Mortgage Charter and Unclaimed Benefits

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Orlando really can be that destination where you can innovate, collaborate, and look to the future. And that's what makes Orlando unbelievably real. Learn more at OrlandoForBusiness.com. Hello, welcome to this Moneybox podcast. More than a quarter of a million homeowners have reduced their mortgage payments or extended their term to help them cope with rising interest rates.

Seven million people are missing financial help they could get but don't claim, says the most detailed look yet at these unclaimed billions. And will plans to scrap the £100 limit on contactless card payments allow thieves to take more?

But first, there's been a sharp rise in the number of people taking their tax-free lump sum out of their pension fund over the past year. Since 2015, of course, people over the age of 55 have been able to take out their pension or part of it, and 25% of them have been able to take out their pension.

of that is tax-free. Newly obtained figures show tens of thousands more people made that choice before the budget last year and before the spring statement earlier this year. The figures from the regulator, the Financial Conduct Authority, The number of savers taking out their tax-free cash in the six months to March rose by a third on the same period a year earlier, to more than 110,000. And that was probably because there were rumours that the government might reduce how much tax...

In the event, it didn't, of course, but those rumours are back, ahead of this year's budget in November. Our reporter, Joe Krasner, spoke to these people in Liverpool who were close to retirement. I'm bringing forward a decision to cash in some of the tax-free elements of my pension by a year. So would you have done that if you hadn't heard what may happen? I'm not sure. I may have done. I may have done anyway.

because of the age I am. The tax advantages change at 75 years of age and I'm a year and a bit away from that so I may have made these decisions had I not been concerned about. budget changes i'm going to withdraw some money and give it to my grandkids but what happens if things don't change the way you're expecting them to No problem, the grandkids will get some money and I won't lose to the taxman. I've got a pension that I haven't cashed yet.

Unless you know what those changes are, you can't really plan what to do. So you're not going to pre-empt the budget? Are you going to wait and see what happens? That's generally what I want to do, but then... Usually they do give you little bits of time before things are implemented and things are probably seek advice then. So next year I thought I'd...

stop working and cash one of my pensions in and then over the next several years I'll cash the rest of my pensions in. So I've spent all my pensions before I get my old age pensions and hopefully I won't get taxed. The Chancellor of the Exchequer, she's made so many changes lately that I feel like my money's not really my own anymore. What happens if things don't change? I'm still going to cash it in.

People in Liverpool talking to our reporter, Joe Krasner. Well, the data on those rising numbers I mentioned was obtained by the wealth manager, Evelyn Partners. And Emma Stirland, its chief financial planning officer, is with me in the London studio. Emma Stirland, these numbers came... from Freedom of Information request you submitted to the regulator, the FCA. What trends did it show?

So, as you've already alluded to, we've seen a significant increase in people taking their tax-free cash. So, when we just look back at the data from September 24 to March 25, we've seen a significant increase. When we look further than that and look at the... pension withdrawals back through a full financial year 24 to 25 versus 23 to 24 we've seen a jump from 11 billion to 18 billion so everything

indicates what you've already alluded to. Yes. So did this surprise you? Absolutely not. With a change of government, spring statements, the budget last year and the rumours pending already, we've got lots of clients already asking us about what to do. Yeah, so there are people coming to you already worrying about what to do. In the light of rumours before the budget, which is still 74 days away on my calculation, does it alarm you to see people making these big and...

sometimes irreversible financial decisions based on rumours. Absolutely. One of your listeners said there that she was going to wait and see and then seek advice. That's exactly what we would say, trying to second guess what's going to be said in the budget. carries risks and there may be unintended consequences of jumping ahead. Yes, but what is the danger, though, of doing it? I mean, if you take out just your tax-free lump sum...

You've got more money. It's free of tax. What might you actually lose? What's the risk? Well, I think it's the consequences of what else you would have been doing. Also, if you bring it into your taxable account, whether... You just kind of invest it, have it in your bank account. If it had been left in your pension, it would have been tax efficient.

Also, we know that the rules are due to change in April 27. So depending on your health, if something happens to you between now and April 27, there's IHT consequences as well. Yes, because you could leave it without it. attracting inheritance tax before April 27. We might come on to that. Let me just read to what Mark said. He said, I'm waiting till my 65th birthday, May next year, so I can get the maximum cash lump sum from my work pension and ride out.

the wave of speculation. Is that your advice? That's the best thing? Yeah, absolutely. I think what we really want people to do is think about what their goals and objectives are and then think about what the consequences are.

For him, he wanted to do something at 65, then absolutely, let's not try and guess. People that were understandably cross about this idea of... reducing that tax-free lump sum because they put their money into their pensions on the promise they could take a quarter of it out and they see it as almost breaking that contract, if it happened, because we don't know that it will.

Yeah, it's frustrating for people to be able to plan. So those people that have invested into their pensions through their working lives, it does feel frustrating for rules to be changed. As you said, these particular rules, it's speculation at the moment.

Looking back to the budget last year, where we've seen that the IHT rules will change in April 27, people do feel like the girl posts have been changed. Yeah, though I must say every budget I can remember in the last 10 years, there have been rumours about restricting this.

hasn't happened. But as you said earlier, people are concerned about something we know will happen. In April 2027, inheritance tax will begin applying to pension funds. Is that a reason people think about taking it out now? I think it's because people are nervous. They have seen changes. There was lots of speculation last year ahead of the budget and obviously speculation has started to begin again. People get worried if it's going to impact.

what they want to do in retirement. And again, one of your listeners talked about gifting to his grandchildren. So for me, it's really about thinking about what it is you're trying to achieve and then trying not to be second-guessing what's coming in the budget ahead. Yes, and if there is a change, and we've had an email about this, Yvonne said, would it have immediate effect? There was a lady in Liverpool who said something similar. Would it happen on...

midnight on Budget Day or would there be a period where people could make adjustments anyway? We just don't know. You don't know. That is the perfect last answer, Emma Sterling, from Evening Partners. Thanks very much. And you can find more information about pensions, what you can do with them, at moneyhelper.org.uk. The Treasury told us, of course, it doesn't comment on...

speculation about taxes outside fiscal events, that's things like the budget. And last week on this programme you may have heard a clip from the Chancellor herself specifically warning against acting. on rumours, as we heard from Emma Sterland as well.

Now, new figures reveal that more than a quarter of a million homeowners have temporarily reduced their mortgage payments or extended their terms since lenders agreed to offer better support to customers in June 2023 through what was called the mortgage. charter. Emma chose to extend her mortgage after her interest rate shot up from, at one point, less than 1% to more than 4% when her fixed rate ended last year.

We were literally hanging on till the last minute in September and unfortunately it did continue to rise so we had to make a decision. And we had to fix at 4.28%. So that was a huge increase. The interest went from like $350 a month to $1,500 a month. The decision we had to then take was, can we absorb absorb that extra hit and unfortunately not it would have basically left us with very little.

disposable income. So we then had to make a further decision on extending the term of the mortgage and we literally went as far as we could. The payments were still £350 a month more. than we were paying previously. So we've just had to absorb that. We're already kind of planning. And I often check my provider's website to see what would my interest rates be today. And already it would be £150.

a month cheaper on interest so hopefully by the time I come to remortgage in June it'll definitely be lower than 4.28. Now Emma was one of hundreds of thousands helped by provisions in the mortgage charter as interest rates rose from record leaving many people in difficulties when their fixed rates ran out.

49 banks and building societies signed up to the charter, which also protects homeowners from repossession proceedings for a year after they miss a payment. And this week, the Financial Conduct Authority released figures about how it's been working.

Head of Mortgages at the Building Societies Association. I played him that clip from Emma. I think the most common reason people utilise a mortgage charter is to enable them to make those payments. It was designed to assist people during that period of rapidly rising interest rates that we saw. So absolutely, they're taking that to help with the cash flow difficulty.

difficulties to get them through that difficult period. It gets them through a difficult period, but if they're struggling and they switch either to interest only or extend the period as Emma did, they will end up paying more overall, won't they, by the end of the term? They will. I mean, that is the trade off between having a lower monthly payment now and taking it either over a longer term or taking it to an interest only period that you will pay back more.

in the long term i mean the the best rule of thumb for people usually is to take that mortgage over the shortest period that you can afford to repay that but when interest rates rise rapidly in the cost of living costs increase so quickly, people do have to make those tough decisions. Now, Emma's checking rate. She obviously manages her mortgage very carefully. When she does refix in June, when the current deal runs out...

Could she bring her term down again, perhaps just to save money on that very long-term mortgage that she's got? She can absolutely do that. In fact, we've seen some changes to mortgage regulations earlier this year that means she can do that at any time she wishes, if she wishes now to return that to the term that she was before, or perhaps a shorter term than she extended to, but not all the way back. Those options are there.

But the figures published by the Financial Conduct Authority show very few people have actually done that. They've kept that long a term. For many people we have, and actually that's a trend we've seen just in the mortgage market more generally with the rising house prices as well. People are taking terms over a longer period of time to meet the affordability criteria that lenders need to utilise.

Yes. So people are taking longer mortgages, sometimes approaching or into retirement. Doesn't that store up problems for the future? I think, well, first of all, you know, we now don't have a compulsory retirement date and people's retirement changes. So what people need to be alive to is when their income does drop during retirement, if they do still have that mortgage, they need to make sure that they've got the ability.

to repay that and take that into account. Yeah, so just be careful. Now, these figures are about the mortgage charter. But as I recall last year, the rules in the charter became rules. They were actually part of what the FCA said all lenders. had to do and the chief executive of the Financial Conduct Authority has said he'd be quite relaxed apparently about the charter being scrapped. Is that something that you think would be okay? Would it affect borrowers?

I think I would have confidence that the mortgage charter has done its job in providing consumers with the confidence that that support is there. As you rightly mentioned last year those rules were updated to include those charter. provisions and to support people that were not yet in payment difficulty so i'd be quite confident that if the mortgage charter was retired that support would remain from the sense of what lenders do but but there is discussion isn't there about

re-looking at mortgage regulation, at the rules. Do you think there's a danger that these charter rules that now have to be followed could be relaxed to the detriment of consumers? so the the regulations are looking at being streamlined now to support first-time buyers to access home ownership those that have been locked out of that there is no suggestion that the support that's available to borrowers that are

either think they're going to face financial difficulty or are indeed in financial difficulty, will be relaxed at all. It's vitally important that we keep that support for people. But now it's rules if the charter was retired.

we wouldn't be getting these interesting figures about how much help people had under which provision, would we? That's absolutely right. But, you know, the SCA does acknowledge that the reporting, in some areas it's difficult to see whether that support was given through the Charter. or through routine engagement with that borrower. The important thing is the customer gets the support, not how it's reported.

Paul Broadhead of the Building Societies Association. And do remember, if you have any problems meeting your repayments or fear you may have in the near future, contact your lender. They must provide support. There are a lot of choices they can offer.

Mmm, I love ravioli. Since when do you speak Italian? Since we partnered with SAP Concur, their integrated travel and expense platform and breakthrough solutions with AI gave me time back to dive into our financial future. We expand into Europe in 2027.

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Millions of people are missing out on tens of billions of pounds they could get from benefits or cheaper tariffs from utility companies. Those findings are from the latest analysis by the Social Policy and Data Analytics Company policy and practice. But with the total cost of benefits forecast to be £316 billion this financial year, you might wonder if that bill is already...

too big. More on that in a moment but first Moneybox reporter Dan Whitworth has been going through the report in more detail Dan. Well, the big headline numbers from this report, Paul, which covers Great Britain, are these. That 7 million households are missing out on £24.1 billion worth of help. That's a small increase on the year before, and that number of people includes... 750,000 pensioners and 1.7 million working age families. And what sort of health are we talking about now?

In terms of unclaimed benefits, we're talking about things like universal credit mainly, pension credit, carer's allowance and attendance allowance. These are at a national level, of course. At a local level, some of these people are missing out on things like free school meals and council tax.

support. Then from utility providers like water, energy and broadband, a lot of people aren't getting access to social tariffs and they're cheaper or discounted bills for people on lower incomes. And what kind of impact can getting help, the sort of things you're talking about, have on people.

It can be big, Paul, really big, depending, of course, on what sort of benefit or social tariff we're talking about. I've been speaking to Robin from Greater Manchester about how important pension credit is to him. But first up is Andrea, who persuaded her mum's salary.

to apply for attendance allowance for help with her dad Ian last December, actually after hearing about it on Moneybox. 110 pounds a week is a lot of money um and they weren't getting the winter fuel payment anymore um like lots and lots of pensioners so the first words out my mum's mouth were well that will make up for losing the winter fuel payment which is which is great and it stopped that

You know, I know all pensioners worry about money. Everyone in that generation worries about money. Like it's a really normal thing. And I think it just eased that worry a little bit. Pension credit is essential to me to enable me to survive financially. Because I'm on pension credit, I get council tax exemption. I qualify for the winter fuel payment, but I also get free dental treatment, a contribution to my spectacles.

and I get the warm home discount scheme as well. Robin, and before him, Andrea, and happy birthday to Andrea's mum, Sally, 81 today, I believe. Now, Dan, what's the government had to say to you about this?

Well, a government spokesperson told me that it's making sure everyone gets the support they're entitled to by promoting benefits through public campaigns and funding the free... help to claim service it also said is developing skills and opening up opportunities so more people can move into good jobs whilst ensuring the welfare system is there for those who need it

Thanks, Dan. Well, I'm joined in our London studio by Devin Galani, founder and chief executive of Policy in Practice. Devin Galani, these figures might sound a little familiar to some listeners. We've reported similar ones before. What's new in this report? Hi, Paul. It's great to be on.

and to be talking about these figures again. I think the first thing I'd say is our most comprehensive report yet. So it's built on more granular data. For example, we've brought in Scottish government, Welsh government administered benefits into the report. But I think there are really two stories to the report. One is...

the headline figures gone up, but that's largely because of things like benefit uprating or the rollout of universal credit, which means that as more people become eligible, there are more people claiming, but also more people missing out. The other story is that you've got other benefits where you're seeing concerted effort to improve take-up, things like free school meals, pension credit, is making a real difference. And you're seeing the numbers of people missing out coming down.

So those efforts that the government mentioned are actually having an effect, or that and other things, things that you're doing. How do you encourage people to claim? I think there are three main barriers. There's awareness, people don't know about benefits. There's complexity, it's hard to claim.

there's stigma and trust. They don't trust the organization administering that support. So examples to tackle those three are peppered throughout the report but i think the main one so awareness you've got proactive take-up campaigns from local authorities for things like pension credit healthy start free school meals

On complexity, you've got things like auto-enrolment, so actually using the data on people to actually award people things like free school meals, or in the case of Thames Water, putting people onto the benefit themselves. And, sorry, just finally on trust.

You've got organisations like Nationwide Building Society putting a benefit calculator into their application form. So just more residents who perhaps aren't claiming any of the support they're eligible for are getting to find out about it from someone that they trust.

Now, we heard from two listeners earlier about the importance to them of the extra money they've got. In your experience, how big a difference is this unclaimed money? What does it make? What difference does it make to people? I mean, it makes a huge difference as well as the figures in the case of universal credit. on average about £6,000 being missed out on the case of pension credit over £2,000. When you think about the difference it makes to people, you've got, you know, we've had...

Reports back from people, we've helped to access that support. So a lone parent, I didn't know about Healthy Start. It means my child can get more of her five a day. On something like pension credit, we had a woman say, we've been able to go on our second honeymoon to Ramsgate for the first holiday we've had in 10 years. So it's real life impacts like that, I think.

make a difference. Yes, as Robin explained earlier, the pension credit can be very important like that. But I'm sure some people listening are thinking, well, we already spend a lot on benefits. It's going to be over 300 billion pounds this year. The government wants to cut the bill, we know that, not extend it. Do we really need to spend another 20 odd billion that's unclaimed? Well, Paul, you can't rely on the complexity of the system making it...

meaning that people miss out on support. What you need is a system that's easy to access. And yes, you can flex who's eligible. For me, I think we've got a system that's far too complex, far too fragmented, and we're far too passive about doing anything about it. And actually, it's those at the lowest. those who struggle to claim the most, who are missing out. And that leads to things like destitution, real risks of homelessness, and helping people access that support can prevent those.

worst case scenarios from happening in a lot of cases. Now, we all tend to think that the government in its broadest sense knows everything about us anyway. Why can't they just pay what people are owed automatically? So I think there's... couple of things really i think that sometimes it's sort of inertia in the government but you are seeing i'm seeing more progress in the last 12 months than i've seen in the decade prior so you are seeing things like

Preschool meals being available to all children on universal credit. They've committed to making data on all universal credit recipients available to local authorities to run these kinds of campaigns. So we are starting to see some unlocking. But what I would say to do, you know, there's still much more to do. And I think it's not just the government. So things like there's some really good examples, as I said, from utility companies, from local authorities, it needs to be a joint effort.

Finally, to your listeners, I guess the point I'd make is check for yourself if you're eligible. Go to gov.uk, use one of the benefit calculators on there, but also check for others. And if you talk to other people about it, just to try and destigmatise, but also just helping. tackle and bring this number down. Because I think things like auto-enrolment, that's where you see the biggest difference. You see like 90% plus take-up. So it can be really powerful.

That's where people are automatically enrolled into a pension at work, isn't it? Devon Gilani, thank you very much for that, Devon Gilani, from Policy and Practice. And for more advice and information, you can search Help to Claim on Citizens Advice, that's about universal credit, or contact the charity Turn To Us.

Now, the £100 limit on contactless card payments looks set to be scrapped. The regulator published plans this week to let banks set their own limit, or indeed no limit at all. Dan's still here. Dan, tell us more about the plans. Okay, so at the moment, you can just tap your card without entering a four-digit PIN code, up to a limit of £100.

Proposals from the FCA are set to change this if it's approved, things that cost more than £100, like a large family meal in a restaurant, say, or a big weekly shop. could be made with just a tap and no need for a code. It would bring cards in line with payments made on people's phones using a digital wallet, which have no restrictions. So is that why the FCA is looking at this?

Well, the regulator has said it's partly about reacting to behaviour that's already changing, but also because prices have risen significantly since it was last changed, and that was 2021. It's also one of around 50 measures that the FCA outlined in a letter. to the Prime Minister in January to support what it called, quote, economic growth and prioritise digital solutions.

growth spending more I think that means but when it first floated this idea in the spring most people and organisations that responded wanted it to stay as it was They did. These changes are being put forward, even though more than three quarters of consumers who responded, Paul, to what the FCA called an engagement paper about contactless limits in March, said they didn't want any change to that £100 limit.

And the limit's been raised several times, Dan. It started as a tenner, as I recall. And every time it's gone up, people have been worried about losing their card and having more money stolen. We've had emails about that already today. Yes, and I've seen some on social media as well, some comments there. But the FCA has clearly... said that banks will continue to reimburse any money stolen by thieves using lost or stolen contactless cards as they do now.

Thanks, Dan. And as a consultation on these proposals, it's open till October the 15th. Search FCA contactless online. Beck says, I don't like the sound of it. And Peter also says contactless is the worst and he's sticking to his pin. Thank you very much indeed.

Well, goodness, that was a podcast with a lot of new figures, wasn't it? You can always listen again if you missed some of them. And if you want to hear Moneybox first, you can listen to our live broadcast, which is on Saturdays at noon on BBC Radio 4. Also gets you Moneybox Live with Felicity Hanna. Next up, she's looking at the financial implications of terminal illness. Benefits, insurance, pensions, wills, it can all feel overwhelming.

If you subscribe, it will magically appear just after its live broadcast on Wednesday afternoon. You can let us know your money questions on that or anything else by email moneybox.bbc.co.uk or send us a message or a voice note, which we love. on WhatsApp 0306 783 183. We do read them all and you might get on the show.

In this podcast, the reporters were Dan Whitworth and Joe Krasner, researcher Ima Devlin, studio manager Isabel Whitehead. Our editor is Jess Quayle. I'm Paul Lewis, and this was a BBC News Money and Work production for BBC Sounds and Now. Who'd be a hero? I'm Rory Stewart, and I want to talk about heroes. When I was a child, I imagined a heroic future for myself in which I would achieve great things and die sacrificing my life for a noble cause before I was 30.

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