Jeff Salway: Banks fail to stop worsening stink over PPI

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FOR those who can’t find enough sticks with which to beat the banks, the payment protection insurance (PPI) scandal really is the gift that keeps on giving.

An eye-watering £12.3 billion has been set aside to compensate millions of victims of PPI mis-selling – and there’s more to come, with some analysts expecting payouts to top £20bn.

Even as they claim to be reforming their rotten target-led sales culture, however, the high-street banks still won’t play it straight on PPI. Lloyds Banking Group has announced a further £1bn provision for repaying those mis-sold the contracts, taking its bill past the £5bn mark.

A far cry from March 2011, when then-new boss Antonio Horta-Osorio won plaudits for setting aside £3.2bn to settle claims in an apparent bid to put an end to the issue.

Yet it has now been accused of rejecting valid claims and adding to the huge pressure on the Financial Ombudsman Service (FOS).

More than nine in ten PPI claims against Lloyds have been upheld in the consumer’s favour, yet claims management companies reckon the bank is rejecting the majority of claims. The FOS also reports that banks are still rejecting valid complaints.

Banks bleat about claims managers and fraudulent claims, reluctant still to take responsibility. They reckon a third of cases are being made by people who have never had a PPI policy, yet the FOS says one in four of complaints dismissed as fraudulent are actually genuine.

Claims management companies are the cowboys persuading people they need help filing their PPI claims and taking a 30 per cent cut of any compensation won. They’ve achieved the seemingly impossible by making the PPI stink even more putrid.

But it’s the banks that are to blame for giving those claims management parasites such a bloated compensation carcass on which to feed.

Sadly, even as they set yet more money aside for compensation the banks demonstrate precious little appetite for learning from their own mistakes.

Mood moves against the 1%

THE Occupy campaign was dismissed in many quarters as a movement lacking a coherent message. Those critics missed the point, however. Where Occupy succeeded was in helping to take the debate over the crisis in capitalism to a new audience, and that is becoming more evident by the week.

When a senior member of the Bank of England’s monetary policy committee says that Occupy got it right, you sense the mood may finally be changing. Andy Haldane acknowledged that the movement had been right in its analysis of the “deep and rising inequality” at the heart of the economic crisis.

Occupy’s 99 per cent message resonated globally, with its simplicity and truth. That’s been vindicated too – research shows that the richest 1 per cent of Americans are getting richer still, their income growth far outstripping that of the other 99 per cent. Meanwhile, in the UK the Resolution Foundation has warned that living standards for those on low and middle incomes may be no higher in 2020 than they were in 2000.

If a new leaf really is being turned, as Haldane claimed, Occupy has helped win the debate. To suggest it has been won is a little optimistic, however; you won’t hear Haldane’s comments in support of Occupy echoed in the City or in Westminster. But acceptance that capitalism as we know it has created unsustainable inequality is clearly growing – a vital step in building a better way forward.

Getting real on pension savings

PENSION savers are in for a shock in 2014 when new projection rates will effectively wipe thousands of pounds off their expected retirement pots.

As it stands, pension statements assume growth rates of 5, 7 or 9 per cent, based on the investments. Those rates will be cut to 2, 
5 and 8 per cent.

In one sense the change is academic, as it won’t affect what investors will actually get.

But it will mean many people have to revise 
their expectations and, accordingly, their contribution levels.

For instance, a 22-year-old on £30,000 a year paying £1,955 a year into their pension is projected to end up with a pension pot of £540,663 on retirement, based on a 7 per cent growth rate.

Under the new 5 per cent growth rate, the projected fund falls to £334,708, according to Hargreaves Lansdown.

It’ll be a sobering reality check for many savers, but that’s no bad thing.