Money & Rights

Money and Rights News: September

FCA to look at a 'basic savings rate'

City watchdog The Financial Conduct Authority (FCA) has published a discussion paper on 'price discrimination in the cash savings market', namely the interest rates that longstanding customers receive on easy access cash deposits, which are generally lower than those offered to those who shop around.

The paper's most eye-catching proposal is for a 'basic savings rate' (BSR), which would apply to all easy access savings accounts and cash ISAs after a set period of time, such as a year.

Christopher Woolard, of the FCA said: "Providers can take advantage of high levels of customer inaction to pay lower interest rates to longstanding customers. While many customers have valid reasons for not shopping around, providers mist still treat them fairly, while maintaining competitive rates for those who do.

"Efforts to encourage customers to switch have had limited impact. This is why we are considering the introduction of a basic savings rate for older accounts, which would promote competition and help get customers a better rate of interest.

A 2015 study by the FCA found competition in the savings market was not working well, particularly for loyal customers. It also found people are put off switching by the expected difficulty of doing so.

Measures introduced to addresses this, including communicating more clearly with customers about interest rates, faster cash ISA transfers and customer prompts before rates reduce have not led to more people switching to get a better deal.

However, some experts are sceptical about a BSR. Susan Hannums, of website Savings Champion says: "The idea of the basic savings rate will help savers with money sat in accounts paying next to nothing. However, with the providers setting the bar this could actually lead to a lowest common denominator- will the providers play fair when they are given a free rein?"

Smart meters may save you just £11 a year

Smart meters will save people an average of just £11 a year on their energy bills, according to MPs.

The new figure emerged after a cross-parliamentary group criticised the £11bn project to install 53 million devices by 2020.

It was hoped that smart meters would lead to a saving on an annual dual duel bill off £26, but this has now more than halved because of delays and cost increases, with installation costing £1bn more than planned.

Government predictions of customer savings were also inflated, outdated and "based on a number of questionable assumptions", according to the British Infrastructure Group (BIG). Most of the savings will be made by energy firms, even though most of the project was funded by customers through higher bills, it claims. It also says more than half of smart meters go "dumb" if you switch provider and an estimated 10 percent don't work properly because of poor mobile networks.

BIG recommends reviewing the timetable and savings, tasking Ofgem to ensure savings are passed on to customers, and introducing automatic compensation for malfunctioning meters.

Meanwhile, an energy price cap will be in place this winter after new legislation requiring energy regulator Ofgem to cap standard variable and default energy tariffs- which are usually hundreds of pounds more expensive than the best deals.

At the time of writing the price of the cap hasn't been confirmed but it is still likely to be more expensive than the market's cheapest tariff.

Fairer premiums for loyal customers

One million couples are missing out on the marriage allowance, according to the Government. This year, the allowance could save married couples (or civil partners) £238 in tax, but those that are able to backdate claims to April 2015 when the allowance was introduced, could get as much as £900.

To benefit as a couple, the lower earner (or pensioner) must normally have an income below their personal allowance. Even if your partner has died since April 5, 2015 you can still claim (www.gov.uk/marriage-allowance)

Don't overestimate EHIC benefits

59% of holidaymakers overestimate the benefits of a European Health Insurance Card (EHIC), according to research from GoCompare, believing it entitles them to free emergency medical care and even that it will pay for an air ambulance home.

However, an EHIC merely entitles you to the same level of state medical care provided to eligible nationals of the country you're in, meaning treatment may not be free and you still need to take adequate travel insurance.

Correction

In last month's 'Ask the Experts' pages the reply to the letter "Should I pay off my granddaughter;s student loan" contained an error. We said that "On earnings of £30,000, or even £30,000 or £50,000 you would still only pay back £450 a year". This should have read "On a debt of £30,000, £40,000 or even £50,000 you would still only pay back £450 a year". Choice apologises for this mistake.

Better holiday protection

A new rule gives better protection for holidaymakers who book flights and accommodation separately but via the same supplier. Those on 'package holidays' with flights and hotels included have always been protected if there are problems with the hotel. now people who book hotels and flights separately but from the same supplier or website will get the same protection.

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