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How to reinvent your financial future
Harriet Meyer: Personal Finance Expert & Guest Blogger
July 10, 2020

Few of us have escaped a financial hit from the outbreak of Covid-19. You may face an income reduction, a slump in your investments, or concerns about whether your business will survive.

Yet whatever your financial woes, there are simple ways to reshape your financial future and manage your money amid uncertain times. Our guest blogger and personal finance expert, Harriet Meyer explains how.

Think ahead

Now is the ideal time to reconsider your long-term goals, and what you’re trying to achieve with your finances.

You may care less about that promotion, starting a business, or travelling the world, for example – and more about making your home life as comfortable as possible. Or perhaps you simply have more time to check whether your finances are likely to support your goals, if these haven’t changed.

If you can envisage what you want to achieve in the years ahead, you can do the financial groundwork to make things happen.  

Track your spending

You may have dipped into savings to make ends meet during the pandemic. So it could be that you need to rebuild your cash buffer, as a priority.

Drawing up a budget is a good start, and the best way to track your spending. Even if you think you have no money to spare, you may find you can free up cash that could be put to better use for your future.

Make a list of all income and outgoings. Then, go through your spending to see where this may be cut to boost your savings potential.Ideally, you want to slot away enough to cover around three months’ worth of living expenses.  

Protect Yourself 

Protecting yourself from financial difficulties by investing in insurance can be a future lifeline.

For example, income protection insurance will provide you with a tax-free income if you’re unable to work because of an accident or illness. You choose when cover kicks in – after, say, three or six months. This will depend on any savings and cover from your employer. This can be particularly valuable insurance for the self-employed who do not have any sick pay or insurance through work.

Alternatively, critical illness insurance will pay a lump sum if you are diagnosed with one of the illnesses covered by the policy,but these policies are typically more expensive. A broker or financial planner can help you work out the right cover for your particular situation.

Keep calm and carry on

If you have money in the stock market, the value of your investments may have plummeted during the market slump. But history shows that, given enough time, markets typically recover. So hold your nerve and,ideally, avoid selling out of the market during dips, as this will only turn paper losses into real losses.

Of course, you can’t be certain there won’t be further falls, but if you have a long-term time frame of at least five years and,ideally, longer, this should give your investments a chance to recover.  

Start an investment habit

You should only invest if you can afford it, and have many years until you’re likely to need the money – for retirement, for example. Investing may not be for you if you have expensive debts to service.

If you're thinking of investing, you could take OpenMoney’s financial health check, which considers your circumstances and whether or not investing is right for you, or if there are other steps you should take first.

While markets have been volatile, this could be an opportunity for those who haven’t yet invested to start doing so. That’s because you benefit from so-called pound cost averaging. This means you buy more shares when their price is lower and fewer when their price is higher.Over time, this helps to potentially smooth returns.

Get a financial boost from the taxman 

Tax-efficiency is key to long-term financial returns,and both pensions and ISAs offer generous tax breaks. You can slot up to£20,000 into an ISA in the 2020/21 tax year, with all investment growth and interest free from tax. Even if you cannot afford to save into an ISA this tax year, it’s one to bear in mind for future savings.

You get tax relief at your personal rate when you save into a pension. So if you’re a basic-rate taxpayer, £80 will amount to a £100 contribution, with 20% tax relief added. A higher-rate taxpayer only needs to save £60 to make a £100 contribution. Over time, this can add up to a substantial boost for your retirement pot.

Talk about financial concerns

Money can be a taboo subject among friends and family.Yet by openly discussing any concerns or needs that may have arisen during the pandemic, you may gain a fresh perspective and support for the future.

Find someone you trust to talk to about any stresses you may have. A unified effort to boost your finances is often the best way forward. If and when the time comes, you may want to seek professional advice to help achieve your financial goals.

Harriet has specialised in personal finance journalism for over 15 years. She writes for a wide range of newspapers,magazines and websites as a freelance journalist. These include Moneywise,Investors Chronicle, Saga, The Sunday Times, The Observer, MoneySavingExpert, Zoopla, House Beautiful, and many others. 

What is a Child Trust Fund (CTF)?
June 12, 2020

If you became a parent between 2002 and 2011 you could claim your child’s lost Child Trust Fund. Over 6 million CTF accounts were opened by the government in a bid to encourage saving for a child’s future (source: Halifax - https://www.investments.halifax.co.uk/get-inspired/news/article/198869), but what are they?

What is a Child Trust Fund (CTF)?

CTF accounts were created by the government in 2002 to kickstart and encourage parents to save for when their children turn 18. The government initially deposited money into the account and then the parents or guardians of the child were able to add to it on the child’s behalf, up until they turn 18. There is a limit as to how much you could deposit each tax year which has increased from £1200 in 2002, to £9000 in 2020.

A CTF is also tax-free. Yes, you heard right, tax-free! This means that whatever money you deposit won’t be taxed when it’s withdrawn in the future.  Once the child has turned 18, they  will have access to the money to use they wish. This is when the product ‘matures’.

When will my Child’s CTF mature?

CTFs begin maturing in September 2020 when the first child reaches 18 years of age.

When a child turns 16, they can take control of the CTF if they wanted to. They can change how their money is invested and change provider by transferring their account and signing up to a new provider. If the child decides not to manage their fund, it remains with their parent or guardian until their 18th birthday.

Who was eligible for a Child Trust Fund?

CTFs were set up by the government for children who were born in the UK between the 1st of September 2002 and the 2nd of January 2011.

Types of CTF accounts

There are three different types of Child Trust Fund accounts that parents could choose for their children. These were Stakeholder, Shareholder and Cash accounts.

• Stakeholder account - This allows you to own a percentage of shares within a company. With a Stakeholder CTF, any money which is still invested in shares when the CTF matures will be sold automatically and the cash will be passed on to the child.

• Shareholder – This account allows you to leave a contribution of the money invested into the stock market. By investing into the stock market, your money could potentially grow or fall depending on the outcome of your shares.

• Cash account - The Cash CTF account is where you can leave any contributions, providing they don’t go above the yearly maximum allowance and earn interest on it. This tends to be the safest and most popular option.

Can I still get a Child Trust Fund?

The government stopped offering Child Trust Fund accounts after 2011 and they replaced them with the Junior Individual Savings Account (JISA). However, anyone who still has a CTF can carry on depositing money into their account until their child turns 18.  

JISAs are also a tax-free savings account for children and many of the same rules apply. However, if you were to open a JISA today, the government does not contribute and the only money that goes into the JISA is the money which you deposit.

What can my child do with a matured CTF?

Once a child turns 18 and the CTF matures, they have a decision to make about what to do with the money. But what are their options?

• Celebrate and spend - As the money is now theirs, they can spend it however they like!

• Become a savvy saver - Some children may choose to carry on saving their money in a cash savings account or cash ISA. Both will offer interest on the money and they are often easily accessible, so the money can be withdrawn at any time.

• Invest it - Although most 18-year-olds won’t be familiar with investing, they could invest their savings in a Stocks & Shares ISA to potentially grow their money further. We would always recommend that if they were to invest their money, they do so for at least 5 years. It’s also worth remembering that when investing your money is at risk and you may get back less than you put in.

That’s our round-up on Child Trust Funds. Did you know that it’s been estimated that more than one million child trust funds are ‘lost’ and haven’t been claimed? In most cases, this is due to HMRC opening the account because the child’s parent or guardian failed to do so. If you think your child may have been eligible, it's worth checking. More details on how to find a lost CTF can be found on the HMRC website.

Your credit record: the facts, myths and tips
Andrew Hagger: Personal Finance Expert & Guest Blogger
June 3, 2020

A lot of scaremongering takes place surrounding your credit history, what it means for your day-to-day life and your future financial decisions. Our guest blogger and Personal Finance Expert, Andrew Hagger, is on hand to take you through what matters, the common credit myths, and tips on how to boost your score.

 Checking your credit report

 The first step is to sign up for a copy of your own personal credit report. You can do this online and for free direct via credit reference agencies such as Experian and Equifax or through third party providers including Clearscore and TotallyMoney.

Once you’re set up, you’ll get an updated report and score emailed to your inbox every month, making it easy for you to keep a close eye on your important financial information.

The first time you get hold of a copy of your credit report, take a little time to read through of all your personal and financial information. These reports are not always 100% correct, so make sure you’re happy with all the details held on your file.

These are the sort of things you’ll find in your report:

•                 Personal information: your name, date of birth and address – including previous addresses going back 6 years.

•                 Financial associations with another person, such as a joint mortgage or borrowing.

•                 Whether you’re on the Electoral Roll,meaning you are registered to vote at your current address.

•                 Your borrowing: how much you owe and whether you have paid on time, and how long you’ve had each account. This will include mortgages, credit cards, store cards, personal loans and overdrafts.

•                 Any County Court Judgements (CCJs),bankruptcies and Individual Voluntary Arrangements (IVAs).

•                 Searches carried out on your account by financial providers – including date and purpose of search.

 These are a few things that do not appear on your credit record:

•                 Savings account information

•                 Your salary details

•                 Criminal record(s)

•                 Medical history

•                 Parking or driving fines

•                 Council tax arrears

•                 If you have an agreed mortgage holiday or payment freeze due to Covid-19, this will not appear on your record and will not have a negative impact on your score.

Much of the information shown on your credit report is confidential, and that’s why it’s managed by Credit Reference Agencies such as those mentioned. It’s important to remember that these agencies may manage your report, but it is the lender who makes a decision to offer credit of any kind.

What affects your credit score?

 The factors that have the biggest negative impact on your score are:

•             Late or missed payments

•             Defaults on debt

•             County Court Judgments (CCJs)

•             Bankruptcy

These are not the only things to consider, other factors that can have a negative impact on your score include:

•  A large amount of borrowed money or using a high proportion of your credit card limit(s).
These can be a warning sign for lenders that you may be struggling with your finances

• Too many searches
Each time you apply for credit the lender will review your credit report. This is known as a ‘search’ and will stay on your report for 12 months. If you accumulate a lot of searches in a short period of time, lenders may feel that you may be having financial difficulties.

• Frequent changes of address.
This can be viewed as a lack of stability and therefore make you appear more high risk.

Mistakes on your report
These can be factual errors, such as the wrong address listed under one of your accounts, closed accounts still showing as open, or an unknown account is linked to your record either by mistake, or in extreme cases as a result of fraudulent activity.  It’s important to check your report regularly, otherwise you may be turned down for finance through no fault of your own.

• Financial association or connection
The credit history of anyone you are financially associated with, such as a joint mortgage or bank account with a spouse, can affect your credit rating. If you are divorced or separated, cut all financial ties and make sure your former partner’s details are eliminated from any joint accounts.

Even if you turn your finances around, be aware that the items on your report stay there for 6 years and will be taken into consideration by lenders when deciding to grant credit.

 Credit record myths

There are many other misunderstandings when it comes to credit reports and scores. Here are some of the most common examples:

• There’s a credit blacklist
There is no blacklist used by credit companies or Credit Reference Agencies. But every finance company or lender has its own criteria, so there are circumstances when it won’t agree a credit application.

• Where you live impacts your credit rating
Your address doesn’t influence your credit rating.Lenders ask for this information purely to help them find an individual’s credit file and confirm their identity.

• Unpaid student loans can damage your credit rating
Students loans aren’t visible on your credit report, so don’t impact your credit score. This is because they’re paid back through salary deductions. However, any credit cards or additional bank loans you take out as a student will show on your credit report.

Top tips to help your credit score 

• Make sure you’re on the electoral register - Lenders use the electoral register to confirm an individual’s address.

• Try not to regularly keep a high balance on your credit card - Lenders may view this as excessive debt and that there’s a risk that you may be unable to repay.

• Make sure you pay your bills on time, every month – this shows you are financially disciplined and can manage your finances.

• Only apply for credit which is necessary – applying for more than three times in a year can lower your score.

• Cancel old credit card agreements and out of date credit cards, such as store cards you no longer use, as these will still show on your file.

Andrew is a respected personal finance writer and commentator from Moneycomms.co.uk. He has many years experience of helping consumers manage their money, enabling them find the best deals on anything from savings and current accounts to loans, mortgages, travel money and credit cards. Andrew can be found tweeting here.
Refunds: What are your rights during a global crisis?
Emma Lunn: Guest blogger and journalist
May 14, 2020

Coronavirus has prompted a consumer rights conundrum. With everything from concerts to holidays cancelled, thousands of people are left having paid for something that isn’t going to happen.

Here our guest blogger, Emma Lunn takes a look at your rights to a refund during the Covid-19 pandemic.

Holidays

Travel has been a big victim of the virus. The Foreign and Commonwealth Office advised against all foreign travel on 17 March, with the restrictions now in place for an indefinite time period.

In theory, holidaymakers should be well protected against cancellations. ABTA rules state entitlement to a full refund for cancelled package holidays, while EU laws mean airlines must refund cancelled flights.

But, unfortunately, would-be travellers are struggling to get their money back from travel companies. According to Which [1] 20 of the UK’s largest operators are illegally with holding refunds that should be paid within 14 days.

Many holidaymakers are finding they are being fobbed off with vouchers or a credit note, or are being pressured to re-book their trip.

Frustrating as this is, industry bodies have warned that travel firms could go bankrupt if they paid out refunds straight away. As a result, various travel industry bodies are urging the Government to step in a support the travel industry.

Sporting events and concerts

The UK’s big summer of sporting events, gigs and festivals is another victim of Covid-19. Generally, if you bought your ticket for a cancelled event from an official seller, you should be entitled to a refund.

Ticketmaster, for example, says its refunding tickets automatically, with the refund including the ticket’s face value plus the service charge.

But most concerts are being rescheduled rather than cancelled altogether. Original tickets remain valid for postponed events – but you can get your money back if the new date doesn’t suit you.

The same goes for sporting events. For example, the London Marathon was rescheduled for 4 October – but you can get a refund if you can’t make the new date.

Tennis fans who got the option to buy Wimbledon tickets in the public ballot and paid for them will get a refund plus the opportunity to purchase tickets for the same day and court for next year’s championships. Football fans with tickets to Premier League matches are likely to be refunded too.

Train tickets

The cheapest Advance train tickets are normally non-refundable but, with people being advised not to travel, you can get a refund on Advance tickets purchased before 23 March.

Refunds can be processed remotely (you normally have to go to a station ticket office) via the website of the rail company or third party that sold you the ticket.

If you are a commuter with a season ticket you are no longer using due to being furloughed, working from home, or because the trains aren’t running, you can get a partial refund if there are at least seven days left on a monthly ticket,or more than seven weeks left on an annual ticket.

There’s normally an admin fee of £10 for season ticket refunds but train companies are waiving it at the moment.

Pausing premium sports channels

With live sport on hold for now, Sky Sports and BT Sport customers are faced with only being able to watch re-runs and repeats.

But you can save a bit of cash by pausing your sports subscription. If you’re with Sky,you can arrange for your Sky Sports subscription (and BT Sport if you have it) to be paused online and you’ll automatically start paying for the full package again when the action resumes.

If you pay for BT Sport directly with BT, you have two options: you can get a two-month bill credit for the service, or donate the cash equivalent to the NHS. If you pay for Sky Sports via BT you’ll have to call to request a bill credit.

If you’re a Virgin Media customer and subscribe to Sky Sports or BT Sport , you'll be able to pause your subscription online. The same goes if you pay for Sky Sports as part of a TalkTalk broadband bundle.

Gyms

Gyms,fitness studios and sports clubs have all been forced to close due to the pandemic. All the main chains, including Pure Gym, Better, David Lloyd, Third Space, Fitness First and Anytime Fitness, have automatically frozen memberships.

Some smaller studios, as well as outdoor bootcamp operators such as Be Military Fit, are running online classes via Facebook Live or Zoom for a reduced monthly fee. However, if you can afford to keep paying your normal membership subs, it might increase the chances of these small businesses being able to re-open when the pandemic is over.  

Cinemas and theatres

The entertainment industry has been one of the hardest hit with the pandemic bringing down the curtain on both cinema and theatre trips.

Film fans with monthly or annual cinema memberships can normally pause or extend their memberships. For example, Cineworld will be extending the membership of all My Cineworld Plus accounts retrospectively once it re-opens, equivalent to the total duration the cinemas closed. Meanwhile Odeon has paused Limitless membership payments until its cinemas reopen. 

The Society of Ticket Agents and Retailers says anyone with tickets for cancelled theatre performances will be contacted by the company they bought the tickets from regarding exchanges and refunds.

Car insurance

There’s good news for anyone who has car insurance with Admiral – the insurer is giving each customer a refund of £25. The pay-out is being made because the number of car insurance claims has dropped as drivers stay off the roads.

The owners of 4.4 million vehicles will automatically receive the payment by the end of May.

Admiral is the only UK insurer to announce an automatic refund policy so far – drivers with other insurers should continue to pay their car insurance, even if they are driving significantly fewer miles than usual.

If you’re not using your car at all, you could apply for a Statutory Off Road Notification (SORN). If approved, this means you no longer need insurance for your car (so you could cancel your policy and get a partial refund), but it also means you won't be able to legally drive it.

 [1] Which?

 

Emma Lunn is an award-winning freelance journalist who specialises in personal finance. She has more than 15 years’ experience writing for national newspapers, trade and consumer magazines, and specialist websites

Three things we've learned since we launched
OpenMoney HQ
May 8, 2020

We recently celebrated the OpenMoney family’s third birthday! As well as sharing a toast (via video call), we took the chance to reflect on the last three years and what we have learned along the way.

Customer service is key

Since we launched back in 2017 we’ve seen how much our customers value the ability to speak to us about any financial issue, at no extra cost. As a result we will be introducing all of our customers, current and new, to their own personal support specialist and financial adviser here at OpenMoney. We know that a friendly face and expert voice can give reassurance as and when needed. Your dedicated adviser will be on hand to answer any questions that you may have and help with any issues, as well as keeping you up to speed regarding any new services or features that we’re launching. To make sure you can make the most of this,we’re extending our support and advice hours to include weekends!

Your Feedback makes a difference

Earlier this year we launched our new app and whilst we were happy with it, we’re firm believers that there is always room for improvement. So, we turned to your reviews to find the gaps and make a few tweaks. Since then we have joined forces with Moneyhub which means that our customers will benefit from a wider range of provider integrations, faster transaction refresh times and accurate spending categorisation while continuing to receive our expert advice on their finances. As well as this, we are also making further improvements to the app including savings and budgeting tips, and our partnership with Uswitch will be expanding later in the year. When our customers speak, we listen. We’ve also invested in user research and we will keep using the feedback we receive to make ours the very best possible service for you.

The financial advice gap still exists

Back in August of last year we released a report that we complied with YouGov on the financial advice gap in the UK. We found that 19.8 million people* across the UK would appreciate a bit of financial advice, but not everyone knows how to get it or that it’s even an option for them. This report, which you can download for free here, was put together off the back of a 2015 study by Citizens Advice[1].They identified the four types of advice gap: the affordable advice gap, the free advice gap, the awareness and referral advice gap and the preventative advice gap, and we were interested to see if much had changed in four years.

Our findings showed that a great deal had changed in that time, such as an increase of over 5 million people* who would benefit from financial advice but are not aware of public financial guidance. As we are trying to bridge the advice gap in the UK, we didn’t want to wait another four years to re-evaluate and so we have decided to make this an annual report with the help of YouGov. Our 2020 report will be released later this year, so watch this space!

*Where figures like this are shown, OpenMoney has extrapolated the YouGov findings from our sample to represent GB population estimate of 50,644,094 (source ONS, June 2018).

 

[1] Citizens Advice

 

 

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