Credit Action News Round-up (9 September 2011)

Nearly a quarter of UK parents in debt over childcare costs: In a survey conducted by the Daycare Trust and Save the Children, four out of 10 of the 4,359 parents contacted said the cost of childcare was level with their mortgage or rent. It also showed that 58% of recipients had cut spending on other essentials such as clothing and some bills. Childcare costs have greatest impact on parents with a lower income. Of the 250 parents with an annual household income of £12,000 or less, a quarter said they had stopped working as a result of childcare costs. This supports the finding that 58% of these low-income families said they were no better off financially by working and paying for childcare. For parents with a household income of more than £30,000 just 19% shared this opinion. Research by the Daycare Trust shows that childcare costs have risen every year for the last 10 years. It has also calculated that 25 hours of nursery care a week in England for a child under two would currently cost an average of over £5,000 a year.

Compensation referral fees to be banned: The government hopes to curb the “compensation culture problem” by banning referral fees in personal injury claim cases. In the current system referral fees are incurred when a ‘no-win, no-fee’ claim is referred up the line between claims management companies, insurance companies and lawyers. The lawyer can recover referral fees from the losing defendant so the cost may be hundreds of pounds. Insurers have covered the cost of successful cases by presenting policy holders with higher premiums. Justice Minister Jonathan Djanogly said: “Referral fees are one symptom of the compensation culture problem and too much money sloshing through the system.”  He said that the ban which will be applied in England and Wales will make claimants think harder about whether to sue, and give insurance companies an incentive to pass the savings onto customers through lower prices. Currently there is no timescale for implementing the ban.

Public sector pay rises by 1.7%: Despite the Coalition’s freeze on wages, millions of state workers’ pay increased by 1.7% in the three months to August, according to payments group Vocalink. This figure was up from 1.3% for the quarter to July. The statistics also showed that take-home pay growth for the overall economy fell by 0.2% in the quarter to August, representing a decline for the second month in a row. Vocalink blamed the uncertain economic climate for the drop in private sector pay, but said that the majority of public sector workers appeared to be experiencing a boost in their wages. A survey conducted last month by consultancy Hay Group showed 80% of public sector managers would continue to implement automatic pay rises this year.

Contributions to pensions fell by more than £2bn during recession: Figures released by the Office of National Statistics (ONS) showed that during the past two financial years contributions to personal and stakeholder pensions have fallen by 10%. These types of pensions are flexible, allowing contributions to be made to them depending on when people have money available. In 2007-2008, total contributions to personal and stakeholder pensions, retirement annuity contracts and free standing additional voluntary contributions reached £20.9bn. This compares with the £18.7bn worth of total contributions in 2009-2010. Darren Philp, Director of Policy at the National Association of Pension Funds, said: "These trends reflect the current state of the economy and the impact this is having on UK households. It is understandable that people have more pressing financial priorities during difficult times, but contributing to a pension regularly is vital to ensure a decent income in retirement.”

Investigations into car insurance after premium increases of up to 40%: The Office of Fair Trading is looking into motor insurance as reports show that car-owners are paying up to 40% more for cover this year.  The figures which were produced by the AA also show that younger drivers have taken the hardest hit. Car-owners aged 17-22 are now paying a typical premium of £2,413 - over 64% higher than a year ago. The OFT said that it had called for evidence into the operations of the motor insurance market to assess whether customers are being fairly treated and if there can be more effective competition in the sector.  

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