IT'S been good to hear from more worried readers in the last couple of weeks. That may sound odd and uncharitable, but bear with me.
It tells us that more people are dusting off their pension statements and bank letters to get a better understanding of where their finances stand. Sometimes it's scary, other times reassuring, but an economic crisis has a useful side-effect of heigh
tening our financial awareness. Half the battle in keeping your finances in order – whether it's controlling debts or making sure retirement plans are on track – is acknowledging, monitoring and reviewing them. (For tips on how to go about reviewing your finances, turn to page 50).
Unsurprisingly, the havoc that market volatility has wreaked on pension investments has been the biggest source of concern. But as long as you are diversified, one or two of those firms imploding will not wreck your retirement plans.
What's more, it's becoming increasingly evident that stock markets are dislocating from the economy, with the market pricing in an even more severe downturn than the one we're likely to experience. So when the credit systems eventually thaw out, investors who remain invested with decent diversification will be in a strong position.
RIGHTLY or wrongly, the general public doesn't have a great deal of trust in financial services. Misselling has a lot to do with that, but it's still happening. A prime example is the continued sale of single premium payment protection insurance (PPI) alongside loans and credit card agreements.
On a standalone basis, the product itself (which covers debt repayments in the event of being unable to work due to an accident, illness or unemployment) makes a lot of sense, particularly at a time of rising unemployment.
But for too long it has been missold alongside the credit or loan it is designed to cover, often to customers who don't need it, were not even told they were buying it or would not be able to claim on it in any case. It's estimated that claims on PPI policies sold with loans are in the region of just 14 per cent, far lower than any other form of insurance and evidence enough of misselling.
Thankfully the Competition Commission has now proposed a 14-day delay between the sale of the loan or credit card and approaching the borrowers to sell the PPI, taking pressure off customers and giving them time to consider the alternatives. If the public is to regain a degree of trust in financial services, this is the kind of measure that's required.
IF YOUR credit card statement didn't tell you the minimum amount you need to pay off your balance each month, you would probably pay less. Or would you? Not according to research carried out by Neil Stewart of Warwick University. He found that giving minimum payment information actually causes people to pay less off their balance than they would do otherwise.
Stewart carried out a survey of credit card users and discovered that those paying less than the full balance but more than the minimum typically choose a repayment figure that correlates with the minimum payment on their statement.
With that in mind, Stewart then gave hundreds of users the same outstanding balance figure, told half of them the minimum payment level and asked them how much they could pay off. Almost half said they would pay off part of the bill. But of those, the users given the compulsory minimum repayment level said they would repay 70 per cent less than the users who were not told the minimum payment. In other words, awareness of the minimum payment required has the adverse affect of dragging down repayment levels – costing card holders a good chunk of money
