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.
Don’t pay the loyalty penalty
Citizens Advice says that people are being overcharged by almost £900 a year by companies that penalise long-standing customers. We’re always being told to shop around (usually by people like me!), but Citizens Advice thinks that it’s time for the competition watchdog, the Competition and Markets Authority, to get tough with companies that impose a loyalty penalty.
It’s launched a ‘super-complaint’, which it can do if it thinks there’s an industry wide problem that needs a regulator to intervene. Citizens Advice says that people who stick with the same home insurance provider for five years pay up to 70% more for their policy, while people who are on a monthly mobile phone contract, where they pay for a new handset as part of the deal, pay over £260 a year too much, on average.
That’s because they don’t switch to a cheaper deal when the initial contract (typically 18 months to two years) runs out. Most mobile phone providers charge the same monthly fee, even though you’ve already paid for the handset.
Citizens Advice wants the competition watchdog to act in five areas: insurance, savings, broadband, mobile phone and mortgages.
SAVVY TIP: You can make the biggest savings if you’ve been with your home or car insurer for a few years, or if you’re paying the standard variable rate on your mortgage. So that’s where I’d start if you’ve not shopped around before.
Shop around for insurance using a price comparison site or an insurance broker, and get a mortgage broker to find you the best mortgage deal. Some mortgage brokers charge a fee for their time, while others take a payment from the lender they recommend. There are some digital-only mortgage brokers that let you do most of the process via your phone.
Refunds where you paid a fraudster
More people are being conned into paying fraudsters, according to the banking trade body. It released figures showing that almost £150 million was defrauded out of people in so-called ‘authorised push payment frauds’ in the first six months of 2018 – that works out at over £800,000 a day.
An authorised push payment fraud is where you pay someone who you think is genuine. Except they aren’t. It could be a fraudster posing as a building company, or as your solicitor if you’re buying or selling a property. Or they could pretend they’re from your bank and that you need to transfer your money to a ‘safe’ account, as it’s in danger of fraud (ironically).
As soon as the money you’ve paid has landed in the fraudster’s account, the account is emptied. That means, even if you realise what’s happened and report the fraud straightaway, you may not get much of your money back. Only around a fifth of the money that’s lost in this way is ever refunded. And victims can lose tens or even hundreds of thousands of pounds.
Banks sometimes take the view that, because you made the payment, they don’t have to refund you. Whereas if a fraudster hacked into your account or stole your details, the bank would have to pay you the money that you’d lost.
There is some good news in that a new voluntary code was published last month [SP1], which – if it’s adopted – could mean that people get their money back. Not everyone would qualify for a refund and you’d have to be able to show that you’d taken steps to check out the person or company before you paid. If you can, the bank should refund you.
This new code won’t be in place until next year, but some banks have already said they plan to abide by it.
If you’re buying your first home, watch out if it’s leasehold. Most flats in England and Wales, and some houses (especially ones on new developments) are leasehold. It’s an odd system that doesn’t exist anywhere else in the world – and it means that you, as the flat or house owner, don’t own the bricks and mortar. Instead, you just own the right to live in the property for the length of the lease. The lease can be anything from 21 to 999 years. And a typical lease is for between 99 and 125 years.
The government is thinking of banning the sale of new leasehold houses, although it hasn’t done this yet. It’s also looking at ways of making it easier for owners of leasehold flats to get a better deal.
The leasehold system is something of a cash cow for unscrupulous freeholders (who own the property) and managing agents (who arrange things like insurance and repairs). The law does let you choose your own managing agent, if you live in a leasehold flat. But there are some legal hoops to go through first. You can also buy out the freehold, if you can afford to do this. That means you and other flat owners, if it’s a flat, own the building and you can agree how to manage it between you.
SAVVY TIP: Never buy a property without checking whether it’s freehold or leasehold. If it’s leasehold, make sure you get a copy of the lease and get your conveyancing solicitor who’s sorting out the legal side to check it out and point out any tricky clauses. The lease is the contract between you and the freeholder, and some leases are much more restrictive than others.
How do you pay for things like a sandwich or a coffee? With cash? Your contactless card? Or maybe you use your smartphone or watch? Of course, you could use good old cash! Many of us still do (including me!), but around one in five of people no longer pay for small transactions in cash and around the same number often leave the house with no cash.
I must confess I’m still quite old school and would feel too nervous to set off with no cash in my purse. But around a third of the people surveyed regularly leave the house with only a credit or debit card.
Paying by contactless card is convenient, but make sure you get a receipt and check what you’re spending. Contactless transactions can take a few days to show up on your statement, and if you don’t have a razor sharp memory, you may not remember exactly what a particular transaction is for.
[SP1]It was published today – 28th