Citizens Advice Closure and Investment Platforms

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Hello, welcome to this Moneybox podcast. The cost of a comfortable or even a basic retirement in Britain has jumped following a year of high inflation. The state pension can't even provide the minimum. And investment firms have until the end of February to stop snaffling the interest on their clients' cash. Is this the start of a new consumer-focused...

clamped down by the regulator. But first, dozens of citizens' advice centres in England are at risk of closing because local councils which support them are running out of money.

That warning came this week from the senior Labour MP Clive Betts in an exclusive interview with Moneybox. He spoke to me in his role as chair of the House of Commons Select Committee on levelling up housing and communities. He also told me that the funding crisis in local councils is the worst he's ever seen in more than 30 years as a Member of Parliament.

One of those citizens' advice centres in difficulties is in Mansfield. It told Moneybox it'll have to close because the local council has cut thousands of pounds in funding. So Dan Whitworth hit the road to Nottinghamshire. Walk around the town centre here with its market square, old town hall and historic buildings and the history is easy to spot.

So too are the tough economic times facing communities like this one. Mansfield is one of the most deprived parts of the UK and it's not hard to find boarded up and empty shops. At the minute, we're just getting by month to month. I'm just keeping my head above water. Everybody's struggling. Lots of children in poverty now. I see it where I live.

Another large space right in the centre of town that will soon be joining those to close its doors for one last time is this large glass-fronted building, home to Mansfield's citizens' advice. Hello, Jodie. Nice to meet you. Hello, how are you doing? All right, thank you. Are you? I'm very well. Jodie Picard, I'm a specialist debt caseworker at Mansfield Citizens Advice. Tailored debt advice, financial issues, benefits, obviously with the increased.

cost of living, energy, crisis, everything. There is a massive need and there's been an increase in the need for that support for clients who are facing issues, just being able to pay basic household bills. So they need help with benefits to increase that income. So there is a huge need for this particular service because of it being one of the most deprived areas as well. Hello, Citizen Advice. Last year, Jodie and the team here gave tailored financial help to two and a half thousand people.

helping them secure £800,000 worth of benefits, writing off £1.1 million worth of bad debt and working with landlords to help avoid countless evictions. What's going to happen to those people? What's going to happen to that need when you close your doors? Well, there is already, from clients that we've spoken to, a sense of panic, definitely, from the clients as to where they're going to go, what they're going to do.

When you're dealing with a client who's already got severe mental health issues, it is concerning as to how much more of an impact the service closing is going to have on them.

So to try to dig a little deeper, it's a quick 10 minute walk up to Mansfield District Council's offices, where I find Executive Mayor Andy Abrahams. The whole landscape with regard to funding of charities, voluntary services, is getting to the point where it's like most things in the country, it's at breaking point.

Like many councils, Labour-run Mansfield District Council is having to work hard to balance the books. It's facing a £5 million-plus deficit while still trying to do its best to provide services for local residents. including offering help and advice to the citizens' advice in the town to try to avoid it having to close. We've got the 13 years of austerity. Our services have been underfunded and disappeared from central government.

There's been this direction of making charities, volunteers pick up those services and it's not a sustainable model. On average, citizens' advice centres get about a third of their funding from local councils. The rest comes from a variety of grants, charities and other organisations. For every £1 that you invest in an assisted advice service...

We offer £13 back into local communities. We know that we save money. We help to stop the knock-on impact of other services locally. Rooney Purcell is a director at Citizens Advice. But ultimately, our ability to make a difference and offer that advice. depends on funding. And that's why we are monitoring the situation quite carefully. Our focus right now is to continue to be there for the people in the places and in the ways that they do.

Back in the town centre and there are big improvements planned. A successful bid for £20 million of levelling up cash from Westminster. A £17 million regeneration project for part of the town centre. and recently approved planning permission for a new future tech skills and knowledge exchange. But back to the heart of this story at the Citizens Advice Hub, we find Mark. At nearly 50, he got into £2,000 worth of debt over a utility bill that he just couldn't tackle on his own.

I couldn't do it myself. I was going county court letters and stuff. Not very good at reading and writing. I didn't really finish school, so yeah. And my parents aren't around to talk no more, so I felt like on my own. What would you have done if... If Jodie wasn't here, if Citizens Advice wasn't here, what would you have done? I don't know. I would have had debt collectors on my door. I don't know how it would have played out. I really don't know. I couldn't have paid, and I couldn't...

I'm not very good on computers. I'm a generation that got left out. I couldn't work it out. Because of the help you got from Jodie, because of the help you got from Citizens Advice... How are things now compared to what they might have been like? Loads better. I haven't got no bailiff letters. I haven't got no CCJs. I've managed to keep on top of all my other bills. Yeah, a lot better. And, well, before I had confidence that if ever I had a problem again, I could...

phone Jodie or phone Citizens Advice and get help. But if it's shutting down soon, then, well, I don't know where we'd turn. Mark, ending Dan's report. Well, as I said earlier, Mansfield citizens' advice is not alone. The MP, Clive Betts, began our conversation with this alarming prediction.

Well, the most serious cases, the local government association are saying up to one in five councils could be at risk of going bankrupt. In all those cases, citizens advice bureaus could be at risk and therefore dozens of citizens advice bureaus up and down the country could now. be potentially at risk in the next few months. And if they do go bankrupt, how does that affect funding for citizens' advice?

Well in that situation councils have to retreat to just funding those services they are legally obliged to, like care for the elderly, for children, special needs education, all those important things. And then they have to look at other services where they haven't got the legal responsibility. They're still important. No legal responsibility. So there are things like advice centres and they're in the line to be cut in that situation.

Citizens Advice has said this week that five million people are living on what they call a negative budget. In other words, they're spending more than their income and spending it on essentials. 2 million have cut spending to the bone. How will the closure of citizens' advice affect them?

Oh, I think very greatly, because one thing that citizens advice bureaus can do with their expertise is to help people who don't always know they're entitled to receive some benefits to get them. And those extra benefits, that sometimes smaller...

amount of money can be an absolute life changer for people who are literally at their wits end how to balance their family budgets. Does it go beyond benefits though? I mean, we heard about councils managing their money. Should the individuals be better at managing their money?

Well, Citizens Advice Bureau, and I talked to the one in Sheffield on a regular basis, told me at one time, yes, they sit down with people and say, look, you've got the money here. If you only managed it better, you'd be all right. They're saying they're just meeting people now who, however they manage the budget, just... can't make ends meet. Don't councils, as the government says, have the responsibility to manage their own finances?

and generally councils have done it very well when you think putting this in context since 2010 government have cut council fundings by 50 percent even when council tax increases are taken into account councils now only have two thirds as much money to spend as they did back in 2010 in real terms. Councils have made cuts, they've made efficiency savings, they've tried to manage their budgets, but then they've now got to the point where essential services like advice centres are going.

And what's your committee going to be saying to the government about this? Because you've been taking evidence, haven't you?

we've said very clearly that we think the whole local government finance system is broken councils need immediate funding but then after the next election there has to be a comprehensive review of what government provides and how you raise money fairly local level because council tax is the main local tax and of course it's regressive it raises disproportionately more from people in lower value properties rather than those in high value properties

Clive Betts, the chair of the House of Commons Select Committee on levelling up housing and communities. Well, Dan's with me now. What have local councils and government had to say about this, Dan? Well, the local government association told us councils of all political colours and types are warning of the serious challenges they face to set balanced budgets next year and how that will hit discretionary services. It wants central government...

to extend the household support fund for at least a year. Well, as for Westminster, the minister responsible for this, Paul, he's Michael Gove, says up to £64 billion has been made available to local authorities in England. That's an increase of seven and a half...

on the previous year which he says will allow local authorities to support communities and reform services to help them prepare for the future thanks dan The cost of a comfortable retirement in Britain has jumped by nearly £6,000 to just over £43,000 a year for a single person, £59,000 for a couple.

Association publishes figures worked out by Loughborough University for the amount of money you'd need to spend on certain lifestyles in retirement. No surprise, perhaps, that the cost, like everything else, has risen sharply, even for what it calls a minimum. a single person now needs an income of £14,400 a year, well above the state pension for almost everyone. And what it calls a moderate lifestyle will cost just over £31,000 for a single person.

Our reporter Sandra Hardiel went for a walk in Cheshire to ask people in style about their expectations for retirement. When do you want to retire? Oh my goodness. As soon as possible? No, I don't know. Where do I want to retire Josh? 60? Guess so. Well, I want to work as long as I can. I'm 54 now.

And I've just started a new career actually about a year ago as cabin crew. So I'm loving that. So I'm not, I am thinking about retirement in the future, but not for now. Are either of you working or are you retired? I'm retired, fully retired. retired and i'm part-time how is retirement financially do you feel like you were prepared i think i was pretty prepared yeah i'm in a fortunate situation that

You know, I can afford to do nice things. So, yeah, I was pretty prepared. Well, I wasn't quite prepared because I didn't invest in a large pension and I didn't have a pension. Basically, that's why I'm working part-time to build that pension pot up so I can retire. But I'm significantly younger, as you can tell. I've probably got another five years to work, maybe. to retire comfortably? Good question. I don't know. 50, 60,000? I've just...

paid into an NHS pension so I just presumed that that would cover me. I can't really tell you an exact figure. So some research came out this week and it shows the amount you'd need on a yearly basis to have a certain lifestyle in retirement. I have the graph here. What's your reaction to these figures? I think the minimum is definitely the minimum. I would look at the 22, two and a half, 14, you couldn't live on that. Maybe... 10 years ago but not now moderate because

That's probably the sort of income that we would be looking at to go on a holiday a year or two holidays. Not big holidays and living comfortably. But I think you don't realise, a lot of people don't realise how much you actually need. I mean, do you think these figures are attainable? For some. For some, but not for an awful lot, I should say. I would think that the majority of people are looking at this figure at the moment, which isn't enough. 22, 14 to 22, yeah.

i think it depends i live on my own so if you're in a joint household and you own your own property and things like that you've got like other sources of income but for a single person that would be quite difficult really i would think I think on salaries at the moment, them having been frozen, I just don't think people have the capacity to save that much. The minimum looks attainable, but comfortable feels like another world, really.

Listening to that is Nigel People. He's Director of Policy at the Pensions and Lifetime Savings Association that published these figures. Nigel People, Sandra found some surprise at your figures among those people in style. No one thought that comfortable level was achieved. How do you calculate them? Yeah, morning Paul. So basically they are calculated...

by independent research by Loughborough University, who are the specialists in living standards research. And they formed these figures on the basis of talking to members of the British public from across the whole of the UK. And they asked them to think about three... lifestyles the kind of minimum basic level where you have enough to cover all your urgent needs like housing and clothing but also a little bit extra to go out.

And then you work your way up to comfortable where you start getting into the realm of wants and things that might be considered luxuries. Yes, I mean, we heard from one person in style that she had an NHS pension. She presumed that would be enough. from their job, is it sensible to think that will be enough?

Well, it might be. I mean, someone with an NHS pension, they may not have enough to be comfortable, but I think they've got a pretty good chance of reaching the middle level, the moderate level. It will depend on your salary and the years of working. And for many people, it will depend on... much you're putting away but it is true that the

The average minimum level required by law for workplace pension saving will not get you up to the moderate or comfortable levels. No. And, you know, £43,000 for a single person to be comfortable, £59,000. for a couple and Ellie's tweeted to say my current salary is nowhere near that I've worked for 44 years I mean these are well above the average wage aren't they and it's in retirement you're not working for that yeah no I mean

As I said, they're based on what the British public would like to have. And this is the top level. We estimate about one in 10 people are likely to be able to have that lifestyle. Most of us are going to be looking at the minimum to moderate lifestyle. I would emphasize that that's a pretty good lifestyle, minimum to moderate. At moderate level, you can go on a two-week holiday to Europe. You can run a car. You can do a whole bunch of nice things.

So you're not in poverty, perhaps, but it is 3,000 more than the state pension, the minimum, isn't it? And you'd need nearly four state pensions to have a comfortable retirement. Does everyone need a good company or a personal pension, perhaps an auto-enrolment? pension well i think i must just say again if you've got two people a couple with a full state pension they will reach the minimum level

But you're absolutely right. It's better to be saving through the workplace. You get a contribution from your employer. You get tax relief from the government and you get the habit of putting a bit of money aside. And that really helps you work your way up. from the minimum to the moderate level.

Yes, and of course the government also says it made the biggest state pension cash increase in history last year, and there's another one in April. But pension credit, which is the minimum you're supposed to live on, according to the government, is £3,000 less than your minimum. Yeah, no, so as I said, this minimum is based on the view of the British public, and it's above the sort of food, lodging, shelter. It's about being able to take part in society.

go down the pub once a week, a modest level of lifestyle, but above the absolute bare minimum. But I do agree with you. It's been, sorry, I do agree with you that the government's been good on the state pension recently. And I think it's really essential that they... keep, they maintain the value of the state pension, and they maintain the triple lock so that everybody will have a good foundation for the extra workplace pension saving on top.

Yes, so just a foundation. Nigel People from the Pensions and Lifetime Savings Association. Thanks. And on Moneybox Live on Wednesday, Felicity Hanna will be asking, when do you want to retire? You can stop shouting tomorrow at the radio now. Could you imagine doing your current job into your...

or can you afford not to? Are you working out the perfect side hustle for retirement or perhaps you're retraining to be cabin crew like the lady in style? Email us or send a voice note to moneybox at bbc.co.uk. Leave a phone number if you can.

Investment platforms and providers of personal pensions, usually called SIPs nowadays, have just a few weeks left to make sure the way they treat customers' cash balances fits in with new rules called their consumer duty. The Financial Conduct Authority wrote to 42 firms after concerns that most of them were keeping some or all of the interest they earned on customers' cash balances. And with interest rates of 4% or more, that's meant big returns.

For them, the regulator found that between them, in one month, the companies retained interest worth over £74 million that had been paid on customers' money. And some were also charging customers a fee for... keeping the cash for them. That's known as double dipping. The regulators told firms they must make changes by the end of this month in what's been one of its first interventions under this new consumer duty. Mark Poulsen is the Chief Executive.

of the LangCat, which is a financial services consultancy for advisors and providers. Mark Poulsen, first that consumer duty. What must firms do to obey it and why is snaffling the interest against these rules? Interest knaffling is definitely a bad thing. The consumer duty most broadly requires firms, whether they're advisors or providers, to ensure fair value for customers.

colloquial way of talking about it i i think is as the granny test if you wouldn't put your granny through this then you shouldn't do it and in the area of retaining cash interest there are two issues here first is that It's happening and the extent to which it's happening. Although retaining interest isn't actually against any rules, the amount of it and the level of disclosure and information that customers are being given about it isn't good enough.

but also the practice of double dipping where firms not only keep some of the interest for themselves but also charge customers for doing that has to finish. Yes, and the FCA, the regulator, says firms must change things by the end of this month. What have they done already? Have they been doing what they're told? Yes. in the main nobody wants to be the last person to find out what happens what

and what the regulator is going to do to anybody that hasn't stopped the practice of double dipping. So that element of it, I think we can expect to finish by the end of this month. The issue about retaining some of the interest... that clients earn when they hold cash in SIPs or on investment platforms. That's a little bit more nuanced. Firms are allowed to continue doing that, but they have to be able to justify it, not only... to themselves and to clients but also to the regulator.

Yes, and the consumer duty, I mean, it covers that. I mean, that's something, you know, many people would think, well, they shouldn't have done it in the first place. But it covers a lot more than that, doesn't it? And what about charges? Many firms, particularly advice firms, take a percentage of their clients' money. each year, are they now going to have to justify that and actually work for it?

I'm not saying that they don't, but some of them don't, do they, Mark? We know that. Yes, I think it's fair to say that the regulator has found examples of where people are going to be having been charged. ongoing fees and aren't receiving any service for that so where it's an advisor for example the regulator said listen you should be expecting to get a review of your portfolio performance the firm should be checking to see if your circumstances have changed

you should have an ongoing relationship and it's absolutely fair to be charged for that. To be honest, whether it's a percentage or a flat fee, is almost a second order issue here. The point is if you're paying for something in whatever form on an ongoing basis, you should be getting ongoing service that goes along with it.

And what about independent financial advisors? They look at the whole of the market. They find the best investment for you. But many advisors now are restricted, including some of the very big ones. I mean, they really can't find the best, can they? Because they're limited to a few. consumer duty affect restricted advice? It largely is flat between restricted and independent. The duty of ensuring that you're delivering fair value for your customers.

in the world in which you inhabit is the same for both. One of the things that consumer duty does do, though, and it will be allied to some more reviews that the regulator is putting out this year, is trying to get the standard of disclosure and information to customers much, much better. it is at the moment. It's quite hard just now sometimes for customers to understand.

where independent stops and restricted starts, because some restricted firms cover very nearly the whole of the market, but not the whole thing. Others just do stuff from their own firm. So the standard of... understanding needs to increase dramatically and firms have to take account of that. Mark Polson of the Lancat, thanks.

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