Category: Finance

Millions of Britons not Saving for the Future

Feb. 25 Economy, Finance no comments

Saving should be encouraged among others who often work hard and spends more but does not leave any amount to spare for future needs. People nowadays are having a hard time doing all the budgeting because everything seems to be increasing but jobs are not that stable and the salary is not even increasing. It is a challenge to those who have spent most of their lives at work. Devoting their time to their profession to earn more money and to live and pay for their daily needs. A lot may have been affected by the recession and most of the time people have debts that they can’t even handle.

A new study has revealed and alarming result among the Britons. It was found out that there is fifteen million Britons who do not save or even thinking of saving for their future. The study also included that there were more and more Britons borrowing money in the form of loan and this are big amount of money to be able to sustain their needs on a daily basis. In the United Kingdom’s population there are 31% who fail to save last year. The study has shown that families fail to save because they loan money to give to their children. It would turn out that the burden is placed on the parents.

The finances of the parents would probably fall and they could no longer have the chance to save. Same research has found that many grandparents would offer help to their grandchildren. Most of the Britons often cut their savings since they need to prioritize the cost of living which has been drastically rising. The annual living cost that has increased was caused by many factors that include lifestyle, education, and the increase of life expectancy.

£700m Put Aside by Banks for New Mis-selling Scandal

Feb. 06 Finance no comments

A new scandal has emerged which could cost banks around £2bn in putting things rights. Barclays, HSBC, Royal Bank of Scotland and Lloyds have put aside £700m in order to compensate the small businesses who were victims of the mis selling of a complex financial derivative known popularly as ‘interest rate swaps’. The Financial Services Authority, the city regulator has urged the banks to review all cases which may have been mis sold financial products. They have said that around 40,000 cases have been the victims of the mis-selling of interest rate swaps since 2001.

Interest rate derivatives were originally designed to protect businesses from rising interest rates. Many small businesses have now however been faced with large amounts of debt and a struggle to pay the banks. However a pilot study carried out on 173 cases found that 9 out of 10 sold to small and medium sized businesses did not meet the regulatory requirement.

Vince Cable, business secretary, said “This is an example of the little guy paying for the big banks
wrongdoing. The immediate priority is to ensure small businesses are not driven out of business by
banks pursuing liabilities for swaps that they mis-sold.”

The FSA is still reviewing sales by Allied Irish Bank (UK), Bank of Ireland, Clydesdale and Yorkshire
banks, Co-operative Bank, and Santander UK. It aims to announce the scale of customer reviews at
those banks from 14th February.

Some affected by this scandal have said that the financial products were a condition of taking out
the loan, others have said that banks had used strong sale tactics in order to sell. As a result many
businesses are now waiting to have their cases reviewed in order to be compensated for any loss. Britain’s biggest banks have already set aside around £12bn in order to compensate those victimised in the Payment Protection Insurance scandal. To find out more go to www.InterestRateSwapsClaim.co.uk.

Payment Protection Insurance Claim Woes Force HSBC to Set Aside A Further £500m

Dec. 30 Finance no comments

The PPI scandal has taken a further toll on the HSBC bank as it has now set aside 500 million pounds to deal with the payment protection insurance scandal as well as additional allegations being thrown its way by the American government. These additional allegations are potentially more disastrous for the bank’s fragile reputation.

Serious accusations were brought against the bank by the US government recently, causing HSBC to set aside over 1.5 billion American dollars to deal with any ensuing scandal. They have been accused of unknowingly assisting drug cartels and rogue states by allowing them to use the US arm of the bank to launder billions of pounds. No additional details as to how this was done – including any specifics – were divulged, but the financial institution’s reputation is already taking a serious hit. These are very serious claims and HSBC are reacting accordingly by using £500 million to cover the fines they will be hit with by the US authorities. There is still no agreement as to how much the bank will have to pay, but when all is said and done the amount could be considerably higher.

As if this new scandal wasn’t enough the bank has added 220 million pounds to their hefty payment protection insurance bill. Because they were mis-selling payment protection insurance at such a large rate they needed to increase the amount they had earmarked to compensate those who deserved refunds. Their bill has amassed to much more than they expected, so much so that with this additional £220 million they have now spent £1.2 billion on repaying payment protection insurance claims.

Between the PPI scandal and these new money-laundering accusations, HSBC’s pre-tax profits have decreased over 50 percent in the most recent three-month period. This newly projected profit of £2.2 billion is being attributed to the value of their current debt as well as the US government’s claims.

Claims Standard Council Speaks Against Bank’s Lack of Action for PPI

Nov. 09 Finance no comments

Claims Standard Council (CSC) Chairman Anthony Sultan, stated that banks should not blame claims management companies and that they are having trouble keeping up with processing payment protection insurance claims due to their own actions. He states that it was the banks’ faults in the first place that they are compensating for mis selling PPI, which brought them an estimated profit of £5 billion yearly for each bank.

Banks have blamed claims management companies such as MisSoldPPIClaimsCo.co.uk, for taking payment from customers for every successful claim and for increasing bureaucratic costs of banks. However, the CSC says that CMCs only “fileld the gaps” that banks left behind.

PPI or payment protection insurance is a policy designed to provide repayment for any loan, mortgage or credit card when the customers gets sick, injured or unemployed. The guaranteed benefits became impossible to claim as many citizens bought the insurance ineligible for its exclusions.

The high PPI bill in the United Kingdom now amounts to £13 billion. Barclays now has a total of £3.7 billion and Lloyds is leading the pack with £5.3 billion. RBS reserved a further £400 million making its total £1.7 billion and HSBC announced it would be adding £223 million more to its £1.1 billion compensation package.

Reliance on Debt on the Rise

Nov. 08 Finance no comments

The months preceding the Christmas period are always difficult for those on low incomes, and even middle-income earners are feeling the pinch as November takes hold. The current economic climate is not a favourable one – despite the government’s insistence that the recession is officially over – and the latest figures suggest that more people are turning to credit as a way of tiding themselves over.

September saw a surprisingly high level of debt, with UK consumers taking on borrowing on credit cards and loans to the tune of £1.7billion. This figure includes the biggest increase in unsecured loans for four and a half years. The news has been met with two responses: optimism that consumers are returning to credit and, therefore, spending, and concern that many people are taking out expensive and potentially crippling loans.

Wage rises remain far below the rate of inflation, a problem that manifests in more ways than one, so families are finding it hard to make ends meet. A credit card is a sensible way of borrowing money if it is used carefully, but any overdue payments can be very high indeed. This is also true of short term, so called ‘payday loans’ which are currently the subject of much controversy.

More Prepared to Spend

Economists have expressed the opinion that the latest trends in borrowing are signs of consumer’s willingness to spend. However, some are warning against taking too much notice of one month’s figures, as Howard Archer of IHS Global Insight told The Guardian:

“The marked rise in consumer credit in September is potentially notable as consumers’ appetite for taking on new borrowing has been limited for some considerable time, while there has also been an ongoing strong desire of many consumers to reduce their debt. If consumers are becoming more prepared to spend – helped by recent healthy employment growth, lower overall inflation and an edging up in earnings growth from the lows seen earlier in 2012 – then there is a real chance the economy can continue to grow following the third-quarter rebound in GDP.”

However, researchers Capital Economics had a different opinion, with their UK economist Martin Beck explaining:

“The prominence of growth in consumer credit suggests that it may reflect households seeking to maintain spending in the face of continued declines in real earnings. So September’s numbers may be more indicative of the economy’s weakness than any resurgence in its strength.”

There is a sense that the economy is on the up, but that more time is needed before we can claim a major step away from recession.