Money news, advice and predictions for savers and spenders.
By Jeremy Gates
If this week's warning that one in eight jobs in Britain's public sector could be axed in Government spending cuts is accurate, many jobs in the private sector too could be at risk before too long.
The analysis by Dr John Philpott, chief economic advisor of the Chartered Institute of Personnel and Development, pitches public sector job losses in Britain as high as 725,000.
Without quantifying the knock-on effects to the private sector, the institute sees unemployment peaking at nearly three million from late 2012 until 2015.
How can workers protect against the worst - a sudden loss of income cushioned only by a small pay-off?
The first line of defence is obviously a savings account to cover that period until another job can be found. If possible, those in regular employment should have enough in the bank or building society to cover four months' basic living expenses - because they might wait several weeks for payment in a new job.
Self-employed workers may need more, typically six months' money - because they aren't entitled to statutory sick pay or possible assistance from their employer.
Beyond that, many might look at Payment Protection Insurance (PPI), a policy which pays out on loss of income - due to redundancy or inability to work because of accident or sickness. But the scheme is currently knee deep in compensation claims from outraged consumers.
When the Financial Ombudsman Service (FOS) reported last month that it had resolved 166,000 new complaints in the past year, it revealed that nearly 50,000 complaints had been lodged alleging the mis-selling of PPI intended to cover loan repayments in the event of accident, illness or redundancy.
In 90% of PPI complaints, the FOS found in favour of consumers. About 60% of PPI complaints which reach the FOS go through claims management companies, which charge up to 25% of the eventual award for taking up the case.
At one claims company, Brunel Franklin, managing director Sally Bowyer says: "If a person's PPI policy cost more than the car for which they took out the original loan, or they discover years down the line that PPI was automatically added to a loan without their knowledge, we believe most reasonable people would consider this to be an outrageous state of affairs."
Brunel Franklin claims its average win for mid-sold PPI tops £2,000. Ms Bowyer thinks millions of people who took a loan or credit card in recent years have not yet realised they could make a successful claim.
However, Andrew Hagger at Moneynet.co.uk, who has produced a new guide to PPI with British Insurance, believes problems stem mostly from PPI policies sold as a single premium product on loans provided by High Street banks.
Says his Moneynet guide: "PPI cover has traditionally been sold by credit providers alongside mortgage, loan or credit card products.
"However, the Competition Commission intends to ban lenders from selling PPI at the point you take out your borrowing. So you can shop around for cover from intermediaries and direct providers via the internet to get the best deal."
If tighter controls can clean up its reputation, PPI could yet play a useful role, Andrew Hagger thinks.
"Whilst State support is available for those who lose their jobs, it is hardly sufficient", he says.
"Weekly Jobseeker's Allowance of £65.45 is barely enough to cover a food bill, while fewer than 2% of households qualify for the Government's £40 a week Income Support for Mortgage Interest scheme (recipients are means-tested).
"In some instances, PPI can clearly help. It may be worth considering it when you are not under financial pressure."
Tim Moss, head of loans and debt at financial website moneysupermarket.com, agrees. "There is no doubt PPI become a 'cash cow' for the banking industry. Mis-selling was the inevitable outcome of this and consumers lost out as a result", he says.
"This led to the product being tainted in the eyes of many consumers who now try to avoid it completely when, in reality, many will need some sort of protection in place should circumstances change."
"We need to be careful not to throw the baby out with the bathwater. PPI is a useful product for many consumers, giving peace of mind at a time of financial uncertainty.
"Consumers should still consider protecting their repayments, and shop around to find the best solution for them which may be through specialist insurers, rather than from a loan provider."
One specialist provider of low-cost PPI is Paymentcare, where managing director Shane Craig advises: "Think about potential problems before your job is at risk.
"Once you know your job is going to go, it is too late to take out cover."
Paymentcare policies cover payments on loans, credit card balances and mortgages - but don't accept claims made within 120 days of a policy being taken out. Applicants must also verify they have been unemployed for 30 consecutive days before the first payment is made on Day 31.
Online applicants at Paymentcare can purchase a policy paying a maximum monthly income of £1,500, for a monthly premium of £72 75p.
On policies arranged by a financial advisor, the maximum amount payable monthly rises to £2,000. This higher level reflects the fact that financial advisers make it harder for policies to be arranged when a job is already doomed.
However, low-cost PPI will pay out only for a limited period - in the case of Paymentcare, for a maximum of 12 consecutive months - and policyholders must get back in work for at least 90 consecutive days before they make another claim.
Shane Craig obviously hopes PPI can come back into favour in difficult times which lie ahead.
"With a new Government in place, and an emergency Budget around the corner, we can expect significant changes to the way we manage our money", he says.
"Affordable, appropriate and accessible financial protection for all is one aspect of the much-needed financial rejuvenation that helps consumers to stay in control of their finances."
:: Information: Paymentcare (0844 406 4088 and www.paymentcare.co.uk); Moneynet.co.uk/British Insurance guide to PPI available at 08450 175178 or at www.britishinsurance.com.
Brunel Franklin (0800 051 5451 and www.brunelfranklin.com.
Poundnotes
:: Despite President Obama's fury, oil giant BP will probably survive the leak in the Gulf of Louisiana. The puzzle for small investors is when to buy BP shares down more than 20% from their peak.
Even City experts seem uncertain. At The Share Centre, investment advisor Graham Spooner has "definitely seen a trend start to emerge where dramatic falls in the share price have generated deals from investors: typically, buys rather than sells.
"We urge investors to assess the level of risk they are willing to accept before making any rash moves", he says.
SocGen sees BP bouncing back to 530p within a year while brokers Killik & Co says BP's low level of borrowing (gearing) at 19% of its value is good reason for holding on.
If you haven't already got BP shares, however, there are few reasons to become a buyer right now. Those who buy now could wait some time for their first quarterly dividend, thanks to the furious Obama.
:: As soccer fans in the Premiership book season tickets for 2010/11 season, financial website Moneysupermarket.com reckons the best value - by measuring the price of the season ticket against likely number of goals scored - will be enjoyed by the fans of Newcastle (at £8.30 per goal) followed by Blackburn (£8.70); Blackpool (£9.05) and West Brom (£9.35).
By comparison, Man United fans will pay £14.04 per goal, and Wolves - bottom of the league - will pay £43.96.
However, as newly promoted clubs dominate the Moneysupermarket league table, fans might reflect that many of the goals they see will be scored by the visiting teams.
:: The European Court of Justice ruling which backs moves to cut mobile roaming rates by up to 70% from July 1 is a boost for 22 million holidaymakers who will take phones abroad this summer, says Matthew Wheeler at price comparison site uSwitch.com.
"However, caps coming into play only apply inside the EU. Holidaymakers venturing further afield to flee the Euro must still keep a close eye on phone use", he says.
"Wherever you go, contact your network before you travel to ensure you fully understand the cost of using a phone while you are away.
"Switch off your voice email and roaming options unless you really need to use them. International and local SIM cards are a great way of making calls while abroad as you can benefit from far cheaper rates.
"When it comes to using the internet on your mobile abroad, the best advice is don't do it. While some networks offer special deals, roaming abroad is far from cheap. Talk and text is definitely cheaper."
uSwitch.com also advises savvy consumers to get their provider to cap data roaming charges to an affordable level; and if they have an unlocked phone, to buy a local SIM card when they arrive at their holiday destination.
If they know they will be making calls while away, they might also buy an international PAYG SIM, such as Trufone.
Enquiries: 0800 093 0607 and www.uSwitch.com.
:: For savers struggling to get a decent return on their money, Nationwide BS claims its new two and three-year bonds are 'market-leading'.
Its two-year Fixed Rate Bond and e-Bond will pay 3.50% gross on balances of £1 and more, while the three-year Fixed Rate Bond and e-Bond promises 4% gross. The three-year Fixed Rate ISA promises 4% gross, with interest paid annually.
Before they lock their money away, savers will need to reflect how soon they expect rates to rise.
:: High five savers
Phone No Rate Account Period Deposit Interest paid
ICICI Bank www.hisave.co.uk 5.00% (F) HiSAVE Fixed Rate Five Year Bond £1,000 Yly
Aldermore 0845 604 2678 4.70% (F) Fixed Rate Account Five Year Bond £1,000 Yly
AA www.theAA.com 4.55% Internet Fixed Rate Five Year Bond £1 Yearly
Close Savings 0207 392 1772 3.15% Premium Gold 180 Day 180 days (B) £10,000 Qly
United Nat'l Bank 0800 218 2266 3.02% Three Month Gold Deposit Three Months £1 Half-yearly
:: Top five borrowers
Phone No Rate Period Max% Adv Fee Incentive
First Direct 0845 610 0100 2.29% variable for term 65% £99 Yes
ING Direct (UK) 0845 603 8888 2.55% disc to 31/08/12 70% None
Yorkshire BS 0845 120 0874 3.89% to 31/07/13 75% £995 Yes
Loughboro BS 01509 610707 2.99% for three years 75% £799 Yes
Hinckley & Rugby BS 0800 774 499 3.39% for term 75% £795 Yes
Code:
*F - Fixed
*P - Operated by Post
*B - Operated by Post/Telephone
*T - Operated by Telephone
*W - Operated by Internet
*H - Operated by Internet/Telephone
*S - Available only to those aged 50 or over
*R - Available to those aged 60 and over.
:: Source: Money£acts - Tel: 01603 476 476 (All rates subject to change without notice).
:: Please note: This is a resend of FINANCE Finance Column, upper-casing the letter B in byline.
