Two Pennies Worth

Energy companies line their pockets again

Energy regulator Ofgem today launched an investigation into the soaring profits of our gas and electricity providers. About time, says Confused.com’s Stephen Jones.

I’ll be the first to admit that personal finance journalists have a tendency to hyperbolise. After all, why use the word “problem” when you could cry “crisis” or, even better, “catastrophe”?  But our regular cheapening of words doesn’t stop us from being genuinely shocked by some of the stuff we come across every now and then.

Today feels like one of those days. When I woke up this morning I was doubtless as shocked as anyone to hear just how much money our energy companies have been making from us in pure profit over the last few months.

Gas and electricity regulator Ofgem revealed new data showing that the amount of profit being made across the industry on dual fuel has risen by 38 per cent in the space of just two months.

The most shocking thing about that is not that energy firms are making profit – they have shareholders to please just like any other business.

Instead, it’s the fact that energy companies have been lining up recently to tell us that the recent price rises were down to unavoidable changes in the market, like increases in wholesale gas prices, network charges and environmental obligations.

Far be it from me from me to question the integrity of our major energy providers, but I don’t remember any mention of profit margins when British Gas, Scottish Power and Scottish and Southern announced their recent price hikes.

It all comes at a time when our winters seem to be getting colder and British households are finding it tougher and tougher to manage. Thankfully, Ofgem is doing what it’s there for and investigating what looks certain to be yet more unfair practice from providers.

Have you been hit by the price hikes? Got something to say? Comment below or email your thoughts to stephen.jones@confused.com.

Some respite for savers... at last

Loyal savers may finally have something to cheer about as one building society promises to stop offering preferential treatment to newer customers. But will others follow suit? Confused.com’s Stephen Jones certainly hopes so.

When talking about Britain’s savings culture, I find it very difficult to avoid the word ‘crisis’. One scary statistic I often tend to cite is that, in the first quarter of 2008, the UK household savings ratio went negative for the first time since 1958. That means, over three months, the whole of the British public actually spent more than they saved. That’s a whole nation spending beyond its means.

One of the reasons behind this is undoubtedly that savings just aren’t sexy. Getting a decent return on our nest eggs has been made difficult for us for far too long, as we’re forced to jump through hoops to get the best rates.

I’ve long been bemoaning the punishment regular savers are subjected to by banks and building societies. Whether we’re talking about the often farcical delays on ISA transfers or preferential rates that are preserved only for new customers, the industry ethos of “treating customers fairly” hasn’t always rung true in practice.

Thankfully, the financial services sector is at last taking notice. Nationwide, the UK’s third largest savings provider, has just announced a set of promises that could put an end to the shameful mistreatment of loyal customers.

Most noteworthy are the promises to not only stop offering ‘brand new customer only’ savings products but also to give exclusive deals to existing savings customers.

For years, savers have been frustrated that their custom is taken for granted as soon as they are signed up, so to prioritise those who have already been proven valuable customers is not only fair, but makes business sense, too. If others were to follow suit, we might actually start to see an environment where saving is seen as really worthwhile once again.

Perhaps an even more pleasing development is the pledge that, from 4 January 2010, all ISAs transferred to the mutual will start accruing interest from the day of the application. I’ve already argued that the lengthy process for ISA switches could and should be cut – at least with this commitment, customers will not be forced to lose out as a result of their provider’s sluggish transferring process.

Here’s hoping that these and several more welcome moves from Nationwide set a standard – really this should only be the start if we really want to become a nation of savers again.

Are you a loyal saver? What are your views? Let me know by commenting below.

Interest rates: Is now the right time for a rise?

The Bank of England announced this week that inflation is likely to stay high for the rest of the year, prompting some calls for interest rates to rise in response. Confused.com's Stephen Jones weighs up the options.

Bank of England governor Mervyn King attracted yet more attention this week following his warning that inflation is likely to stay (un)comfortably above target for at least the rest of the year.

Announcing the grim news for consumers, he said that the Bank would ready themselves "like the English batsmen preparing to defend the Ashes, watching carefully, perfectly balanced in the crease, ready to play forward or back according to the length of the incoming delivery... in order to keep inflation on track to meet the two per cent target in the medium term."

Bizarre cricketing analogies weren't the only thing raising eyebrows. In case you didn't know, I'm hooked to Twitter, and the responses on there to King's statement were pretty pronounced to say the least.

One fellow tweeter, Dr Ros Altmann - a hugely-respected pensions expert and newly-appointed director general of Saga – put her point across:

"at last Bank of England waking up: inflation is too high, no deflation. Growth is faster than forecast. So why are interest rates so low?!"

In less than 140 characters, she pretty much voiced what most beleaguered savers are feeling right now. With CPI inflation at 3.1 per cent, the vast majority of Brits' savings are actually losing value year-on-year. Whichever way you look at it, it's fair to say that savers are getting a pretty raw deal.

However, there is another side to the story. Housing benefit cuts, real-terms reductions to mortgage interest support and a tough economic backdrop mean a rise in interest rates could be devastating for thousands of homeowners. That's not to mention what it would mean for British businesses.

The Bank and the government are playing a careful balancing act, with loose monetary policy offsetting harsh fiscal measures such as the VAT increase and cuts to benefits and other public spending.

As a result, one major concern is that raising rates now may well be seen as the measure that pushes the UK economy from uncertain recovery to double-dip recession. And none of us want that.

Have you got a view? Let me know your thoughts by commenting below.

Can we make pensions simpler? Please?

As he navigates a workplace pension for the first time, Confused.com reporter Stephen Jones shares his experiences, and why he thinks it could be made easier...

When I first started writing about personal finance, the one area that filled me with dread was pensions. As a green young journalist fresh out of university, the whole area was one that seemed full of confusion and a sense of something near taboo. My parents had gone through the still-fresh embarrassment of trying to explain the birds and the bees to me, why not touch upon pensions too?

A couple of years later, and thankfully the subject isn't quite the source of fear that it once was.I'm now in a position where I can start looking at my own retirement options with less anxiety and start to make my own – if modest - contributions for the first time.

At 23 years of age, it might seem early, but in my job I'm acutely aware of just how poorly many Brits are preparing themselves for old age because our culture promotes spending and debt above prudence and saving. Starting early is likely, I hope, to mean that I'm not left with a panic later in my career when I might also have commitments to think about elsewhere.

Furthermore, almost every expert I speak to tells me that failing to take up a defined contribution scheme from my employer would be equivalent to throwing away a pay rise. Of course, they're absolutely right - with the average employer contribution standing at just over 6 per cent, and the added tax bonuses of saving into a pension scheme, you're wasting a significant amount of money if you don't opt in.

So why aren't more people saving for retirement?

Given all of this, the obvious question seems to be why more people aren't making the right provisions for later in life. Recent government statistics showed that around 60 per cent of workers don't currently contribute to a workplace pension. The answer, to me, has to stem back to my very first feelings about pensions two years ago.

Pensions need to be made simpler. The coalition government recently made inroads into making the state pension more straightforward by announcing plans for a flat rate, universal basic state pension. However, we are yet to see anything like this simplicity in the realm of private pensions.

In 2012, all employers will be forced to auto-enrol their workforce in a workplace pension scheme, and this, many think, is likely to improve the number of people saving. However, it doesn't solve the problem of public confusion about pensions, or encourage people to take a more active interest in their investments – something which could make a huge difference by the point of retirement.

When starting up my pension, I found myself asking questions and taking a keen interest in what I was investing, but this was largely down to the fact that I read about pensions on a daily basis through my work. Even then, it still took me some time to digest exactly where my money was going and what it meant in terms of returns.

My biggest concern is that the majority of people wouldn't feel confident about doing this, with many having little prior experience with pensions and some likely to be afraid to ask questions at the risk of feeling stupid.

That is as much the responsibility of employers, pension providers and financial advisers as it is the government, and there have been a number of suggestions as to how investing can be made easier to understand.

But we also need to appreciate that, as pension saving becomes more and more our responsibility, we need to take control and invest some time into thinking about where and how we invest our money.

Have you recently joined a pension scheme? Or have you been offered one and failed to join? What are your reasons? I want to hear your thoughts and stories – comment below or email me on stephen.jones@confused.com.

Renters: Know your rights

After suffering damp problems with a new rental property, Confused.com's Stephen Jones wanted to know his rights. Here's what he found out...

 A couple of months ago I moved into a new studio flat – perfect for me, I thought. It's affordable, sits on the ground floor in a nice quiet street, not too far from work and has me near my friends.

All of those attractions still stand. However, what I hadn't thought about when I moved in, and what I certainly hadn't been told about by the letting agent or landlord, was that the flat suffered from a lack of ventilation. A trivial issue at the first sound of things, but in fact it leads to one very nasty and not so trivial problem – mould.

Having gone home for a week, I returned to find black marks on the walls, and, worse, some of the clothes hanging in my wardrobe covered in mould. The problem is, I simply can't open my windows when I'm away.

So I asked for a solution from my landlord, and got a de-humidifier. Fine, but it doesn't solve the problem. I've continually asked for extra vents to be added to the flat – or at least for something to be done - and as yet have had nothing.  In the meantime, I've come down with a chest infection that I think has something to do with the problems I've experienced in the flat.

Needless to say, it's all left me more than a little fed up, and part of me just wants to rip up the contract, move out and be done with it. But am I entitled to? I went to the Citizens Advice Bureau (CAB) for some guidance, and unfortunately it doesn't seem that it's quite as easy as all that.

Where you stand

Any tenant has the right have the structure of their home kept in good repair by their landlord – that includes, things like heating and hot water systems – but many tenancy agreements will dictate that repairs to internal decorations and minor repairs should be dealt with by the tenant.

In a case like mine, the issue of whether the dampness is a result of the tenant's actions (drying clothes indoors, for example) or of a structural defect is potentially contentious, and you should ensure that you are confident of where the blame should lie before making any complaints.

Anyone that does decide to complain should always check their housing status and tenancy agreement first. If you have a shorthold tenancy agreement or don't have any tenancy agreement at all, for example, you may find that your landlord tries to evict you if you ask for repairs and have a tenancy which allows them to do so.

Steps to take when requesting repairs

Once you do decide that repair should be carried out by your landlord, you should take the following steps:

• Tell them that the repair is needed – write out a description of the problem and collect evidence such as photographs and reports from environmental health officers at your local authority. If the problem is affecting your health, you should also attain medical reports to prove this.
• Should the landlord still fail to carry out the work, consider contacting the Environmental Health department at your local authority, or you could also take them to court. If you rent from a social landlord (usually a private landlord or housing association), your local authority may be able to force them to take action. If you are a tenant of the local authority itself, then complain using the authority's official complaints procedure.
• However frustrated you get, you should continue to pay your rent while you try to get the repair work done. If it turns out that the flat has been uninhabitable then you may be able to get compensation through further action, but the landlord will be able to evict you if you fall into arrears with your rent.

If you need further help, try the CAB's advice website, adviceguide.org.uk or contact them for specific advice on your situation. I'll be following their guidance and will let you know how I get on.

Have you had a problem with a rental property? I want to hear your stories; comment below or email me: stephen.jones@confused.com.