The Financial News You Need To Know with Sarah Pennells – January 13 2016

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.

Action against PPI claims company

A company that made 40 million calls about PPI in three months has had its licence to act as a claims management company taken away. The regulator said that the company, called Falcon and Pointer, had set out to ‘plague the public and rip off consumers’.

The government says that in the future, it will make all companies that cold call people display their caller ID number. If they don’t do this, they could be fined up to half a million pounds. The government says that one in five cold calls reported to the Information Commissioner is from a withheld number.

Help to buy scheme in London goes live

The government’s scheme to help Londoners buy their first home will go live on February 1st. The scheme will let buyers borrow up to 40% of the property’s price, as long as it costs less than £600,000. You’ll need to come up with a 5% deposit.

The help to buy scheme is an equity loan, which means there’s no interest to pay for the first five years (but you will pay interest after that).

When you come to sell or repay the mortgage, you have to pay back the same percentage of the property’s value that you borrowed. So, if you borrowed the maximum of 40%, you’d pay back 40% of whatever the property was worth at the time. If the house prices had risen, it could be a lot more than you’d borrowed.

Self assessment deadline – 31st January

If you’re due to send in your tax return, you haven’t got long! January 31st is the deadline when you have to file your tax return online and pay any tax you’re owed. But if you’ve never filed your tax return online before, you have to register so you can use the system. And that takes time.

If you’ve never registered for self assessment (perhaps because you’ve set up a business recently), you need to do that first. Once you’ve registered for self assessment you’ll be given a UTR (unique taxpayer reference – a bit like a National Insurance number for paying your tax bills). That can take up to ten days to arrive.

You’ll need that before you can register to file your tax return online – and getting your code to activate your online account can take – you’ve guessed it – another ten days!

SAVVY TIP: You’ll find information on how to register for self assessment and to file your tax return online on the Gov.uk website.

How to get a cheap loan

At this time of year, banks tend to have a ‘new year sale’ on their personal loans, and this year is no exception. Some banks are charging as little as 3.3% APR on loans between £7,500 and £15,000. So, if you want to take out a loan, how do you make sure you get the lowest rate?

  • Many lenders do ‘risk-based pricing’ which means that the better your credit score, the lower the interest rate is likely to be.
  • Interest rates on loans tend to be tiered, which means that you’ll get charged a higher interest rate on a smaller loan. Loans for £2,000 or less could cost you 15-20% APR.
  • Some banks give customers preferential rates. If you already have a product with the loan provider (such as a current account or credit card) you may get a better deal.
  • Loans are more flexible than you might realise. Although loans are designed so you pay a fixed amount over a fixed term, you can make extra payments early. The rules changed a few years ago and you can pay off up to £8,000 in any one year and you’ll only be charged a small penalty (1% of the extra amount you’ve repaid).

SAVVY TIP: I’m sure it goes without saying but don’t borrow more than you need to, or take out a loan if you can’t afford the payments. The interest rate APR (annual percentage rate) quoted on adverts isn’t the one you’re guaranteed to get.

State pension statements are confusing

Retirement may be a long way off for you, but if you want to know how much you may get from your state pension, you have to apply for a state pension statement. Now a parliamentary committee has described these statements as confusing and says they should be improved.

The committee was told that important information about state pensions was hidden on the second or third pages, that the language used was complicated and that some information was missing altogether.

SAVVY TIP: You can find out when you’re due to get your state pension by using a government state pension age calculator (which is quite straightforward to use!).

Meanwhile, a petition campaigning for changes to the way the state pension age rise for women was introduced has got over 100,000 signatures, and MPs will debate it in Parliament on February 1st.

Warm Home Discount scheme

If you’re a pensioner or on a low income, you may be able to get money off your electricity bill. Most of the energy companies have signed up to the Warm Home Discount scheme, which means money off your energy bills. Pensioners on a low income automatically qualify for it but others have to apply for it, and the closing date is soon. How does it work?

  • The Warm Home Discount is worth £140 and is given to you as a discount off your bill (rather than a cheque).
  • If you’re a pensioner and you get the guarantee element of Pension Credit (which tops up your pension to a minimum level), you’ll automatically get it.
  • If you don’t qualify for the discount automatically, you may get a letter from the Warm Homes Discount scheme asking you to apply by January 29th. You’ll need to ring a Freephone number and have your electricity account details handy.
  • If you don’t get a letter, you should contact your electricity supplier. They’ll be able to tell you if you can apply for the discount, and how to do it.
  • You’ll get a letter by the end of March telling you that you have been paid the discount (as long as you haven’t switched electricity supplier by then).

SAVVY TIP: Although the scheme officially closes on 29th January, some suppliers (including British Gas and Scottish Power) have already stopped taking applications for it.

National Savings’ Pensioner Bond

This time last year there was quite a scramble for National Savings & Investments’ ‘Pensioner’ or 65+ bond. Not surprising bearing in mind the fact it paid 4% if you tied your money up for three years and 2.8% if you took out a one year bond.

Now these bonds are coming to the end of the term and thousands of savers are wondering where to put their money now, especially as NS&I is paying a much lower rate of interest on its one-year bonds now (just over half at 1.45%). Here’s my advice on shopping around:

  1. Check out how much interest you could earn if you move your money to a different savings account. Bear in mind that from April 6th you’ll be able to earn up to £1,000 a year in interest from your savings and you won’t have to pay tax on it (£500 a year if you’re a higher rate taxpayer).
  2. Think about using a current account that pays interest. Several bank accounts pay between 3% and 5% if you’re in credit. There are catches though, in that the interest rate may only be paid for a limited time, may only be available on a limited amount, or you’ll have to pay a monthly fee for the account.
  3. Make sure your money is protected. You could only save up to £10,000 into each Pensioner Bond (so £20,000 in all), but if you move your money into a savings or bank account with a bank you already have savings with, bear in mind that only the first £75,000 is protected by the FSCS, which runs the savings compensation scheme. The limit fell from £85,000 on January 1st.