Savers have never had it so good, says Defaqto

April 17, 2008 | posted by Chloe Cottam in Banking, Insight, Press Release, Savings | comments (0) |

Historically, when base rates changed, savings rates followed suit, but in the current credit crunch, those with spare cash and prepared to move their money around can take advantage of the banks’ and building societies’ eagerness to attract retail funds.

Last time the Bank of England’s base rate was changed to 5.00% was 17 months ago in November 2006. Comparing the fixed rates available then and those available now shows massive differences. The highest available 6 month fixed rate bond is now paying over 1.50% more than 17 months ago on a £10,000 investment.

David Black, Principal Consultant  - Banking at Defaqto, said: “With many people thinking  that the base rate is likely to fall further this year some of the fixed rate products available now look outstanding value.”

Variable saving rates look set to be reduced, but with some of the newer entrants, such as Kaupthing Edge & Icesave saying that they will hold their rates for the time being, people could still maintain or better their current rates going forward if they are prepared to move their money around.

“It is clear that some financial institutions are making their decisions about fixed savings rates in the light of their own particular circumstances and are not being influenced too much by what is happening to the Bank of England base rate. While this is the case, savers can consider taking advantage of the situation by locking into some very attractive rates.  Remember though, that only balances of up to £35,000 with any one institution are covered by the Financial Services Compensation Scheme.”

Comparison of past and current fixed gross AER rates for

a £10,000 balance with Bank of England Base Rate at 5%

Term of Bond

HIGHEST

rate   November 2006

HIGHEST rate       now

Additional interest
6 month fixed rate bond

5.27%

6.86%

1.59%
1 year fixed rate bond

5.80%

6.92%

1.12%
2 year fixed rate bond

5.72%

6.60%

0.88%
3 year fixed rate bond

5.71%

6.70%

0.99%
4 month fixed rate bond

5.60%

6.00%

0.40%
5 year fixed rate bond

5.58%

6.00%

0.42%

 

 

 
Term of Bond

AVERAGE  rate      November 2006

AVERAGE rate      now

Additional interest
6 month fixed rate bond

4.78%

5.97%

1.19%
1 year fixed rate bond

5.03%

5.64%

0.61%
2 year fixed rate bond

4.97%

5.36%

0.39%
3 year fixed rate bond

5.06%

5.37%

0.31%
4 month fixed rate bond

5.11%

5.27%

0.16%
5 year fixed rate bond

4.63%

4.79%

0.16%

Highest fixed savings rates currently available

Provider Product

Open by:

Gross AER % for £10,000

Fixed Term
Icesave 6 Month Fixed Rate

I

6.86

6 months
Birmingham Midshires Direct 6 Month Fixed Rate

PT

6.82

6 months
Kaupthing Edge 6 Month Fixed Term

I

6.80

6 months

 

 

 
Saga 1 Year Fixed Rate Monthly

PT

6.92

1 year
Kaupthing Edge 12 Month Fixed Term

I

6.86

1 year
Heritable Bank 1 Year Fixed

P

6.80

1 year

 

 

 
Icesave 2 Year Fixed Rate

I

6.60

2 years
Alliance & Leicester 2 Year Fixed Rate

B

6.30

2 years
FirstSave 2 Year Fixed Rate

I

6.30

2 years
Cheshire Building Society 2 Year Fixed Rate Bond

BIPT

6.30

2 years

 

 

 
Kaupthing Edge 3 Year Fixed Term

I

6.70

3 years
Icesave 3 Year Fixed Rate

I

6.50

3 years
FirstSave 3 Year Fixed Rate

I

6.30

3 years
Yorkshire Bank 3 Year Term Bond

BI

6.25

3 years

 

 

 
Anglo Irish Bank - UK 4 Year Fixed Rate

P

6.00

4 years
Heritable Bank 4 Year Fixed Rate

IP

5.75

4 years
Bradford & Bingley 4 Year Fixed Rate

BP

5.60

4 years

 

 

 
Anglo Irish Bank - UK 5 Year Fixed Rate

P

6.00

5 years
Heritable Bank 5 Year Fixed Rate

IP

5.75

5 years
United Trust Bank Ltd 5 Year Fixed

P

5.50

5 years
Birmingham Midshires 10 Year Fixed Rate

T

6.00

10 years

B = branch  I = internet

T = telephone  P = post

-Ends-

For further information contact:

Defaqto Limited          

David Black or Luci Mylward

01844 295 454

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Defaqto comments on Base rate change

April 10, 2008 | posted by Chloe Cottam in Banking, Insight, Press Release | comments (0) |

Following The Monetary Policy Committee’s decision to reduce the Bank of England Base rate by 0.25% to 5.00%, Defaqto’s Principal Consultant – Banking, David Black comments:  

“This 0.25% cut by the Monetary Policy Committee was widely anticipated and comes as no surprise. What remains to be seen is how much each individual lender will pass on of this cut to its variable rate borrowers. 

“Prior to this cut the average Standard Variable Rate was 7.21%. Last time the base rate was at 5.00% (between 9th November 2006 and 10th January 2007) the average Standard Variable Rate was 6.80%” 

-Ends-   

Notes to Editors: 

1 Dependent on the content of the release 

For further information contact: 

Defaqto Limited          

David Black, Chris Johnston or Luci Mylward

01844 295 454  

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Borrowers suffer triple whammy with tracker mortgages, says Defaqto

April 8, 2008 | posted by Chloe Cottam in Banking, Insight, Mortgages, Press Release | comments (1) |

In the days before the credit crunch, people took out mortgages that tracked the Bank Base Rate because they thought the rate would drop in the future. The loading above BBR was generally stable in the region of 0.5% to 0.75%, depending on the length of the tracker term.In today’s increasingly difficult conditions, all this has changed. Not only has the number of available BBR tracker mortgages dropped by almost a quarter since July 2007, the higher loadings on the BBR have, on average, has more than negated the half percent decrease in BBR since then.

For two year trackers, the period with the most plans on offer, the average loading above BBR increased from 0.49% to 1.17% over the eight months since July 2007, an increase of 139%,  while the BBR rate fell from 5.75% to 5.25% over the same period.

It’s a similar picture for three year trackers with an average loading increase from 0.52% to 1.14%, an increase of nearly 120%. For the other main mortgage term products, there have been increases, even if they have not been quite as swingeing.

For the consumer the pain doesn’t stop there. Not only has the number of mortgages on offer decreased while loading percentages have increased, but application fees have seen huge uplifts since July. Fees for a typical 2 year mortgage have gone up from £688 in July 2007 to £1,005 currently, a 46% increase. This gets worse at the tracker term increases, rising to a massive 139% for term trackers.

David Black, Principal Consultant - Banking at Defaqto said: “With banks and building societies trying to repair their balance sheets in an atmosphere of financial mayhem, it is hardly surprising it is the poor consumer who is caught in the middle and is having to pay more for less choice. It is almost as though we are going back to the days when lenders felt they are doing you a favour by offering you a mortgage.”

-Ends-

Bank Base Rate

Tracker Mortgages

July 07

April 08

% Increase/  Decrease
1 year

 

 
Number

7

3

-57.1
Average % Loading

0.48%

1.19%

147.9
Average Fee

£505

£486

-3.8

 

 

 
2 year

 

 

 
Number

265

159

-40.0
Average % Loading

0.49%

1.17%

138.7
Average Fee

£688

£1,005

46.1

 

 

 
3 year

 

 

 
Number

75

74

-1.3
Average % Loading

0.52%

1.14%

119.2
Average Fee

£606

£1,016

67.7

 

 

 
5 year

 

 

 
Number

29

17

-41.4
Average % Loading

0.72%

1.04%

45.0
Average Fee

£444

£789

77.7

 

 

 
Term

 

 

 
Number

215

199

-7.4%
Average % Loading

0.75%

1.15%

53.3
Average Fee

£442

£1,060

139.8

 

 

 
All

 

 

 
Number

591

452

-23.5
Average % Loading

0.6%

1.16%

93.3
Average Fee

£573

£1,013

76.8

For further information contact:

Defaqto Limited 

David Black,Chris Johnston or Luci Mylward

01844 295 454

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Platform providers need transparency of proposition and charging structures, says Defaqto report.

April 7, 2008 | posted by Chloe Cottam in Insight, Investment, Press Release | comments (0) |

Despite assurances from market players about the transparency of their propositions, some IFAs claim that platforms are too expensive and that they still struggle to understand the concept, according to a report recently published by Defaqto.

The findings from the review of the adviser platform market coincide with the FSA’s feedback on its platform discussion paper. This highlighted concerns over the complexity, cost and training issues relating to the use of platforms.

Defaqto’s report, entitled: ‘Adviser Platforms in the UK 20081 - Stand and Deliver’, includes results from a study of IFAs conducting investment business. The study found that among the reasons given by IFAs for not adopting platforms were that there was not enough awareness of either their functions or of the available products.  Other reasons were that platforms required to be fully understood by clients before they would request them, while some IFAs simply thought that they were too expensive.

Matt Ward, Defaqto’s Principal Consultant for Pensions & Wealth Management, stated that: “Although it is acknowledged that platforms should be seen as a service it does not preclude providers from putting together marketing and support material which clearly defines the capability of a proposition and details the component parts. Clearly, more work needs to be done in getting the ‘platform’ message across to IFAs, and this needs to be followed up with ongoing support.”

Further, Ward comments: “Advisers also need to be in a position to compare and contrast propositions ahead of further adoption considerations for their practice and the fact that this process is not currently a straightforward one does not reflect well on the market.”       

-Ends-

 

Notes to Editors:

1The report ‘Adviser Platforms in the UK 2008- Stand and Deliver‘  is on sale priced £1,200 excluding VAT for a PDF version and £595 (No VAT payable) for a single printed copy. For further information please contact Chris Johnston on 01844 295457, or the Sales Department on Freephone 0808 1000 804 or visit http://www.defaqto.com/

For further information contact:

Defaqto Limited          

Matt Ward, Chris Johnston or Luci Mylward

01844 295 454

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Are you covered for lost baggage?

April 4, 2008 | posted by Chloe Cottam in Insight, Insurance, Press Release | comments (1) |

With the chaos that has surrounded the opening of Heathrow’s Terminal 5, and the late Easter school holidays upon us, families are looking to take a break and the issue of baggage being lost or delayed is prominent.When travelling abroad, if your luggage is lost or delayed and you need to purchase items such as a change of clothes, hygiene products or any other necessary items, you would expect your insurance policy to reimburse you. Similarly, if your flight was delayed you would expect your insurance policy to provide some form of compensation for you being stuck in the airport lounge.

Defaqto has looked into the single trip travel insurance market to see what cover is provided for lost and delayed baggage as well as being delayed at an airport. The research noted:

  •  14% of single trip policies do not provide any cover for delayed baggage.
  •  40% of single trip policies only provide a maximum cover of £100 or less for delayed baggage.
  •  40% of single trip policies only provide a maximum cover of £100 or less for compensation for flights being delayed.
  •  74% of single trip policies provide £20 or less for the first 12 hours of being delayed at the airport.
  •  82% of single trip policies provide £20 or less for the each subsequent 12 hours of being delayed at the airport.

Mike Powell, Consultant for General Insurance at Defaqto, said:  “With the problems that have occurred with the opening of Terminal 5 and the fact that there has been widespread reports in the media of people not being able to collect their luggage and flights being cancelled or delayed, consumers do not always consider what cover is provided by their travel insurance policy for these types of eventualities. It is therefore important to check what is provided by a travel insurance policy before purchasing cover.”

-Ends-

 

For further information contact:

Defaqto Limited          

Insight person, Chris Johnston or Luci Mylward

01844 295 454

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Defaqto announces improved suitability letters in Aequos Engage

March 27, 2008 | posted by Chloe Cottam in Press Release | comments (0) |

Defaqto is pleased to announce that it has enhanced the suitability letters capability within Aequos Engage by incorporating ATEB Suitability (file:///C:/AppData/Local/Local%20Settings/Temporary%20Internet%20Files/Content.Outlook/UY25NUMZ/www.atebsuitability.co.uk), following a successful pilot scheme that was carried out towards the end of 2007.

ATEB Suitability is a bespoke version of Intelledox, the smart document creation software. Intelledox is partnered with ATEB Business Solutions Ltd, a specialist compliance consultancy with extensive industry experience that distributes Intelledox as part of its systematic approach to compliance, based on good business practice and risk management strategies. ATEB’s suitability report templates have proved extremely robust in compliance terms and used in conjunction with Intelledox, they virtually eliminate the possibility of error.

Commenting on the incorporation of ATEB Suitability into Defaqto Engage, ATEB Director Huw Reynolds’s said: “The industry has been crying out for this type of software for years. Existing report generators are all well and good, but there is too much reliance on user input and hence error rates are high. Intelledox virtually eliminates errors by forcing the user through a simple ‘wizard’ type interface. Letters are produced more quickly and the work can be delegated. The result is a quality end product every time. As suitability reports are an essential risk management tool, this software provides a significant advance.”

Alan F Kerr, Principal at Alan Kerr Financial Services said: ” When Defaqto asked me to take part in the pilot  scheme using ATEB Suitability within Aequos Engage I was sceptical about the claims being made for the Report Writer.  However, having used the system, I am thoroughly impressed by how professional the output is and how easy it is to use.”

Andrew Sotiriou, Adviser at Ethical Financial Planning said: “There are so many different suitability letter writing systems on the market, ATEB Suitability built into Aequos Engage is definitely the market leader. It is remarkably intuitive and makes the report highly personalised to the client and is so much quicker than anything else I have come across”.

Ian Osborne, Director at Granite Financial Management Limited said: “It’s good to see Defaqto listening to feedback from its customers and using this in its product development. The new functionality enhances the product and shows its commitment to supporting advisers through the research and sales process.”

Roger Perry, Adviser National Accounts Manager at Defaqto said:” This is a genuine enhancement to Defaqto Engage and I am truly excited by it because it will enable advisers to complete their suitability letter more quickly, more accurately and with complete confidence.”

-Ends-

For further information:

Defaqto Limited

Roger Perry, Chris Johnston or Luci Mylward

01844 295 454

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Thinking the unthinkable

March 25, 2008 | posted by Chris Johnston in Banking, Insight, Investment, Savings | comments (0) |

 With commentators now beginning to openly discuss the possibility of a collapse of another bank or financial institution, it is perhaps timely to consider what compensation  arrangements are in place for depositors and investors should this happen. For savers, there are only two homes for your money that are 100% safe and these are Northern Rock and National Savings and Investments as these are both owned by the government. For everything else, there are limits to the amount of compensation that is available. Compensation payments are managed under the Financial Services Compensation Scheme (FSCS),  and limits vary for deposits, investments. and insurance claims. Only institutions regulated by the FSA are eligible to be covered by the scheme, which only has £4bn per year to use for this purpose. Claims totalling in excess of £4bn would trigger meetings between the FCSC, the FSA and the Treasury to work out a solution.  As things stand currently, £35,000 of deposits per person per financial institution are covered and this doubles for accounts in joint names. For investment the figure is £48,000 with 100% for the first £30,000 and 90% for the remainder. But  the FSCS will only pay compensation up to the limit of £35,000 per person, per authorised institution. This means that a parent institution could be the authorised entity and depositors will only be eligible for one pay-out, even if they have other accounts in the parent’s subsidiaries.  So, it may be wise to spread your savings and investments across different authorised entities, but you will have to do your own research to find out who owns whom, which companies are authorised under a group registration and which are registered individually.

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Consider taking your annuity sooner rather than later, says Defaqto

March 25, 2008 | posted by Chloe Cottam in Insight, Pensions, Press Release | comments (0) |

Selecting exactly the right annuity to meet individual needs from the many payment options and providers available can be one of the most important decisions a person has to make. But buying sooner rather than later may be even more important, says Defaqto, the financial research company.Not only is there a realistic prospect of the bank base rate being reduced in the coming months, having the effect of bringing annuity rates down with it, buying early will both secure the current rate but also provide an income that would take many years to replace if the annuity is taken later.

A typical open market level annuity for a 65 year old man in good health, without a spouse’s income, guarantee or escalation, with a pension fund of £100,000 currently is £7,4101. The same annuity, if taken at 64, would typically be £7,2341.

So by delaying his annuity until 65, the man would receive an extra £176 per year for as long as he lived. However, he would have forfeited £7,234 by not taking his annuity at 64, and he would have to survive 41 years to make up the difference.

This assumes that the pension fund remains the same over the time in question. Even if it grew 6% in the year between him being 64 and 65, the resulting break-even period would be 12.2 years.

For a 60 year old woman in good health, a typical open market level annuity without a spouse’s income, guarantee or escalation, with a pension fund of £100,000 is currently £6,3231. The same annuity, if taken at 59, would typically be £6,228.1

So by delaying her annuity until 60, the woman would receive an extra £95 a year as long as she lived. However, she would have forfeited £6,228 by not taking her annuity at 59 and she would have to survive 65.5 years to make up the difference.

This assumes that the pension fund remains the same over the time in question, Even if it grew 6%, in the year between her being 59 and 60, the resulting break-even period would be 13.8 years.

Matt Ward, Principal Consultant for Wealth and Pensions Management at Defaqto said: “Choosing the right time to take your annuity is very specific to your individual circumstances and to your view on future annuity rates, even if your pension pot is protected by being in money or near money assets. So when you decide to take your annuity is just as important as getting the right annuity from the right provider at the right price.”

 

Average annuity £100,000 purchase price, level term, no escalation, no guarantee, no spouse’s pension

Average annuity £106,000 purchase price, level term, no escalation, no guarantee, no   spouse’s pension

Male

Female

Male

Female
Male Aged 64 / Female Aged 59

£7234

£6228

-

-
Male Aged 65 / Female Aged 60

£7410

£6323

£7829

£6679
Increase if annuity taken at 65 for male and 60 for female

£176

£95

£595

£451
How long it takes to replace lost annuity value if annuity taken at 65 for man and 60 for woman

41 years

65.6 years

12.2 years

13.8  years

            Source: Defaqto

Notes to editors.

1 Typical annuities are based on the average income of top five providers for the respective purchase price, as at 25 March 2008. Source: Defaqto’s RateTracker

For further information contact:

Defaqto Limited
Matt Ward, Chris Johnston or Luci Mylward
01844 295 454

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Advisers hold the key to platform success, says Defaqto

March 13, 2008 | posted by Luci Mylward in Investment, Pensions, Press Release | comments (0) |

Providers planning a long-term future in the adviser platform market will need to respond positively to IFAs’ requirements to achieve success, according to Defaqto’s latest report, ‘Adviser Platforms in the UK 20081- Stand and Deliver‘.  The report identifies key areas of focus for those wishing to deliver successful propositions within this ever-changing marketplace.The report suggests that despite experiencing some growth, the platform market is essentially still in its infancy. IFA networks and support groups, which have yet to take a stance on platforms or commit to preferred partners, will need to be the target of platform providers. These providers will need to cite the positive experiences of those who have bought into the concept of platform technology and are conducting business online.

In the report, Defaqto uses feedback from IFAs conducting business in the UK investment market to deliver a qualitative dimension to the findings. This includes an insight into IFA business habits, IFA opinion on pertinent industry issues and IFA perception of service standards within the platform arena. This gives important insights to providers by allowing  a better understanding of the IFA community’s behaviour and needs in this developing market.

Matt Ward, Defaqto’s Principal Consultant for Pensions & Wealth Management, comments: “It would appear from our research that many IFAs are still trialing platform solutions ahead of further commitment to one or two partners. One of the reasons for this would seem to be a confusion surrounding the USPs of each proposition and it is vitally important for providers to ensure that IFA supporters are clear about the capability of the services and systems on offer.

“Everyone who is involved in the market, whether as an active or potential participant, will benefit from understanding more fully how the market is moving and how propositions are developing, as well as finding out what the likely impact of regulatory directives on the platform market will be.”

-Ends-

Notes to Editors:

1The report ‘Adviser Platforms in the UK 20081- Stand and Deliver‘  is on sale priced £1,200 excluding VAT for a PDF version and £595 (No VAT payable) for a single printed copy. For further information please contact Chris Johnston on 01844 295457, or the Sales Department on Freephone 0808 1000 804 or visit http://www.defaqto.com/

 For further information contact:

Defaqto Limited 

Matt Ward, Chris Johnston or Luci Mylward

01844 295 454

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Evaluating web comparison sites

March 12, 2008 | posted by Luci Mylward in Insurance, Press Release | comments (0) |

With moneysupermarket.com and confused.com both claiming to offer the cheapest quotes for motor insurance based on research surveys, the poor consumer could be forgiven for wondering how one piece of research could end up favouring one site and another favouring the other.Price comparison websites have rapidly become hugely important in the process of selecting insurance policies, but the assumption that they all work to a uniform set of criteria so that the consumer can genuinely compare like with like, is way off the mark.

A typical instance of this is where the aggregator sets the voluntary excess to automatically default to a large amount in order to offer reduced premiums. The consumer may not spot this and only find out at claim time. Similarly, if the consumer requires courtesy car cover or wishes to protect their no claims discount, the cost of this is not always shown or included in the initial quote.  The consumer, therefore, will have to obtain this information directly from the insurer. Another complication is where the consumer cannot compare the actual cover levels between one policy and another to assess each one’s respective value for money.

Defaqto, the independent financial research company, evaluates motor price comparison sites for the overall quality of their operations, but not for premiums. To carry out this research it uses at thirty-three criteria relating to three aspects of the operation: The Quotation Process; The Quotation Results Process and Insurer Results. The findings provide a comprehensive and independent analysis of the quality of the sites1.

Commenting on the situation, Mike Powell, Consultant - General Insurance said:   “Our research so far has been into car insurance on price comparison sites. To do this we rate each site for the way it handles the thirty-three criteria we consider most relevant to the quotation process from a consumer point of view. What has emerged is that not one site covers all insurers and many have a fairly restricted pool of insurers to draw on. 

“The same insurance requirement can even produce different premiums from the same insurer across different sites. The message is clear - make sure you know what you want in terms of cover levels and treat price as a secondary consideration.”

-Ends

Notes to Editors:

1 The report entitled ‘Motor insurance in the UK, 2007 - the rise of the aggregator’ is on sale priced £1,200 plus VAT for a PDF version and £595 (No VAT payable) for a single printed copy. For further information please contact Chris Johnston on 01844 295457, or the Sales Department on Freephone 0808 1000 804 or visit http://www.defaqto.com/

                                                                  

For further information contact:

Defaqto Limited
Mike Powell, Chris Johnston or Luci Mylward
01844 295 454

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