Money news, advice and predictions for savers and spenders.
By Jeremy Gates
Although the last of Britain's big six energy suppliers put long-awaited cuts on gas bills into effect this week, up to three million households could be wasting hundreds of pounds on energy bills.
That's the warning from Mark Todd, at price comparison service energyhelpline.com, who fears the problem has arisen because so many customers took capped tariffs in 2008.
He says: "Many people who switched to these tariffs at the peak of the price rises may now be paying rates way above current market conditions. Some feel they cannot leave these plans and are stuck with them until the end of the contract.
"They should take stock of their situation, because it is generally cheaper to take the hit on the penalty fee and switch to a cheaper deal. The average lock-in tariff is £247 more expensive than the current cheapest tariff."
Gareth Kloet, head of utilities at rival website confused.com, claims capped tariffs are only partly to blame.
He says: "Back in 2008, when energy prices were rising at 42% per year, we advised people to get capped tariffs, and for many it was a good decision. By late 2008, we had stopped recommending fixed price tariffs, but Ofgem said one in five consumers were on them in 2009.
"At least five fixed price tariffs expire in March/April 2010, when companies usually put customers back on standard tariffs, which are pretty much the most expensive in the market. Savvy shoppers must consider their best options."
After one of the coldest winters in 30 years, the sap is rising, evenings are getting longer and most households want to forget fuel bills altogether.
However, this year, that could be a costly mistake.
Mr Todd adds: "Although the latest round of price cuts saves households £30-£60 per year, a bigger gulf is opening up between internet tariffs and standard tariffs still used by two thirds of consumers.
"In some cases this gulf is £350 per year - a huge penalty for people who don't do their homework."
At its most extreme, Mr Todd identifies a gap of £532 per year. This is between a family on the British Gas fixed price tariff running to January 2012 and costing an average £1,428 per year, and the cheapest available online tariff of £896.
Other consumers on the EDF Energy price protection 2010 plan until September 30 this year could save £395 by taking the cheapest available option.
Scottish Power's capped price energy September 2011 is £284 more expensive than the cheapest in the market. Also, Scottish & Southern Energy's fixed price August 2010 is £405 more expensive than the cheapest option.
This week E.ON (formerly Powergen) cut gas prices by 6% for six million customers, with Scottish Power making an 8% cut.
These cuts complete a process started in mid-February when British Gas, slammed for years for its high prices, claimed its lower tariffs attracted 150,000 new customers in 2009. This took its total to 15.7 million out of 26 million households.
It became the first to announce long-awaited gas price cuts on gas only, which major rivals had to copy. However, electricity prices remain unchanged.
Conceivably, British Gas and the rest of the big six had to do act to recognise continuing falls in the wholesale prices of oil, gas and coal.
Pressures on the big suppliers increased when two small companies brought much lower prices to the market.
Last October, Ovo Energy announced a new energy plan: a duel fuel standard tariff that became the cheapest product available in 13 out of 14 regions.
Ovo customers pay by direct debit, receive monthly statements by email, and face a £30 cancellation fee if they get off the new energy plan before the year is up. Otherwise there are no hidden charges, penalties or complicated rebates.
On March 1 another small supplier, First: Utility, launched what it claimed was the cheapest online energy plan and the cheapest direct debit standard plan in the market.
Its online plan, at £883 per year, is £16 cheaper than British Gas's web saver 6, while its standard plan at £1,074 is £9 below British Gas.
Tens of thousands of consumers have signed up with these two minnows. What can others find good value?
Mr Todd says: "Internet energy prices have dropped rapidly while capped tariffs have been left behind. There is no reason to miss out on cheaper prices, so it is time to leave a capped rate and move to something cheaper.
"The cheapest standard tariff, on average is British Gas. Otherwise go online for a tariff which is at least £250 cheaper - possibly with a provider like Ovo."
Mr Kloet says: "The best option depends on personal circumstances.
"If you are on a tight budget, and want the security of knowing what your payment will be, a capped tariff is still a good option.
"If you are happy to monitor the market, a tracker tariff has advantages. The British Gas websaver, for instances, is priced at 6% below the standard tariff. If prices fall, trackers are a better bet, but within the next 18 months, prices are likely to start rising again.
"Energy companies are keener to see their accounts included in best buy tables. They reserve the best tariffs for consumers who go online and pay by direct debit, while people on standard tariffs pay the same old rate".
Mr Kloet points out that many suppliers offer online rates to consumers who merely sign up online and then request paper bills. The big firms are also keen to differentiate style and quality of service. E.ON, for instance, sends bills monthly, or every six months.
Mr Kloet thinks both Ovo and First: Utility are in a strong position while wholesale prices are falling. He says this is because they are not saddled with expensive energy purchased several years ago. But their price advantage could evaporate as prices start rising again.
At uSwitch.com, energy specialist Tom Lyon says: "Anybody who signed up to a fixed tariff pre-July 2008 didn't do badly.
"EDF has a tariff running until 2015, and five year tariffs have been a good buy in the past. British Gas has one which is just ending: customers paid slightly over the odds in the first two years, but since then, they have enjoyed some of the cheapest rates in the industry.
"However, there are massive price increases facing consumers not far down the line: one analysis by Ernst & Young spoke of £233 billion investment needed by 2025, equivalent to £550 per household per year for the next 15 years.
"Our core message remains 'go online, pay by direct debits, take a duel fuel tariff'. If you have never switched before, you will save at least £421. Manage, or at least sign up to an account online to save at least £300."
Mr Lyon adds that anyone who signed up to a fixed price tariff before July 2008, and will soon come off it, should move to an online tariff to keep paying about the same.
Her comes summer 2010 - when the prudent must still worry about energy bills.
:: Information: www.energyhelpline.com; www.uSwitch.com (0800 093 0607); www.confused.com.
Poundnotes
:: As the driving test celebrates its 75th birthday, a new partnership between leading retailer Halfords and Provisional Marmalade, the new driver's champion, offers learner drivers fully comprehensive cover on a family or friend's car for £3 per day.
On a traditional policy, premiums to add an L-plate driver can top £3,000. Car owners also put their no claims discount at risk if a learner has a crash. Some insurers raised the minimum age of named drivers to 21 or 25, preventing parents adding a provisional driver to their policy.
The new policy, in the name of the learner driver, costs £90.95- £99.50 per month and, to parents' delight, can be paid for by the learner. As a separate policy, it does not affect any existing insurance on the car.
The high cost of insurance deters many young drivers. The number of 17-21 year-olds with a provisional licence has fallen by almost a third since 1995. Also, an estimated 300,000 learners mistakenly think they are insured to drive a parents' car.
Halfords spokeswoman Diane Perry said: "High insurance premiums for young drivers deprive many of the vital practice they need to supplement tuition from qualified instructors.
"The Driving Standards Agency recommends over 20 hours of private practice alongside professional tuition and this insurance policy removes one of the biggest concerns facing parents when helping their children behind the wheel - the risk to their no claims bonus.
Information: Cover can be arranged on www.halfordslearners.co.uk. Packets of L-plates on sale in Halfords stores also carry details of scheme.
:: Most savers are losing money on savings in a bank or building society, says Michelle Slade at Moneyfacts.co.uk. Although latest inflation figures show the Consumer Price Index has fallen to 3%, a basic rate taxpayer has to find an account paying 3.75%. A higher rate taxpayer needs to account paying 4.98% to stop their savings pot eroding.
Only regular savers and holders of fixed rate bonds get anywhere near that. Ms Slade adds that on an average no notice account, the real return after basic tax and inflation are factored in is a miserable minus 2.42%.
:: Borrowers looking for a personal loan of less than £5,000 face a shock as loan rates have rocketed by up to 130% since 2006, says Moneysupermarket.com. This is despite the Bank of England base rate crashing 4% to 0.5% over the same period.
Four years ago, the top 10 average rates for loans of £3,00 was 6.49% APR, which equated to £309 interest over three years.
Today's average rate at 14.92% APR more than doubles the interest charge.
Tim Moss at Moneysupermarket.com reckons rates have soared because the Financial Services Authority (FSA) has cracked down on the sale of single premium payment protection insurance.
He suggests borrowers might ease the pain by borrowing larger amounts. For example, Sainsbury's Bank charges 15.7% on a loan of £14,700, meaning a payback of £5,838 over three years.
But if you borrow £5,000, the rate is only 8.8% payback and the total payback £5,679 - saving £159.
:: Britain's four-legged friends face an obesity epidemic, just like humans, says research released by Sainsbury's Finance.
The research claims that four animals in 10 seen by vets are overweight.
However, despite all these fit-to-burst Busters and Brunos, Sainsbury's pet insurance covers vets' fees of up to £7,500 per condition. Customers who spend £50 a week with Sainsbury's have Sainsbury's Pet Insurance and a Nectar card get £52 worth of Nectar points a year.
:: Information: 0800 056 5758 and www.sainsburysbank.co.uk/
:: High five savers
Phone No Rate Account Period Deposit Interest paid
State Bank of India 0207 454 4315 5.00% (F) Hi Return Fixed Deposit Five Years £1,000 Yly
Nationwide BS 0800 302010 4.75% (F) Fixed Rate Bond Five Years £1 Yly
Secure Trust Bank 0800 408 2020 3.25% 120 Day Notice Issue 1 120 Days £1,000 Quarterly
Santander www.santander.co.uk 3.20% Flexible ISA Instant £1 Yly
Barclays Bank 0800 494949 3.10% Golden ISA Issue 2 Instant £1 Yly
:: Top five borrowers
Phone No Rate Period Max% Adv Fee Incentive
First Direct 0845 610 0100 2.39% variable for term 65% £499 Yes
Earl Shilton 01455 844422 2.45% for 30 months 75% £599 Yes
ING Direct (UK) 0845 603 8888 2.69% 75% £945 Yes
Norwich & Peterboro BS 0845 300 2522 2.95% for three years 75% £695 Yes
HSBC 0800 494999 2.99% to 31/07/12 70% £999 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).
