Past Articles for August, 2007

Costs associated with sending children to school are putting a significant financial burden on parents around the UK, according to a recent study carried out by Citizens Advice.

As debt management problems increase for households nationwide, the charity reports that three in four parents find school costs difficult or very difficult to pay.

Charges for trips, books and uniforms can add to financial pressures and steps should be taken by the government to ensure that parents are able to meet the demands of sending their children to school, Citizens Advice makes clear.

“Parents shouldn’t have to spend sleepness nights worrying about how they are going to pay for what their child needs simply to go to school,” said David Harker, chief executive for Citizens Advice.

“For many it doesn’t feel like a ‘free’ education, it is hitting their budgets very hard and potentially having a direct impact on children’s schooling.”

According to Citizens Advice, around 20 per cent of people approaching its staff for help are looking to find a debt solution.

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Borrowing money from or to friends and family can often lead to debt management problems for all concerned, one expert has warned.

Stephen Rose from the Debt Advice Bureaux suggests that there are financial risks involved with lending to friends or family, particularly if no written agreement has been drawn up by the two parties.

Furthermore, he claims that the risk of debt problems is more acute if an individual has taken on a loan in order to lend that money to someone else who could not secure the cash themselves.

“Where the family member that’s lent to them has borrowed the money themselves… that magnifies the problem,” said Mr Rose, who is the director of the not-for-profit organisation.

“Because if… the repayments they were expecting from their family member aren’t coming forward, then there’s almost a domino effect there.”

A quarter of all British adults have added to their debt management burden over the course of the past three months, figures from MoneyExpert.com revealed recently.

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A report from the consumer group Which? has highlighted some of the ways credit card providers are aiming to increase their revenues.

Which? describes the methods used by financial service firms to raise revenues, including low usage fees and unclear interest rate calculations, as “ingenious”, but warns that consumers could find themselves struggling to deal with their credit card debt as a result.

The recent report claims that credit card companies are adjusting the ways they make money following an Office of Fair Trading (OFT) ruling, which limits the penalty fees they are able to levy to £12.

Martyn Hocking, editor of Which? Money, commented: “Credit card providers seem to be resorting to a raft of ingenious methods to recoup lost revenue following the OFT crackdown on penalty fees.

“To avoid being stung, opt for a Which? Money Best Buy credit card and always check the small print to make sure you know what charges apply.”

Earlier this year, research by the UK payments association Apacs revealed that half of all British credit card users do not thoroughly read through their statements.

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The national charity Citizens Advice has welcomed plans that will see schoolchildren aged 11 to 16 around the UK taught how to manage their money.

It is hoped that the “economic wellbeing and financial capability” lessons will lead to a reduction in the number of British adults who find themselves dealing with debt management difficulties.

The charity is convinced that if children are given access to these kinds of lessons in schools, they will engage with the subject and stand a better chance of dealing with money problems more effectively.

A spokesperson for Citizens Advice said: “We very much welcome the move to improve people’s skills in personal finance, because we know that a lot of debt problems are caused, at least in part, by a lack of understanding and a lack of confidence in dealing with money matters.”

More than 1.4 million people approached Citizens Advice about debt issues over the course of last year, according to the organisation’s own figures.

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Recent research has suggested that young British consumers are the most likely to be fearful of rises in the base rate of interest.

According to a study carried out by ICM Research on behalf of Intelligent Finance, a full 40 per cent of Britons aged between 18 and 24 are worried about an increase in the cost of borrowing and a further one in ten consider themselves extremely worried about the prospect of added debt management pressures.

The Bank of England’s monthly decision on where to fix the cost of borrowing is also a cause for concern for 41 per cent of all adults around the country, the latest figures demonstrate.

“With interest rates on the rise and purse strings tightening, it’s important to make every penny work as hard as possible,” remarked Mark Parker, managing director of Intelligent Finance.

The cost of borrowing is currently at a six-year high of 5.75 per cent, which has made it more difficult for many British consumers to find a debt solution.

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An increasing number of homeowners around the UK are remortgaging their properties in an effort to become debt free , one expert has asserted.

Sue Anderson, head of member and external relations for the Council of Mortgage Lenders (CML), suggests that replacing one mortgage loan with another from a different lender is an increasingly common way for UK consumers to address their debt management problems.

The trend is being driven by an urgency among British consumers to pay off their unsecured debts and to leave only “less expensive secured credit” outstanding, explains Ms Anderson.

Reflecting on the rise in remortgaging around the country, Ms Anderson commented: “We know that the UK is becoming more indebted and that would seem to be a logical thing that people may well be doing.”

Earlier this month, the CML revealed that the number of homes repossessed in the UK during the first half of 2007 was 30 per cent greater than in the same period last year.

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As debt management problems increase for consumers around the country, a new report has predicted that millions of Britons will face serious financial difficulties during retirement.

Figures from Aegon suggest that a full 22 million people in the UK can expect to face poverty when they retire and only 37 per cent of British consumers feel they have enough financial security to be comfortable in later life.

Moreover, close 9.6 million adults around the country currently have no long-term savings plan or active pension scheme to provide for their retirement, according to the latest research.

Malcolm Flanders, director of individual pensions at Aegon, said: “The fact is a large swathe of the UK population risks being financially impoverished in retirement.

“Our survey suggests that many people are still expecting to rely solely on state benefits, or are gambling on the prospect of their children taking care of them.”

Data compiled recently by Scottish Widows shows that there are more than one million retirees in the UK still dealing with debt management issues.

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A new report has shown that millions of UK consumers are unaware of how much they can expect to be charged for entering their current account overdraft.

Bank charges can often lead to debt management problems for many British consumers, but research by MoneyExpert.com suggests that two-thirds of the population do not know how much they will have to pay for going into the red.

Furthermore, around 18 million adults in the UK are unaware of the charges banks typically levy if their customers exceed their overdraft limit, the financial comparison service has revealed.

Sean Gardner, chief executive of MoneyExpert.com, said: “Bank charges may be a hot topic in the media but many people’s idea of how much they are being charged for their overdrafts is horribly wide of the mark.

“It’s critical that people check with their bank to ensure they are borrowing money at a competitive rate.”

A report from Grant Thornton recently showed that the scale of Britain’s debt management burden now exceeds the country’s annual gross domestic product.

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Thousands of young British consumers are facing “huge amounts of debt” when they leave university, according to Kelvin Lillywhite, spokesperson for Best Advice Financial Planning.

Mr Lillywhite suggests that students around the country are borrowing money from a variety of sources and leaving themselves with serious debt management problems.

It is common for young consumers to utilise bank overdrafts and take on student loans, each facilitating to thousands of pounds worth of borrowing, the personal finance expert made clear.

“When I started uni all of my friends went around and opened as many student bank accounts as they could with £1,000 overdraft limits on each,” he said.

“Every single one of my friends that are coming out of university have got huge amounts of debt, not only with the student loan company but with the bank.”

Figures from the National Union of Students show that student debts have increased by 544 per cent in the UK since the grant system was abolished.

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The Conservative Party has blamed the new prime minister Gordon Brown for the relative lack of savings among consumers across the UK.

During his time as chancellor, Mr Brown has left millions of people around the country without an inclination or the ability to put money aside for later life or to avoiding debt management problems, the Tories insist.

“On his watch, the savings ratio has plummeted to its lowest level for nearly 50 years while personal debt has soared to over £1 trillion,” said Philip Hammond, shadow chief secretary to the Treasury.

“It says much about the culture of Gordon Brown’s Britain, after ten years of Labour, that people are more likely to play the National Lottery than save regularly for their future,” he added.

Mr Hammond was reflecting on figures released by the Post Office that show debt management pressures and a lack of spare money have left a quarter of British adults without any kind of savings provision.

Figures from Credit Action show that the total personal debt burden of British consumers increases by close to £1 million every four minutes.

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