Sarah Pennells is a personal finance journalist and the face behind SavvyWoman.co.uk. We think she does a great job at explaining financial subjects in a very clear and accessible manner. You can find her column below where she writes about the latest financial news, and helps you get more from your money.
Interest rate rise on the cards?
Interest rates could rise sooner, rather than later – which should be good news for savers, but not necessarily if you’re a borrower. The Bank of England set interest rates at 0.25% last August and they’ve been at or below 0.5% since 2009. But ten years ago, the Bank of England rate was 5.75% and 20 years ago it stood at 7%.
Here’s my three point action plan if you owe money:
- Switch to a 0% balance transfer credit card deal if you can and pay off your credit card debt as soon as possible.
- If that’s not an option, consider switching your credit card debt to a loan where the interest rate is fixed. Not many people realise that they can overpay on a loan by up to £8,000 in a year with only a low penalty to pay.
- If you don’t have credit card debts or loans, you could remortgage to a better deal. If you don’t have enough equity in your property, consider overpaying on your mortgage so you qualify for a lower loan to value (LTV) deal. If you have a fixed rate mortgage, you can still normally overpay, although there are likely to be limits on how much.
SAVVY TIP: If you’re a saver, don’t leave your money lying in a low rate account. Some accounts pay literally no interest, but you can earn over 1% on easy access accounts and more if you’re happy to tie your money up for a couple of years. Check that you can take your money out (for example, if you spot a better deal if interest rates do rise). Some will let you do this and all you’ll lose is a few months’ interest.
If you’ve booked a flight with low cost airline Ryanair, you may find it’s been cancelled. Ryanair has cancelled thousands of flights between now and next March, affecting almost half a million passengers.
According to EU regulations, Ryanair must offer passengers the option of a refund or an alternative flight, and any extra expenses, such as food, taxis etc. it must also pay compensation for. This is set at different rates, depending on how late the replacement flight is compared to the original flight and how far you were due to travel (it ranges from €125 to €400, per person, although you can get more for long haul flights).
Crucially, the replacement flight can be with another airline if it will get you to your destination faster than Ryanair can.
However, Ryanair isn’t obliged to pay for what are called ‘consequential losses’. This means costs such as car hire or hotels you’ve booked, which you now can’t use because you can’t get to your destination. This won’t necessarily be covered by your travel insurance either, as the consumer information site Travel Insurance Explained points out. It advises people to look for a clause that states that you can claim for missed departure and connection cover for ‘any cause beyond your control and which you are unable to claim back from any other source’.
Spend your round pounds
Round pounds cease to be legal tender in less than two weeks. October 15th is the last day that shops can accept them (they don’t have to take them before then if they don’t want to). You also don’t have to accept round pounds as change after the 15th.
However, don’t despair if you find some old pound coins in your wallet or purse (or down the back of the sofa!). I’ve seen a growing number of reports saying that round £1 coins will be ‘worthless’ from October 16th onwards. This is rubbish (not to put too fine a point on it!).
You should still be able to pay them in at your bank or at the Post Office. But check with your bank as it may have limits on how much you can pay in. You should also be able to donate old £1 coins to certain charities, and I believe that one or two retailers are likely to accept old pound coins beyond the deadline.
Automatic enrolment five years on
October 1st was the fifth anniversary of automatic enrolment. If you’re employed, the phrase will probably mean something to you, but if you work for yourself it may not.
So what it automatic enrolment and how does it affect you?
- Automatic enrolment is the term given to a government backed scheme that turned the model of saving into a pension through a workplace scheme on its head. Previously, if you wanted to join your workplace pension, you normally had to fill in a form first. And, because pensions aren’t a priority for many of us (until retirement is just around the corner!), lots of people didn’t get round to it. At one large employer I spoke to a few years ago, 90% of its employees weren’t in the pension scheme. Since automatic enrolment, that’s completely changed and now almost 90% are in the scheme.
- The important part of automatic enrolment is that you don’t have to stay in the pension scheme if you don’t want to. You can always opt out. If you opt out within the first month, you’ll get back any money you’ve paid in. If you opt out after a month, the money will stay in your pension.
- You, your employer and the government will all pay into your pension. The amount you and your employer contribute to your pension is currently 1% of your earnings each, but that is due to rise next April and again the following year. When you’re paying the full rate, your contribution will be 4% of your earnings, your employer will pay 3% and the government will add 1% in tax relief.
- You will be automatically enrolled into your pension if you’re aged between 22 and state pension age (which is currently around 64 for women and 65 for men). You also need to earn at least £10,000 a year from each job you do to be automatically enrolled. However, if you earn more than around £5,800 you can ask to join the scheme and your employer must contribute into your pension as well. You are also only automatically enrolled if you are employed (whether that’s as a permanent member of staff or on a contract), but not if you’re self employed.
SAVVY TIP: Tax relief means that some of the tax you would otherwise have paid goes into your pension.