Tag: inflation

Phone and broadband providers are set to increase their prices by up to 8.8% in April.

How Price Rises are Calculated

Many broadband and mobile phone providers use the CPI or RPI rates of inflation to calculate their price rises.

The December CPI figure was 4% and the January RPI figure was 4.9%.

Many providers will also increase their prices each year, regardless of inflation, by a set percentage point, usually 3.9%.

 Therefore, your phone bill could go up by 8.8% if your provider raises their price by 3.9% every year, and also adds on a 4.9% increase based on the rate of RPI. Indeed, Virgin Media and O2 are expected to raise prices for mobile-phone customers in the middle of their contracts by up to 8.8% in April.

Ofcom Proposes Ban to Inflation-linked Price Rises

Ofcom stated that 4/10 broadband customers and over ½ of mobile phone customers were on contracts linked to inflation-linked price rises as of April 2023.

They are proposing a ban to inflation-liked price rises and price rises set out in percentage terms in contracts but have not yet published their financial decision.

They are proposing that companies instead set out price rises in customer contracts upfront in pounds and pence, so that customers can clearly see how much their contract will increase by during the contract period.

“With most major phone, broadband and pay TV companies now including mid-contract price rises linked to uncertain future inflation, we are concerned that customers’ contracts do not provide sufficient certainty about the prices they will pay.

So we are proposing to introduce tougher protections for customers by banning this practice” – Ofcom

Consumer Harm

From January to October 2023, Ofcom received over 800 complaints regarding price rises, highlighting just how many customers feel misled about the prices set out in their contracts.

Ofcom notes that consumers lacked understanding about terms like CPI and RPI.

“More than half (55%) of broadband customers and pay monthly mobile customers (58%) do not know what inflation rates such as CPI and RPI measure. And of those who are with providers that use inflation-linked price rises, very few broadband (16%) and mobile customers (12%) were both aware of the price rise and able to identify that it was inflation-linked with an additional percentage.”

They also noted that even those who did consider future inflation-linked price rises when choosing a contract found it difficult to estimate how this could impact their future payments.

It is clear that these inflation-linked price rises are steeped in uncertainty, with customers being misled when entering contracts. Many customers lack the complete financial understanding to realise the terms of their contract, and even those who have an excellent financial understanding are not able to prophesise how much inflation will rise by.

These price rises can make it difficult for customers to manage costs and can lead to consumer harm, as it often means that customers are stuck in contracts paying much more than they thought they would, with no real way of exiting due to high contract fees. More clarity and transparency is needed from phone and broadband providers to help deal with this confusion.

Saving Money on Your Phone

  • If you are happy with your existing device, you may wish to consider switching to a SIM only deal when your contract runs out to reduce your monthly bill
  • Shop around when your contract is close to running out – look into various providers rather than just sticking with the same one. Money Saving Expert notes that many customers who are out of contract have been rolled onto more expensive tariffs (which you are free to leave without exit fees) so make sure you check when your contract runs out, as it might have already happened!
  • When your current contract runs out, you may want to consider buying a new device outright and finding a cheap SIM only deal to pair with it yourself
  • Consider using a reseller for your next contract – resellers buy new handsets in bulk at wholesale prices or buy refurbished models and get them back up to scratch. Therefore, they tend to be able to offer mobile phone deals along with network contracts at more competitive prices

Premium Bonds are an investment product offered by National Savings & Investment. Let’s have a look at how they work and whether they’re right for you…

National Savings & Investment

National Savings & Investment (NS&I) is a state-owned UK savings bank. NS&I is the only place in which you can get these Premium Bonds.

When you save money with NS&I, you’re essentially lending your money to the government, and the government in return either gives you interest on your money, or in the case of Premium Bonds, a chance to win cash prizes.

As with any product offered by NS&I, your money is secure and backed by HM Treasury.

How Premium Bonds Work

Each Premium Bond costs £1, and you can hold between £25 and £50,000 worth of bonds. For every bond you hold, you are entered into a monthly prize draw. So, if you had £50 of bonds, you would get 50 different entries.

A random number generator decides which bond holders win the draw each month. If you do win the monthly prize draw, winnings are tax-free and range all the way from £25 to £1 million.

If I Win

If you win, you can choose to have the money paid straight into your bank account, reinvested into more bonds, or sent as a cheque through the post.

However, if you’re lucky enough to win more than £5,000, you will not be automatically paid and will instead receive a claim form to complete and confirm how you wish to receive the prize.

Are Premium Bonds Right for Me?

As with any financial decision, whether Premium Bonds are right for you is a personal choice.

You might decide they are right for you if you want the excitement that comes with the possibility of winning a prize every month. You can also cash in all or part of your Premium Bonds at any time, meaning that you aren’t tied in if you decide it’s no longer right for you.

However, if you want a regular income with guaranteed returns, they may not be the best choice for you, as the money you hold as bonds will not benefit from added interest. Therefore, over time, inflation will have an erosive effect on your savings, making them lose value over time.

The odds of winning are 24,000 to 1 for every bond you hold, and many will either win smaller-value prizes or never win at all. This means that unless you are lucky enough to win one of the bigger prizes, your money will probably fail to keep pace with inflation.

For more information about Premium Bonds, you can head to the NS&I website.

The Government has introduced a temporary window where you can fill gaps on your national insurance record dating back 16 years, rather than the usual 6. The deadline is just around the corner, on 5th April 2023.

The Temporary Window

Ordinarily, we can fill in gaps on our national insurance record up to a maximum of 6 years after the gap occurred. After these 6 years have elapsed you cannot make any changes and it instead becomes a permanent gap on your national insurance record.

At least, that was the case. However, we have now been granted a temporary window wherein we can fill in gaps dating back an additional 10 years. Where before, for the tax year 2022-23, the oldest year we could fill in gaps for was 2016-17, we are now allowed to fill gaps dating back to 2006-07 for a limited period.

This temporary window is only applied to those who fall under the new state pension system, i.e, those reaching state pension age after 5th April 2016.

Maximising your State Pension

You usually need a minimum of 10 qualifying years on your national insurance record to claim the state pension. A qualifying year is when you were:

  • Working and paying national insurance
  • Getting national insurance credits, e.g, if you were unemployed, sick, a carer or a parent
  • You were paying voluntary national insurance contributions

To qualify for the maximum amount of state pension, you need 35 years of qualifying national insurance contributions.

Inflation-Linked Savings

It’s important to remember here that the state pension is triple locked, meaning it is linked to match the highest figure out of 3 separate measures of inflation:

  1. Average earnings
  2. Consumer Prices Index
  3. 2.5%

Therefore, filling these gaps on your national insurance record enables you to make the most of an inflation-linked retirement income. This window is offering a great opportunity and is certainly worth looking into, because once the deadline is up, you’re back to only being able to fill in gaps dating back 6 years.

Checking your State Pension and National Insurance Record

You can check your national insurance record by clicking here. This will allow you to see if there are any gaps and the amount required to fill these in.

You can also check your state pension forecast if you want to find out how much state pension you’re eligible to claim, and when you can start receiving payments.

Remember, the deadline to fill these gaps on your national insurance record to help maximise your state pension is 5th April 2023, so get moving!

The growth in UK house prices per annum is huge, making houses increasingly unffordable for the average buyer. However, it looks like this growth is finally starting to slow down

The price of property

According to Nationwide building society, the average price of UK homes has increased by over 60% over the last decade. This is due to limited supply and a growing demand

As of July 2022, UK house prices have declined for the first time in a year due to a rising rate of interest and inflation. Rightmove predicted that house price growth will slow from 11% to 7% in 2022. Therefore, the huge pace in which house prices are increasing is finally beginning to slow

If you are interested in learning more about property price trends in the UK, you can check out the government website for more details

The cost of living crisis

The cost of living crisis is reducing the demand for new homes

  • Enormous inflationary pressure on goods and services means that the purchasing power of our money is reducing
  • Soaring energy bills and rising petrol costs are making it nearly impossible for ordinary homeowners to build savings
  • Tax increases are adding pressure

More people are struggling to make ends meet and so are unlikely to be able to stretch their budget in order to purchase a new home

Mortgage costs

Variable rate mortgages make up a substantial 1/5 of UK home loans. Anyone on this type of mortgage will be hit particularly hard by increased interest rates. This is because they are directly linked to the base rate of interest so any rise will immediately affect these homeowners

The rising interest rate can also be off-putting for first time buyers, as it makes them less able to sustain the cost of moving, due to higher borrowing costs. It really is an expensive time to buy a house, especially since experts don’t expect house prices to fall in the short term

Therefore, anyone aiming to get on the property ladder is faced with the difficult decision of whether to buy now or wait to see if prices fall. At the end of the day, anyone considering buying should think about their finances in a long-term mindset to ensure they can meet rising mortgage repayments. We also recommend checking out this blog before undertaking any property purchase, to ensure everything runs as smoothly as possible