isn’t rocket science, don’t think you can buy cover without first giving it considerable thought. Policies vary greatly and each have their own inclusions and exclusions.
  • Before you decide what you are going to buy ask yourself the following questions: Will I be bringing expensive personal belongings? Will I be carrying a relatively large amount of foreign currency? Am I taking part in winter sports? This will help you decide what cover’s right for you.
  • Standard travel insurance covers you in the UK but the cover here is not as powerful as when overseas, though it can still prove useful, so you’ll need to weigh up the pros and cons. The problem is not all trips are covered, e.g., most insurers only cover you if you’ve booked accommodation.
  • You may already have travel insurance without knowing. Many bank accounts which charge a monthly fee have extra benefits such as travel insurance. If you think you get insurance as a sweetener with your bank account, check the terms to see if it is appropriate for your trip.
  • Older travellers are considered higher risk. This means travel insurance is more expensive and more difficult to buy as you get older – especially if you are over 65, with the average annual cost standing at more than £80.
  • If you buy family or other types of group cover, also note the price is based on the oldest traveller or the person deemed to be the highest risk.
  • If you are travelling with your partner or your family, you have two options – you can either cover everyone under one policy, or each person takes their own. It’s often cheaper to get a combined policy but always check first.
  • For example, a couple both aged 40, can get an annual worldwide policy with winter sports cover for £83. But buying two individual, equivalent policies costs £46 each. The two can usually travel independently even if you’ve a joint policy.