Your PPI money is coming back

There's been a sharp acceleration in the payments of compensation for mis-sold Payment Protection Insurance. Payments reached £37m in May and £65m in June according to the Financial Services Authority.

The insurance, called PPI, was sold with loans to cover repayments if the borrower fell ill or lost a job. But the policies were widely sold to people didn't need them or would never have been able to claim.

The FSA says the scandal has left "an indelible stain on the financial industry's record". It is publishing compensation figures to measure firms' progress in making payouts.

They have a long way to go. Leading banks have set aside over £6bn to cover compensation for mis-selling the policies.

Payouts so far this year add up to £215m.

Barclays PPI complaints up 93% from last year

Barclays admitted today that complaints about sales of Payment Protection Insurance or PPI have soared.

In the first 6 months of this year the bank received over 73,000 insurance complaints, mostly about PPI. That was up from 59,000 in the second half of last year and 38,000 in the comparable period in 2010.

The bank set £1bn aside earlier this year to meet PPI compensation costs and promised to compensate all customers who complained they had been mis-sold PPI before 20 April on a "no questions asked" basis.

Overall Barclays saw a 14% drop in complaints about its services. However, it expects complaints about PPI to continue rising.

Loans and overdrafts at 10 year low

Households have cut back sharply on personal loans and overdrafts, leaving them at the lowest level for 10 years according to the latest snapshot of lending from Britain's banks.

They've also been trying to save more in the face of worrying economic prospects.

Family budgets have been coming under heavy strain as incomes stagnate and inflation increases - and there's the fear of job losses.

So people have been busily repaying personal loans and overdrafts, to the tune of £200m in the last month alone.

And they're attempting to save more -- total savings are up more than 8 billion pounds so far in 2011.

But that's a smaller increase than last year as the rising cost of living soaks up spare cash.

Surge in loan scam complaints

The Office of Fair Trading is warning people to steer clear of scam loan companies who take upfront fees but fail to provide loans. It says it has seen a 50 per cent increase in complaints from members of the public.

Many of the victims made applications for credit and were asked to "wire" or send upfront fees through money transfer companies. The OFT advises loan applicants to be very careful of lenders or credit brokers who cold call and ask for money before providing a loan.

Complaints about the practice surged to 3,167 in the year to June, a rise from 2,059 in the previous year.

Millions under pressure to leave gold-plated pensions

EMPLOYERS TO TRY TO PUSH 2.5m OUT OF FINAL SALARY PENSIONS

More than 2.5m million employees in reliable but expensive final salary pension schemes are likely to be offered inducements to leave by their employers over the next few years.

750,000 are likely to accept the up-front cash on offer, leaving them at risk of  being left with second-rate pensions.

Final salary schemes promise a pension based on your pay when you finish working. Generally, the alternative on offer is a stockmarket-based scheme with no guaranteed pension amount.

The figures come from the accountancy firm, KPMG, which questioned financial advisers being used by companies to offer pensions advice to staff.

Of 91,200 employees offered payoffs to leave their schemes over the last 3 years, one in four have taken the money and moved their pensions.

They were given an average of £65,000 to transfer into another pension arrangement.

The pensions minister, Steve Webb, warned in May that employers must stop tricking people into giving up valuable pension rights.

Interest rates - what to expect

How are our finances going to be affected by the huge shift in interest rate expectations?

The prospect of a rise in interest rates has receded into the far distance.

Back in March, those all-seeing City economists were predicting, confidently, that the Bank of England's base rate was set to rise, with the first hike pencilled in for May.

Some even thought that the Bank's Monetary Policy committee would eschew quarter-point hikes and plump for a half-point jump to 1%.

Three of the MPC's nine members had already voted for an increase in February, they were so worried about inflation.

Come April and the predicted date for a rise was pushed back to August, then to November.

And today we hear that the MPC voted 9-0 against a rise.

More economists are suggesting that interest rates will stay where they are until 2013. That is so far ahead that it is hard to say what the situation will look like by then.

It is an intensely gloomy situation for people who rely on savings interest to prop up their incomes. Although headline savings rates are around 3% and fixed rates are higher, the average being earned from a Cash ISA is just 0.5%, uncannily close to Bank base rate.

Don't expect that to change much.

The conventional wisdom is that low rates are great news for mortgage borrowers. The large proportion of households on variable mortgage rates can breathe a sigh of relief that their payments won't be going up soon.

On the other hand, homebuyers face a tricky judgement. Should they choose a cheap variable (or tracker) rate, on the grounds that a rate rise could be a long way off?

Or should they choose the security of a fixed rate, knowing that for a period of 5 years, say, their payments will not change? Given the outlook for rates in general, new fixed rates could be forced down.

There is no easy answer. As you have seen, forecasts of future interest rates can shift wildly from month to month.

Brother can you lend a dime?

CREDIT CRUNCH FORCES FAMILY MEMBERS TO LEND TO EACH OTHER

Parents, grandparents, brothers and sisters are asking each other for money more frequently, as household budgets come under pressure in the wake of the credit crunch, rising prices and job losses.

This form of lending is notoriously hard to measure. But 63% of a sample of 2,000 adults reported an increase in family members approaching relatives for money as a direct result of the credit crunch.

15% of family members are lending to each other on a regular basis, with the average loan running at £2,300 across the UK. Often the sum is more than they owe on credit cards.

The research, from insurance group Aviva, identifies parents aged between 40 and 60 years of age coming under particular pressure to lend, either to children who are short of funds or to grandparents who have retired and are hard put to find affordable borrowing.

How to shield savings from inflation

After today's news that the Consumer Price Index rose to 4.4% from 4.2%, ways to save and get protection from inflation - courtesy of Moneyfacts.

Provider	Account	Rate	Term	Minimum Investment
Cambridge BS	Inflation Linked Bond	1.00% plus RPI	16.9.16	£5,000
NS&I	Index Linked Savings Certificates	0.50% plus RPI*	5 Years	£100
Post Office	Inflation Linked Bond Issue 2	0.50% plus RPI	10.10.14	£500
Post Office	Inflation Linked Bond Issue 2	1.50% plus RPI	11.10.16	£500
Santander	Inflation Linked Bond Issue 4	110% of the growth in the Retail Prices Index (RPI), or a guaranteed minimum return of 12%, plus original investment returned	1.4.17	£1
Yorkshire BS	Protected Capital Account – Inflation Linked 8	100% of the growth in the Retail Prices Index (RPI), or a guaranteed minimum return of 16%, plus original investment returned	15.9.17	£3,000
Yorkshire BS	Protected Capital Account – Inflation Linked 7	100% of any annual growth in the Retail Prices Index (RPI), or a guaranteed minimum of 1.5%, plus original investment returned on maturity	17.10.17	£3,000
* Interest earned tax-free Source: Moneyfacts.co.uk 15.8.11