Archive for April, 2010

The average pensioner unlocking money from their home has run up debts of nearly £36,000, research has shown.

Half of people aged over 65 who take out an equity release plan owe money on mortgages, credit cards and loans, with their borrowings averaging £35,991, according to Key Retirement Solutions.

The group said 27% of pensioners taking out one of the plans still had a mortgage on their property, on which they owed £45,600 on average.

It said the high level of mortgage debt among pensioners reflected the fact that many people had been forced to extend their mortgage into retirement after endowment and other investment policies taken out to pay it off had fallen short of the sum needed.

A further 20% of retired people unlocking money from their home had credit card debts of around £9,000, while one in five had outstanding loans averaging £10,447 and 3% had an overdraft of £4,290.

Overall, the group said the average pensioner who had taken out an equity release plan with it spent £297 a month on debt repayments, the equivalent of nearly 30% of their income.

The research, which was based on 3,501 customers, found that older pensioners were more indebted than younger ones, with the over 70s owing an average of £40,958, compared with debts of £29,314 among those aged between 65 and 70.

Dean Mirfin, group director of Key Retirement Solutions, said: “Property wealth has enabled the over-65s in common with the rest of the population to comfortably afford to borrow.

“Servicing debt cannot continue to be a way of life once you no longer have an income to enable you to comfortably make repayments and clearly many pensioners will struggle to juggle loans, credit cards, overdrafts and mortgages.”

Source: channel4.com/news/

Average personal debt in UK is £9,731 – with women most likely to lie to partner about clothes and men about alcohol

The UK’s “hidden” debt mountain stands at an estimated £55bn, according to new research today which reveals that as many as one in three consumers are keeping the full scale of their financial problems from their family.

The new report exposes the serious emotional and physical consequences of covering up that debt, ranging from problems at work, sleepless nights and anxiety, to alcohol abuse.

The research, for the Post Office, shows that while the average personal debt in the UK is £9,731.51 (excluding mortgages), people only admit to owing half this when talking to a partner or member of their family.

One in five consumers is hiding their debt from their partner, the research shows, while an overwhelming 78% of people who have hidden debt have never confessed to the true extent of their financial dishonesty. Of the 22% who did, the majority (60%) were caught out rather than choose to come clean.

A recent report from the Commons public accounts committee said that in the UK, one person in 10 is struggling to manage their debts, while the total of all personal debt is some £1,500bn. It warned that a government strategy to help consumers struggling with record levels of debt was “seriously deficient” because of poor management and a lack of leadership.

The Post Office research shows that of those who were found out, a quarter (25%) reported that they still tried to deny everything, despite the same proportion (26%) stating that hiding the debt only made their money problems worse. A breakdown of expenditure showed that expenditure on clothing was the item women were most likely to lie about (45%) while among men it was alcohol (19%).

The dishonesty led to anxiety, with 43% complaining of loss of sleep, 21% of mood swings and 12% admitting that they drank more alcohol; 12% said they could no longer do their job properly.

The research was commissioned by the Post Office and carried out online by OnePoll, which surveyed 2,258 UK consumers.

Doug Strachan, director of financial services at the Post Office, said: “The recession has put a massive strain on many families and people may be, for the first time, experiencing levels of debt that they cannot control. The most important thing to remember is that if you do need to borrow money, make sure you are responsible about it and set out a clear re-payment plan. Managing the debt effectively can mean there is no need to experience the terrible emotional and physical symptoms hiding debt can result in.”

Donna Dawson, psychologist specialising in personality, behaviour and relationships, said the knock-on effects were enormous: “Hiding the extent of debt from a partner or family member may give us a false illusion of control or independence, but the reality is that our mental and physical health suffers – and once uncovered, the health of our loved ones suffers as well. The irony is that the very things we are trying to protect – our trustworthiness and our good self-image – is lost anyway, when all becomes revealed.”

Source: Guardian.co.uk

A new agency has been launched aiming to improve money education in the UK and help people avoid debts.

The Consumer Financial Education Body (CFEB) has taken over the role from the City watchdog, the Financial Services Authority.

It will run the free guidance service – Moneymadeclear – which has a website and answers individuals’ queries.

The London-based agency is funded by a levy charged to authorised financial institutions and has 134 staff.

‘Confidence’

The agency will be headed by former Pensions Regulator chief executive Tony Hobman, who will start on 17 May.

“Now more than ever, people need help with their finances so that they have the knowledge, confidence and support to take control of their money and choose products and services that meet their needs,” he said.

The financial services industry pays about £100m a year towards financial education, which includes funding for this agency.

Recently, the British Bankers’ Association (BBA), which speaks for UK banks, said it felt that the current funding from financial institutions to pay for teaching was sufficient.

“Banks fully support financial education but would urge streamlining existing expenditure,” said Lesley McLeod of the BBA.

Source: news.bbc.co.uk

Debt consolidation is now a much less significant reason for people taking out personal loans than it was two years ago, according to new figures from Sainsbury’s Finance.

The supermarket bank, which offers a personal loan rates of 7.9% APR typical for loans of between £7,500 and £14,999 for Sainsbury’s shoppers, says this may be an indication that many borrowers are choosing to pay off their debts rather than consolidate them.

In 2007, one pound in every 13 taken out by Sainsbury’s Finance’s personal loans customers was solely for debt consolidation purposes. In 2008 this dropped to one pound in every 19, and in 2009 this fell to one pound in every 50. In contrast, large purchases such as home improvements and cars are becoming much more common reasons for people to take out a personal loan.

The supermarket bank says that a decline in debt consolidation may be an indication that the difficult economic climate has led debt-conscious consumers to try and pay off their debts, an analysis that backs up Bank of England statistics which show that for five consecutive months in the latter half of 2009, repayments outstripped new unsecured consumer credit.

Steven Baillie, Head of Loans at Sainsbury’s Finance, said:

“Debt consolidation has always been one of the most common reasons for people to take out personal loans, but while more and more people are taking out a loan for other reasons, there has been a sharp decline in the proportion of people borrowing money in order to consolidate their debts. This suggests that more and more people are choosing to repay their debts rather than consolidate them.

“However, for those with multiple debts, consolidation is still one way to reduce their monthly outgoings as long as they look around for the best rates on the market, which could save them a considerable amount in repayments.”

According to Sainsbury’s Finance, the majority of personal loans are currently taken out for more domestic reasons such as home improvements and buying cars, but there is still a significant number which are used to fund more unusual expenditure such as cosmetic surgery.

Source:  myintroducer.com

Consumers aged under 40 are most likely to seek help with their debt problems online, new research has found.

Of the 150,000 people who used the Consumer Credit Counselling Services’ (CCCS) online facility last year, two thirds were younger than 40, the same proportion as recorded in 2008.

The figures also revealed that more women than men are prepared to use online tools to help with their debt problems, with 53 per cent of users being female in 2008 and 2009.

Online debt counselling was also most popular with those with small annual incomes.

Four in ten users of the CCCS’ online services earned between £10,000 and £19,999. By contrast, the income group with the fewest users was those earning £30,000 or more, with less than one in five (16.5 per cent) debt counselling requests.

There was also a marked variation in users per region. The highest proportion of users came from the South East, at 14.8 per cent, while the North West and Yorkshire accounted for 13.7 per cent and 10.4 per cent of all users respectively.

The region with the smallest number of users was Northern Ireland, at just 1.7 per cent.

“The higher rates of online debt counselling users in any particular category is likely to be a combination of need for help with their debts and general internet usage,” commented Paula Searle, head of e-services at CCCS.

source: moneyfacts

The management of the government’s strategy for helping people in debt has been branded a “complete failure” by a committee of MPs.

The Public Accounts Committee said 51 different projects since 2004 had been uncoordinated, with no-one in charge.

The committee’s report said 11% of adults were struggling with debts, with the population’s total personal debt reaching almost £1.5 trillion.

The committee praised one initiative to give face-to-face debt advice.

Overall though, the committee’s chairman, Edward Leigh MP, was scathing.

“In 2004, the government launched a strategy aimed at improving the support to, and reducing the number of, people who struggle with unmanageable debt,” he said.

“No one is in charge of the strategy; groups intended to oversee it have not met, and there has been no reporting on its progress since 2007.

“The strategy has not been evaluated to assess whether the policy goals have been achieved and the department does not know how effective the interventions making it up have been.”

‘Gleam of light’

The committee’s report found one initiative to praise, launched by the Department for Business, Innovation and Skills in 2006, to give face-to-face advice to those in debt.

It described this project as a “gleam of light”.

“The £130m project is funded primarily from the Treasury’s Financial Inclusion Fund, and delivered locally by Citizens Advice and other third sector organisations,” Mr Leigh said.

“The department has achieved greater success in managing this particular project, which is delivering more debt advice than planned at a lower cost per person than budgeted.”

However, the report said that even this project was failing to help all those it was aimed at, and more people could be helped if the Department for Business had a better grasp of the best ways to give advice.

A Department for Business spokesman said: “The National Audit Office reports that the government has invested £600m to help people struggling with debt.

“Close to 300,000 people have been supported by the Department for Business face-to-face debt advice project alone, and the committee has recognised that it is well-liked and provides good value for money.

“We are already in the process of reviewing our schemes and will carefully consider the report’s findings with other departments across government.”

source: BBC

Figures to be released by the Bank of England may show that consumer credit increased by £0.5m in February, but the Consumer Credit Counselling Service (CCCS) believes the economic downturn has made a lasting impact on the way people in Britain view debt. According to a spokesman for the charity, which provides assistance for people in financial difficulty, the reported increase in personal loan and credit card borrowing is more likely to stem from escalating competition in the market than a return to pre-recession borrowing habits.

Nevertheless, the spokesman has warned that Britain’s debt crisis has yet to come to a head, suggesting the importance of shopping around for the best personal loans is now more obvious than ever.

Increased lending

Growth in consumer credit has fallen sharply in the wake of the economic downturn, with many households being forced to rein in spending as a result of decreased income or prohibitively high interest rates. However, the latest figures suggest the tide is turning as the annual growth rate of consumer credit rose by 0.3 percentage points to 0.2% in February. This followed a £0.4bn increase in credit card lending and a £0.2bn surge in personal loans and other advances.

Yet while it would be easy to conclude from this that the return of growth to the British economy has filled consumers with greater confidence when it comes to borrowing, the CCCS spokesman believes the trend has been driven by providers rather than consumers. He argues that relaxed lending criteria combined with lower rates has injected more life into the market, and is not worried that Britons have forgotten one of the main lessons learned during the recession, namely that they should not borrow more than they can afford to repay.

Changing attitudes

Indeed, the spokesman believes the greater focus on budgeting which came with the recession is here to stay, with consumers now showing an improved willingness to pay off their personal loan and credit card debt. That said, he also noted that a changed attitude towards debt is not enough to help those in trouble. The recession might officially be over, but the number of people turning to the CCCS for help is still on the rise, with many of those seeking advice unable to cover the cost of their basic living requirements, never mind their debt repayments.

Furthermore, the spokesman predicts that things will get worse before they get better. “Future interest rate rises and cuts in public spending will hit consumers hard. 2009 has been a year of ‘pain deferred’, and more households can be expected to come unstuck next year,” he confirmed. In the meantime, consumers will have to concentrate on restricting expenditure and seeking out the best personal loan deals so interest repayments can be kept to a minimum.

Source: compareandsave.com

THE pound’s fall against the euro is pushing many expatriate Britons into serious debt, it emerged yesterday.

A leading financial helpline has seen a huge rise in calls from pensioners who retired to Spain.

The Consumer Credit Counselling Service has been contacted by more than 500 people living overseas this year – a 33 per cent jump on 2009.

Many who had hoped to spend their retirement abroad fear they may be forced to come back to the UK.

Una Farrell, spokeswoman for the helpline, explained: “Pensioners living in Spain are facing a big challenge when it comes to repaying their debts. Those over 60 tend to have higher debt levels anyhow and many are asset rich but cash poor.

“The decreasing value of sterling means that anyone whose pension is paid in British pounds has seen its value decline massively when they change it into euros. This is not a situation they expected when they moved to Spain to enjoy retirement.”

Britons who rely on their pension income to keep them afloat while living in mainland Europe have seen the pound fall from about 1.5euros to the pound in 2007 to 1.1euros today.

That, combined with the rising cost of living, has left an estimated 5.5million British expats much worse off.

CCCS says the rise in calls for debt advice is being driven by expats in Europe without enough money to clear debts racked up back home.

The charity’s helpline manager Laura Carver said: “We have had people whose income had allowed them to live comfortably abroad and, although that income hasn’t changed, they have been left struggling by the decreasing value of the pound.”

The bleak figures follow a warning that nearly four million Britons living abroad are planning to move back to the UK because of dwindling incomes and falling property values. Seven in 10 expats are considering a return, foreign exchange specialist Moneycorp found.

This month the European Court of Human Rights refused expat pensioners the right to be paid the same pensions as those living in the UK.

Judges said denying index-linked state pension rises to the 500,000 retirees living abroad did not breach their human rights.

The National Pensioners Convention described the decision as “shameful and morally unjust” in light of all the national insurance contributions the pensioners had paid.

THE average person is nearly £6,000 in debt over and above their mortgage, a report revealed yesterday.

This is despite many making inroads into debts after the recession provided a financial wake-up call.

A quarter of people used cards or overdrafts for everyday needs like petrol and food.

The typical Briton has a credit card debt of £1,747 spent on clothes, shoes, gadgets and furnishings. They also owe £3,077 in loans for cars, weddings, holidays and house repairs.

A further £518 is owed on bank overdrafts, with most people also owing around £646 on finance deals to cover kitchens, sofas or other household goods.

That adds up to an average £5,988, says the lovemoney.com survey.

A spokesman said: “It’s a shame but not a surprise.

“It was way too easy to borrow in the boom and it’ll be a long time before we’ve all nursed our finances back to good health. It’s best to get free counselling from a charity such as National Debtline.”

Source: express.co.uk