Social Tariffs and Open Banking

This BBC podcast is supported by ads outside the UK. At the BBC, we go further so you see clearer. Through frontline reporting, global stories and local insights, we bring you closer to the world's news as it happens. from the BBC. Find out more at

Make money predicting football. Now you can. Now in Texas with Calci. Calci is the only platform that lets you legally trade on real world events in all 50 states from football to Bitcoin, the Oscars, and even politics. If it matters, you can trade on. Trade on who wins each game, props, spread, and more, legally, now in Texas. Don't miss your shot. Download the Kalshi app or go to K-A-L-S-H-I dot com. Use code PODCAST and get $10 when you trade on.

Hello, welcome to this Moneybox podcast. Pension tax relief cost the Treasury £43 billion last year. Will the Chancellor cut that back in her budget? And this week, the Open Banking Roadmap was completed. And if you haven't a clue what that means, you're not alone. More later. But first, people are missing out on nearly £2bn worth of discounts on water bills and broadband, the oldest...

and newest essentials of daily life, I guess. That figure from a report by Citizens Advice on what are called social tariffs. They're lower prices for people generally on low incomes. The trouble is not enough people know about them and fewer still claim them. So the potential savings are not being made by millions of people who need them.

There's also criticism that different rules lead to what the citizens' advice call a postcode lottery. More from that report in a minute, but first, Moneybox reporter Dan Whitworth has more details, Dan. So to be clear, Paul, this is not money from the government, but from the water suppliers and from the broadband providers. So water firms in England and Wales are obliged to offer this type of help, whilst broadband suppliers across the UK are encouraged.

But as well as there being lots of different types of help, there are different ways to qualify. Although generally speaking, eligibility is decided on things like household income. Now, Adam Backhouse from Leeds has been getting a cheaper social tariff from... his broadband provider since he lost his job and began claiming Universal Credit last year. Currently I pay £16.99 a month. I had to move to that provider because I was struggling at the time.

I had to claim universal credit as I was out of work. Previously to that, I paid £29.99. so it does make quite a bit of difference especially when you've just got universal credit to live off on a monthly basis me and my son we regularly stream on a regular basis we watch a lot of youtube great service if i'm to go on my whatsapp check my emails no problem at all it's great

And it's not just entertainment or family life and work that's improved and made easier. If you're on Universal Credit, you just about have to have broadband to keep in touch with your work coach and report your efforts to find a job. a month it's obviously just over 150 pounds a year well that may not seem huge to some people what adam told me how important it is to him it makes a great difference to your finances especially when you saw income is just universal credit

Every pound makes a difference. And you're right, you know, most people might look on it and think, well, that's not a lot of money to save. But when every pound counts and you're thinking about putting food on the table. That saving, relatively small, I know, does make a big difference. You could either be spending that on the internet provider or it could be a meal for a couple of nights. That's where it makes that difference.

Dan, lots of different organisations involved in this. What have they had to say to you about this low take-up and indeed this postcode lottery criticism from Citizens Advice? Well, the government said more than 1.3 million households in England and Wales benefited from £200 million worth of help with water bills. That's in the latest year they have figures for. And that it's working with broadband providers to raise awareness. OK, thanks, Dan. Well, listening to that...

Dave Mendez de Costa. He's author of that Citizens Advice report on social tariffs. Dave Mendez de Costa, nearly £2 billion unclaimed. How did you get to that figure? Well, hi, Paul. Just to set the same... Our advisors over recent years have been seeing more and more people who have been struggling to afford essential services like energy, water, broadband and car insurance. And what our report has shown is both that this problem isn't going away.

but also the support that's available in some of these sectors and which people like Adam greatly benefit from actually isn't working well enough to meet the challenge that we're seeing. And one of the problems that we see is that a lot of the support just simply isn't getting to the people who need it the most. So for that two billion figure, we looked at two sectors, which are water and broadband.

In broadband, we see that uptake of social tariffs is pitifully low. Even though they can save people up to £200 a month, according to Ofcom, only 5% of eligible households currently claim them. And we see a similar problem in water as well. Our advisors regularly speak to people who don't know that that support's available or who struggle to understand whether they can claim.

And so we're worried that hundreds of millions of pounds in water is also not getting to people who need it the most. Yes. I mean, water obviously is essential and it's water. But broadband, some people might say, why do you need it? I mean, I said, you know, when you're on universal credit, you do. but just explain a bit more why people like Adam do need broadband to function properly. Well, in the way that society is now and modern living...

Having a good, stable internet connection is essential for all sorts of parts of daily life. More of us are working from home and may need a solid internet connection. to carry out that work or to access work. And of course, I should just interrupt and say people on universal credit often are working, aren't they? Well, absolutely. Absolutely. I think, you know.

lots of people think that people on benefits aren't in work and that's simply not the case and it's really important that people can access that as much work as many job opportunities as possible and broadband helps with that As your reporter said, it's also really important for people to be able to keep up with the requirements that are needed for their benefits, but also

just to enjoy daily life which everybody needs in terms of accessing entertainment which for many people streaming something is a much cheaper alternative to going out Indeed. We've talked about water and broadband and you mentioned electricity and gas earlier. Is there no scheme there? In electricity and gas there is. There's the warm home discount. which is available to people on pension credit and also on other people on lower incomes who have potentially high energy usage.

People who are eligible for it get a £150 discount. on on their energy bills and what's interesting with the warm home discount is that for the majority of people so about 95 of people eligible they'll get that discount automatically so their eligibility it's all worked out in the background using government data and other publicly available data and the discount is just given to them they don't have to apply they don't have to lift a finger whereas in water and broadband

We don't see those processes in place at all. And that's something we want to see change. So that could be done, could it? The government could say to them or the regulators say, well, just do it automatically. Get the data from DWP, Department for Work and Pensions, and do it automatically. Well, we think that's a conversation that needs to start right now in terms of what the government can do to share data with suppliers and what suppliers can do to proactively offer people.

their customers who could be in need those social tariffs because at the moment expecting people to understand what's quite a complicated landscape of support and to take that first step and ring up and ask for that support, it's not working. Dave Mendes, Dacosta of Citizens Advice, thanks. And I should say we've had an email from Molly, a widow with a big family, and she says social tariff for water saved her £840 a year. So well worth doing. So contact your supplier if you have difficulties.

Chancellor Rachel Reeves says she has to save money to fill what she calls the £22 billion black hole left behind by the previous government. One tempting way of doing that must be reforming the near £43 billion cost of tax relief. when we pay into pensions, most of that going to the richest fifth.

Now, in this third of our items on the Chancellor's choices, we look at how tax relief on our pensions could be threatened. The Institute for Fiscal Studies says in a note this month that the current system of pensions taxation provides what it calls overly generous...

tax breaks to those with the biggest pensions, and it makes out a case for reform. At the moment, people don't pay income tax on pension contributions they make, and when they retire, they get up to a quarter of the fund back tax-free. in Liverpool City Centre about their pensions. I've cashed it out. So I took a tax-free cash-lum sum and I get paid a monthly payment after working for one place for 31 years. So it was a final salary scheme. It was a good deal. So you got 25% tax-free? Yes.

And how do you think that would affect people if that was changed? Massively, obviously. If they were to take that away, it stops people having the incentive to contribute, doesn't it, at the end of the day?

Yes, I do have a pension. I work for the National Health Service. I think everybody in the country is probably concerned about their pension and have some security in old age. And I think the thing that worries us is not knowing what's going to happen and how that's going to affect us. So yes, of course we're worried.

I mean, at the moment, there's lots of tax free advantages, aren't there, with saving into a pension. Do you think that might be affected? Well, they need to get some money from somewhere because clearly their situation is not good at the moment in the country. And yes, I guess there is a chance that could be.

I have got private pensions. I've just got to analyse it as the changes come out and then understand it and see how it benefits or affects me. What do you think she could do? I think the easiest thing is to go for the money at the top.

where there's a lot of it. Well, with me in the studio is David Sturrock. He's Senior Research Economist at the Institute for Fiscal Studies and co-author of that note on pensions I mentioned. David Sturrock, just to explain, how does this subsidy on pension contributions work?

So under the current system, you don't pay any... income tax on what's going into a pension so that means in principle there's something upwards of 40 billion of income tax not being levied there in addition actually you don't pay national insurance on employer contributions to pensions that's another more than 20 billion in return there is income tax on the way out that takes off about 20 billion or so although

25% of your pot up to a million is tax-free, so there's a bit of subsidy there too. Yes, there's a lot of money, and undoubtedly it is a subsidy. Some people question it, but in fact it is a subsidy because it costs the Treasury a lot of money. seem unfair though doesn't it I mean most of that

subsidy, when you pay into it, goes to higher rate and top rate taxpayers, I think nearly two thirds, 62 and a half percent. And, you know, a higher rate taxpayer pays in 100 quid and gets nearly 68 from the Treasury. It doesn't seem right that they get so much more than basic. rate taxpayers. Surely there's an answer to that.

Well, there's substantial sums at stake here, that's for sure. There are arguments about why it's not quite as straightforward. There's some practical things when it comes to trying to reduce upfront relief, which was going into defined benefit pensions.

is that you have to start to value the contributions that are going in from employers to those schemes and attaching them to individuals and assigning a tax rate. That raises all sorts of issues. There are some principles reasons that are a bit more technical. And there's also maybe the issue that once you start to try and...

increase the taxes there might hit some people that you wouldn't expect it to. Yes, I mean, like that lady we heard from in works for the NHS. I mean, she could be affected by that because they do have a final salary scheme, don't they? Now, one of the people Joe spoke to in Liverpool was a...

He'd drawn 25% of his pension fund tax-free, which you can do now up to a certain limit. He saw that as an incentive to pay into a pension in the first place. So tax-free on the way in, tax-free on the way out. be huge can't it for some people is is there a sense that the chancellor might try and limit that or even take it away altogether at the moment you get that 25 tax-free amount on pots up to a million and you could say that that

cap is pretty high and so what that means is that for someone who's saved even more than 900 000 pounds and securing quite a high income for themselves in retirement they're still getting some subsidy from the treasury to save more so what the chance they could consider doing is

that cap down for example you could take it down to four hundred thousand pounds everyone can still take out one hundred thousand pounds tax-free that would hit the top fifth wealthiest and it would raise something in the region of two billion in the medium run. Yeah, so all that would help, I suppose, from her point of view. She says she has to raise this money.

Do you think that if the Chancellor does cut the subsidies on pensions, that could put people off saving into one like that chap in Liverpool? Because we need to encourage particularly lower income people to put more in, don't we? Because auto-enrolment isn't going to give them an adequate... pension in retirement.

It's definitely important to think about this and really the main justification for having these subsidies is to make sure that people are saving enough for retirement. But what I would say is we need to look at where those subsidies are directed and are they going... to those people that we are really worried about under saving for retirement, that might be those on more moderate incomes, and how much of them are going to people where...

they're really on such a high income and they've secured themselves enough that they're not really a concern. And can we maybe think about redirecting some of the subsidies, targeting them better? Yes, and of course, people who have saved a great deal, more than they can actually spend...

a pension when they reach pension age, they can then leave what's left of that fund when they die to their heirs tax-free, can't they? It's not in the inheritance tax calculation. Is that something she might look at? I think so. I mean, it's something which I think surprises a lot of people. They don't necessarily realize it unless they're kind of at older ages and getting financial advice. The reality is that your pension pot sits outside your estate and you can pass it on inheritance.

tax free. Now bringing that into the scope of inheritance tax would I think make the system fairer. apply inheritance tax equally across those with their wealth in different forms. It would not raise substantial sums right now, maybe a few hundred million, but probably growing quite quickly because more and more people are going to have substantial pension pots in older age.

a reform where it would be sensible to do it and it would be sensible to do it sooner rather than later and it could raise some revenues David Sturrock from Institute of Fiscal Studies thanks very much now in two weeks time we're broadcasting a special programme live from the atrium

BBC Studios in Salford, looking at just one very big change that we've talked about for years. It will, or should be, good news for a couple of hundred thousand people a year who in future have money stolen from their bank account. And now, what can I call him? correspondent Dan Whitworth is here. Dan, why is that weekend so special?

Well, because, Paul, on Monday the 7th of October, new mandatory rules for the finance industry come into force, and they will place a much smaller voluntary scheme. Now, those new rules will strengthen protections for victims of authorised...

Now, the main change will be that very nearly all victims of this type of... fraud going forward from Monday the 7th will be reimbursed the money that was stolen up to a certain maximum amount the idea is the thinking is if banks and finance companies are held liable for money stolen this way well they'll do more

to stop it from happening in the first place. Now, you mentioned a maximum. That's been a bit controversial, that figure, hasn't it? It has. So the maximum amount victims could be refunded was all set to be £415,000. Up until a few weeks ago when the finance watchdog in charge of all this, the Payment Systems Regulator, or the PSR, announced a two-week consultation on dropping it.

a lot to just £85,000. Now the PSR said 99% of victims would still be protected, but that it was trying to balance protecting victims with industry concerns that a higher refund limit could drive some firms out of... business. Now that consultation ended on Wednesday and we're expecting a result by the end of the month just a few days before the new rules kick in.

Thanks, Dan. And whatever happens, we'll tell you and explain those new rules in more details just two days before they begin. On that special programme, Saturday, October 5th, I'll be live with fraud experts and, indeed, the man in charge of the changes. Dan will also be here, of course.

course with some fraud victims we've helped in the past and we'd like to hear from you send us your questions or thoughts about fraud and getting your money back email moneybox at bbc.co.uk leave a number phone number if you can

More than 11 million people used open banking in July, and that figure was up by 12% on the month before. Open banking allows customers to view multiple bank accounts in the same place, see exactly what they're spending and move money. between them. Earlier this month, the Competition and Markets Authority announced that what it calls the Open Banking Roadmap had been completed. That means all nine of the biggest UK banks have now made the changes needed so they can offer open banking.

their customers. But do people know that? Our reporter Emma Smith went to Monton in Greater Manchester to find out. So we're just asking people if they know what open banking is? No idea. Never heard of it? No. Is it the virtual banking? Never heard it before. No, no. Open banking? No, no idea. I don't go into open banking at all or online banking or anything like that.

What would you think it is if you just hear the word open banking? I don't know. It sounds a little bit more like giving people access to it. I don't know. You can take all your different bank accounts from all different banks and put them together in one place. You can access them through payments.

Would you do it yourself? No. No. Would you do it yourself? We'll put it in one place for security reasons. Yes. Because I'm a dick person, that's why. Yeah, I probably would. For ease, purposes. No. No. Absolutely no. Why is that? I don't know. It's maybe an issue of trust. I don't like giving all my information out. I don't want people just having that information. You don't know whose hands it's going to get into. So, no, I don't think I'd be comfortable with that.

Well, listening to that is John Somerville. He's the Director of Financial Services at the London Institute of Banking and Finance. John Somerville, 11 million people use it, though none of them apparently shopping in Monson this week. They had a vague idea at best. survey did find 58% of people didn't know what open banking was so start by giving us an easy guide to what it is and how it works I'll do my best for you Paul good afternoon thanks for having me on

So first of all, I think it is the best kept secret in financial services, but many of us are already using it without actually knowingly using it. So open banking enables consumers and businesses. to securely share their financial data with authorized third-party providers through something called application programming interfaces. Now, that's as technical as I'm going to get. After this, it's just more about keeping it simple. So what it does is it allows the development of...

innovative financial services such as things like budgeting apps, payment solutions, lending platforms by giving these third parties access to account information and payment initiation capabilities. So what it allows you to do or allows open banking to do is promotes competition and transparency in the financial services sector, but what it does is empowers users for more personalised, efficient and cost-effective banking and payment options.

Yeah, so Jo, who tweeted me this morning to say it's happening without us having a choice, she was kind of right, wasn't she? Because banks are using it in the background. Have we agreed to this? Well, you always... give consent without knowing that it's open banking. So if you want to use a... That doesn't sound like consent to me, I'm sorry. Yeah, well, you do consent to using applications by applying to use them.

With all applications, there are various protections in place. So part of the open banking framework is to allow proper authorities being given to individuals before they take up any applications.

You do agree to it. I spoke to one of my colleagues, actually, who's a great fan, and she has two apps which she says help her manage her money. One of them even has a rainy day fund, and do you know what? It transfers a bit of money into it. when it actually rains. I mean, that's all a lot of fun, isn't it? But this is more than a bit of fun. This is actually something that you say it can really help you manage your money.

better than an online banking app, which does a lot of those things anyway, doesn't it? It really is a step forward from the online banking apps that we all use day to day. And I say we all, that's a generalisation, not everybody uses them. And I think a lot of that aggregation... listening to some of the people that were polled yesterday.

And we've always been taught for many, many years not to keep all our eggs in one basket. And effectively now what we're saying is keep all your eggs in one basket. So behaviors are being asked to change by doing that. There are an enormous amount of safety features built into open banking that will certainly make sure that all consumers are looked after. One of those people in Greater Manchester did say to us, I don't think I'd be comfortable with that.

And it is a concern. A lot of people were concerned. And that survey I mentioned earlier by NTT Data, only about one in six people thought open banking was actually safe. How is it collected, stored and protected? Certainly. Well, first and foremost, there are five, six key mechanisms in place. There's a strong consumer.

authentication, which means you have to have a two-step password and biometric access to... Just briefly, if you would, because we can't go through all six problems. Yeah, absolutely. Data security standards, consent management, transparency requirements.

There's a regulatory oversight from the FCA and the PSR, and there are redress mechanisms to make sure that consumers have access to the Financial Ombudsman Service. Yes, and indeed Open Banking Limited, which provides the framework for all this, told us that firms that produce...

the apps as you said are regulated and that it's built on secure systems used by high street banks and people consent to sharing it and decide with whom and for how long. I'm going to ask you literally in a word is it going to grow? Very much so. John Somerville of London Institute of Banking and Finance. Thanks.

Banking might be open, but it's time to close this Moneybox podcast. Make sure you never miss one by subscribing to BBC Sounds and you'll also get Felicity Hanna every Wednesday with Moneybox Live. Next up, she looks at student finances. Should loans rise and will today's students ever pay them off? We love to hear from you, so email us about money, whatever your...

degree of wealth. We do read them all. You might get on the show. In today's podcast, the team was Dan Whitworth, Emma Smith and Joe Krasner. Studio manager, Tavey James. Our editor is Jess Quayle. I'm Paul Lewis and this was a BBC News money and work production for... BBC Sounds. And now, rough weather ahead. I'm Gabriel Gatehouse, and from BBC Radio 4, this is Series 2 of The Coming Storm.

There's a divide in American politics between those who think democracy is in peril and those who think it's already been subverted, hollowed out from the inside. In order to understand the deep state, you must understand the organizations within the deep state. As America prepares to elect its next president, we go through the looking glass into a world where nothing is as it seems. Where the storming of the Capitol was...

set up and the institutions of the state are a facade. It's all an illusion. Listen on BBC Sounds. Through frontline reporting, global stories and local insights, we bring you closer to the world's news as it happens. from the BBC. Find out more at

Make money predicting football. Now you can. Now in Texas with Calci. Calci is the only platform that lets you legally trade on real world events in all 50 states from football to Bitcoin, the Oscars, and even politics. If it matters, you can trade on. it. Trade on who wins each game, props, spread, and more. Legally, now in Texas. Don't miss your shot. Download the Kalshi app or go to K-A-L-S-H-I dot com. Use code PODCAST and get $10 when you trade a

This is an investment that carries risk. CalSheet.com.