Paying 1% a year on your pension savings, rather than 0.5%, could cost you £77,900.
Paying 1.5% rather than than 0.5% would cost you £144,200.
That is how much less your fund would be worth because of higher charges -assuming you started putting in £100 month and raised contributions gradually over 46 years and got some decent investment growth.
The analysis comes from the DWP's consultation on capping charges at 0.75% or 1%.
The Pensions Minister, Steve Webb has put off imposing a cap until after April 2015
The average charge for new savers is 0.51% but thousands are already on higher rates.
Showing posts with label cap. Show all posts
Showing posts with label cap. Show all posts
Thursday, 23 January 2014
Monday, 25 November 2013
Where will a cap on payday lenders be set?
Look at Wonga's website and you'll see it admits to an APR on its short terms loans of 5843%.
Wonga's line is that this rate is unfair because it assumes customers borrow for a year -- which it says they don't -- and it includes lots of extra charges.
It says its interest rate is actually 365% a year.
But how would that compare to a possible cap on the cost of credit in the UK?
France, Germany, Japan and Poland all have caps of around 20%, even less in Germany's case.
Florida has an 11% upper limit.
These rates would surely represent a huge challenge for the likes of Wonga.
In his comments today, the Chancellor referred to Australia as an instructive example, so we should take particular notice of that.
Australia has a 20% cap on up front charges and a 4% cap on monthly interest.
My calculator tells me that 4% a month is the equivalent of 60% a year. A lot, but still well below the Wonga rate.
However, Australian payday lenders are also allowed to charge 200% of the loan in default charges, if the customer has trouble paying back, plus additional debt recovery costs.
So the total bill for the borrower can still escalate.
It is being left to our watchdog, the FCA, to decide an appropriate upper limit for the total cost of credit.
Its worries are:
*set the cap too high and some lenders will actually raise their charges
*set it too low and some might leave the market, pushing desperate customers to illegal loan sharks
Where will it end up: somewhere in the middle? Will the FCA sanction charges which could still add up to hundreds of per cent?
The watchdog is unlikely to want to be seen as a soft touch -- so expect some frantic lobbying from the lenders.
Wonga's line is that this rate is unfair because it assumes customers borrow for a year -- which it says they don't -- and it includes lots of extra charges.
It says its interest rate is actually 365% a year.
But how would that compare to a possible cap on the cost of credit in the UK?
France, Germany, Japan and Poland all have caps of around 20%, even less in Germany's case.
Florida has an 11% upper limit.
These rates would surely represent a huge challenge for the likes of Wonga.
In his comments today, the Chancellor referred to Australia as an instructive example, so we should take particular notice of that.
Australia has a 20% cap on up front charges and a 4% cap on monthly interest.
My calculator tells me that 4% a month is the equivalent of 60% a year. A lot, but still well below the Wonga rate.
However, Australian payday lenders are also allowed to charge 200% of the loan in default charges, if the customer has trouble paying back, plus additional debt recovery costs.
So the total bill for the borrower can still escalate.
It is being left to our watchdog, the FCA, to decide an appropriate upper limit for the total cost of credit.
Its worries are:
*set the cap too high and some lenders will actually raise their charges
*set it too low and some might leave the market, pushing desperate customers to illegal loan sharks
Where will it end up: somewhere in the middle? Will the FCA sanction charges which could still add up to hundreds of per cent?
The watchdog is unlikely to want to be seen as a soft touch -- so expect some frantic lobbying from the lenders.
Friday, 12 April 2013
What's included in the benefits cap?
Benefits that count towards
the cap
• Bereavement Allowance
• Carer’s Allowance
• Child Benefit
• Child Tax Credit
• Employment and Support
Allowance (except where
it is paid with the support
component)
• Guardian’s Allowance
•Housing Benefit whether
paid direct to you or to
your landlord (but not
including Housing Benefit
paid for Supported Exempt
Accommodation)
• Incapacity Benefit
• Income Support
• Jobseeker’s Allowance
• Maternity Allowance
• Severe Disablement Allowance
• Widowed Parent’s Allowance
• Widowed Mother’s Allowance
• Widow’s Pension, including
the
Age-Related component
Source: DWP
Fewer hit by benefit cap
The Department for Work and Pensions says its estimate of the numbers likely to be hit by the government's benefits cap has been reduced from 56,000 to 40,000.
Couples and lone parents will have their benefits limited to £500 a week and people on their own to £350 a week, although those on Working Tax Credit or disability benefits will be exempted.
Those affected are likely to £93 a week each on average.
The DWP says many have already found work or moved to smaller homes.
Couples and lone parents will have their benefits limited to £500 a week and people on their own to £350 a week, although those on Working Tax Credit or disability benefits will be exempted.
Those affected are likely to £93 a week each on average.
The DWP says many have already found work or moved to smaller homes.
Tuesday, 8 January 2013
Benefit cap hits single parents
Highlights of who's affected by the 1% limit on benefit and tax credit increases in 2014-15 and 2015-16, culled from the DWP impact assessment.
Worst hit in cash terms are single parents, who lose £5 a week, or 1% of net income.
Poorest families are hit hardest, the bottom tenth seeing an average £4 a week loss, or 2% of income. It's because they rely more on benefits.
Average loss for the 30% of households who are affected by the cap on increases is £3 a week, or 1% of income.
Just be clear, these households will still receive cash increases in benefit or tax credit income. But the increases will fail to keep pace with price rises, which are expected to be 2.6% and 2.2% in the two years in question.
Worst hit in cash terms are single parents, who lose £5 a week, or 1% of net income.
Poorest families are hit hardest, the bottom tenth seeing an average £4 a week loss, or 2% of income. It's because they rely more on benefits.
Average loss for the 30% of households who are affected by the cap on increases is £3 a week, or 1% of income.
Just be clear, these households will still receive cash increases in benefit or tax credit income. But the increases will fail to keep pace with price rises, which are expected to be 2.6% and 2.2% in the two years in question.
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