Should you invest in property rather than your pension?

By Ryan Smith

As young people, we’re always told to start thinking about our futures. Pension investments are one of those things that just seem so far away that it becomes difficult to comprehend as something we need to concern ourselves with right now. Reports state that young people are more interested in saving the money they’re earning to invest in a property; that first home is something we aspire to more than a pension fund. And while auto-enrolment is making it easier to at least start putting something away for retirement (alongside extra contributions from our employers and the government), property still might be the best investment.

Here are 5 reasons we think you should invest in property instead of your pension…

Military Couple In Front of Home, House Keys and Sign

1. Property prices up 4.2% in 2014

In the 12 months between December 2013 and 2014, UK property prices saw an average yearly increase of 4.2%. Greater London saw the biggest increase at a whopping 11.1%, with the South East just behind it (9.5%) and the South West reporting increases of 6%.

2. Mortgage rates have fallen

Thanks to a combination of low inflation, a prediction of slowing economic growth and more Eurozone fears, Autumn 2014 saw a drop in mortgage rates. A healthy deposit is required but you can now get a 2-year fix below 2 per cent, a five-year fix below 3 per cent and even a ten-year fix at around 2.94 percent. It’s worth setting up a meeting with an independent financial advisor as they’ll be able to help you make the most of a property deposit while these great rates are available.

3. Generate an extra income

One of the more popular mortgage products on the market these days is buy-to-let mortgages. It may require a bigger deposit, and won’t be ideal for a ‘first home’ but it could be helpful for generating an extra income, particularly in later life. An investment in a buy-to-let property, with the combination of rent incoming and the increased value in the property could see a much greater return than the same investment into a standard pension fund.

4. A retirement nest egg

Those who purchase their first home between the ages of 26 and 35 are expected to be mortgage free by 61 years old. The average age of first time buyers has increased to 36, so it shows just how important it can be to get on the property ladder early. Not only will you be paying into your own bricks and mortar, rather than throwing money away to a landlord, by the time you retire you’ll hopefully have no mortgage left to pay. This leaves you able to live a more comfortable existence, or even unlock the value in the home by downsizing. If you have a number of rented properties you can also sell these to fund your retirement if you don’t want to continue on as a landlord.

5. New pension rules show uncertainty

With new pension rules coming into effect from 6 April 2015, the landscape looks blurry. Annuity rates are expected to fall, at least in the short term, so you may not get the best return on your savings. Some reports are even predicting that pensions may not even exist by 2050, due to young people’s disinterest in saving into funds they cannot access when needed. It’s always good to have a mix of investments, but a financial advisor who is independent and unbiased can guide you through the changes, and advise you on any questions you may have on finances, pensions and investments.

Ryan Smith writes for Local Financial Advice, pointing people in the direction of independent financial advisors in their area. The views of the author are his own and do not necessarily represent those of the Young Money blog.

What do you think? Do you agree? Leave a comment or get in touch – ionabain@hotmail.com.

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Filed under First-time buyers, Investments, Mortgages, Pensions & Retirement

How to avoid waste in Foodbank Britain; the joys of homecooking

By Iona Bain

Last year, I looked at why food banks have become commonplace in modern Britain – what is it due to a real fall in living standards? Difficulties in finding worthwhile jobs that put food on the table? Or has there been a growing faith in – and awareness of – food banks to provide a sticking plaster when all else fails?

All three factors have played their part, but a further issue began to play on my mind recently; how many people know how to cook with the ingredients they have?

Baroness Jenkin in the House of Lords landed in hot water last year by seeming to suggest that ‘poor’ people cannot make their food last because they don’t know what to do with it. Many critics hit out at her comments, arguing that you cannot produce ingredients from thin air and that extreme poverty cannot be simply alleviated with a quick Home Economics lesson.

A valid point, for sure, and one that Baroness Jenkin and her fellow peers endorsed in a comprehensive report on Feeding Britain at the end of last year. But the report also pointed out the need for more hands-on, intensive support for food bank claimants that includes training on supermarket psychology, food planning and healthy eating.

Who wouldn’t support this initiative? I have talked many times about financial literacy on the blog but what about culinary literacy? In fact, Baroness Jenkin’s comments can be applied to most of the young population, if my experience is anything to go by.

A newspaper column by the journalist Daisy Goodwin recently highlighted a worrying lack of cooking skills among all demographics thanks to a fast-food culture promoted by takeaway firms and supermarkets on every street corner.

The writer referred to a friend who volunteers at a foodbank and kept seeing one client who couldn’t make her food go far enough to feed her children. The mother in question didn’t know how to cook the spaghetti that she received, so the volunteer showed her how to knock up a nutritious and delicious meal, using tomatoes and tinned veggies to make a lovely pasta sauce.

Such such skills not only help you to survive and make your money go further. Creating dinners with healthy and varied ingredients makes a tremendous difference to your quality of life, whatever your income.

Sadly, I know many young people who lack the desire and ability to cook a meal from scratch. Why?

Fantastical programmes like Masterchef and The Great British Bake-off can make us feel very inadequate in the kitchen. Many of us believe that cooking should be of the highest standard, and if we can’t achieve that, we leave it up to the professionals. That means takeaway apps like Hungryhouse and Just Eat have exploded in popularity. If a meal can be delivered to our door, why slave over the stove? The extortionate prices charged by Dominos and other major chains shows our willingness to pay over the odds for a quick, comforting meal. It seems like a very high price to pay for poor organisation.

Young people, especially in urban areas, are also relying a huge amount on mini-stores. Rather than do a big shop for the week, they pop in and out of these stores, spending relatively smaller amounts on ready meals and essentials (and by essentials, I mean booze, chocolate and sweets…no?)

Why defer gratification when food is instantly available at practically any time? But the next time you go into one of these outlet stores, have a think about the ratio of healthy to junk food. Just as importantly, consider the following question; what is the mark up for this convenience? Does a ready meal, a pizza, a fatty pudding represent better value for money than a recipe using thoughtfully sourced ingredients?

Question of the day~ What is ur favorite junk food snack? I can't get enough oreos

Popping into Tesco Express on my road is an eye-opening experience. There are whole aisles devoted to chocolate, alcohol, crisps, sweets, puddings and pastries. It’s a veritable temple to instant pleasures. But try asking for some oatcakes! It’s like asking whether they sell oven-roasted unicorn.

To be fair to Tesco, it has played a huge role in helping foodbanks and their clients by hosting collection days and contributing produce. Other supermarkets such as Asda, Waitrose and Sainsburys have also partnered with local foodbanks to minimise food waste and making sure surplus food goes to those in need. These efforts are somewhat undermined, I think, by marketing techniques to persuade people to buy more food (at a higher price) than they really need.

I have also had the dubious pleasure of inviting a very popular breakfast cereal back into my life recently, as my flatmate (aka my brother) developed a sudden New Year craving for them. This cereal isn’t particularly cheap, especially when you’re getting through pints of milk at a rate of knots. Worst of all, it doesn’t fill you up. You find yourself having another bowl or snacking throughout the morning (or evening, if you desperately use it as a substitute for a meal!)

I hate to come over all pious – I go for the easy option whenever I can. I think proper food planning is one of the hardest tasks of modern day life. I have a made a study of it in recent times as I try to figure out what’s good value, what’s healthy and what’s filling. It’s a challenge but one must we try to tackle every day if we are to function and thrive.

So my first insight would be; soups and stews are a life saver. It’s ideal to plan meals for the week so you save yourself time each day, have the right ingredients to hand AND save money. But if we’re time poor or lacking imagination when it comes to food – and I frequently have both problems – then the slow cooker is your friend.

Here are typical ingredients that go in a slow cooker: tomatoes, stock, vegetables, hummus, pesto, cream, potatoes, cupboard sauces, curry paste, sesame oil, soy sauce, any kind of stir fry, beans, lentils and of course meat or fish. Never put the last two together, though I find finely cut anchovies add great flavour to any meat based stew.

It is often pointed out that you can use less meat in a stew, and cheaper cuts of it, without really compromising the taste. My favourites are mince and lamb but I also use pre-cooked chicken and turkey, both of which are cheaper and take no time to prepare.

In other words, just about anything and everything savoury you can think of. You can even use some stale bread to make croutons on top, or grate some cheese as a topping.

And here’s an extra treat for you. Why not try making this soup in the next week? It’s got ingredients that may already be in your kitchen and it only costs £2.40 per person. Make a big enough batch, add some bread and you have a warming meal for these harsh Winter months. Many thanks to Jona at Soupe du Jour for the suggestion. Bon appetit!Image

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Filed under Bargain hunting, Consumer Affairs, Food, Moneysaving tips, Politics

Why has a wonder treatment for acne disappeared from pharmacies? EXCLUSIVE for the Daily Mail

MailOnline - news, sport, celebrity, science and health stories

By Iona Bain

As a consumer journalist, I’m always on the hunt for cracking deals so that I can shave a few pounds off my shopping bill.

But when it comes to skincare, cost considerations don’t apply.

I’ve bought countless expensive lotions and potions, hoping that just one will clear up my complexion.

You see, I’m one of millions in the UK who have battled ‘acne vulgaris’, simply known as acne.

This happens when sebaceous glands near the surface of the skin produce too much sebum, or oil, which mixes with dead skin cells.

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It blocks the hair follicles, tiny holes in the skin, forming blackheads and whiteheads.

Nasty pustules and cysts occur when those blocked follicles come into contact with otherwise harmless bacteria on the skin’s surface.

The condition is believed to affect 80 per cent of those aged between 11 and 30, according to the British Skin Foundation.

And it can last into adulthood – I’m 27 in March and still expect breakouts whenever life takes a stressful turn.

I have been plagued by pimples since I was 14 but my condition reached ghastly new heights three years ago.

When a painful breakout on the side of my neck triggered speculation from a colleague that I was overly fond of love bites, I resolved to find a cure for good.

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I tried anything and everything.

There was high-tech heat therapy, supposed to kill acne-causing bacteria in the skin, as well as French seaweed (known as thalassotherapy).

But nothing worked.

After spending a small fortune, I finally discovered the miracle – a blackhead-buster that was worth its weight in gold. And it cost £5.

READ THE REST HERE

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Dry January may be over–but did we REALLY cut back on the booze?

The sauce bottle is a notorious wallet drainer – so did this year’s Dry January make any difference to the amount we spent on alcohol?

New data reveals that January is not as ‘dry’ as you might think it is. The average monthly spend on alcohol in January 2015 has increased by more than two thirds (74%) in just three years, from only £19 in the first month of 2012 to £33 last month.

The free personal finance app Money Dashboard analysed debit and credit card payments and has found that outgoings on booze last month were only 9% lower than the monthly average in 2014.

Chalkboard Print -Kitchen Art-Chalkboard Alcohol Beverage -Shots Menu-Bar-Shots Recipes-Drinks-Cocktails Recipes Print 8 x 10" No.270

Despite the average spend on alcohol falling 33% from December 2014 to January 2015, many people around the UK appear to be still enjoying a tipple to start the New Year. Those in the Scottish Borders spent the most on alcohol last month, at an average of £80, whilst the North West appears to be much better at staying on the wagon, spending an average of just £16.  

The figures from Money Dashboard follow the news that, although 12% of adults planned to give up drinking last month, more than half (52%) admitted to being back on the sauce in the first two weeks of January.[2]

Iona Bain, young personal finance journalist and editor of the Young Money Blog, said: “While initiatives like ‘Dry January’ have certainly had an impact on the drinking habits of many, booze is eating into our pay packets more this January than in previous years. I’m sure that many people will be surprised at how much they spend on alcohol during the year, particularly during what is the hardest month financially. A root and branch change in spending habits doesn’t have to be daunting though, as a better understanding of monthly outgoings and small steps to cut back in certain areas can help to ensure a healthy and happy start to the year.”  

On the plus side, the same data reveals that the nation appears to be making some investment in its health in January, with average spend on gym subscriptions increasing for the first time in a few years. With an average of £50 spent on the gym this January, year-on-year spend is up 11% and has increased 9% on the monthly average in 2014.



Money Dashboard, insights from over 80,000 consumers, 1-27 January 2015. ICM study of over 2,000 adults, commissioned by Phamarcy2U, January 2015

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Are you letting your money wither away in a ‘scrapheap’ account?

By Iona Bain

Herald Scotland

The financial regulator is finally cracking down on high street banks who have let a huge swathe of our savings wither away in scrapheap accounts that earn as little as 0.1 per cent.

Half of the nation’s savings, worth £354bn, is housed in easy access accounts, but most consumers who hold onto the same account for years may not realise their interest rate has dwindled and that better-paying accounts have come onto the market.

That is because the big four banks, including two partly owned by the taxpayer, are keeping us in the dark about this two-speed savings market, according to the Financial Conduct Authority, which has identified a junkyard of 1000 accounts paying pitiful interest.

In its market study published this week, the FCA said big names had capitalised on their market dominance and consumer inertia to drive down interest rates on older accounts, with as much as £160bn held in products that paid less than the Bank of England’s base rate of 0.5 per cent in 2013.

Of that amount, £145bn was kept in moribund accounts with balances of at least £5,000, making it a no-brainer for many to switch to a more attractive deal.

Click here to read more

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Why money and mates shouldn’t mix: Mr Anonymous gives us his take on financial feuds among friends

In the first of an occasional series, Young Money Blog’s Mr Anonymous (no, not Iona but a terrific young financial journalist!) will be giving his unvarnished views on the tricky issues affecting young people and their finances today…this week, he asks why young people are borrowing and lending among themselves, and why it can go badly wrong

By MR ANONYMOUS

It’s getting towards the end of the month and money’s running tight. Unopened bills are lying in the letterbox and the rent is due. Payday still feels an eternity away.

Circumstances like these gave rise to the much-maligned payday loans industry. For many though, looking to a friend for financial assistance is far preferable to the exorbitant interest rates and aggressive collection tactics of the payday lenders.

Borrowing from our nearest and dearest can certainly seem a tempting proposition – a loan with zero percent interest (if they are charging, you might want to consider what kind of friend they are), without a credit check and from someone you trust.

But turning friends into creditors isn’t without risk. A recent survey showed 15 percent of people in the UK have lost a friend following a financial dispute. That figure rose to 28 percent among those aged between 24 and 35.

It’s little surprise that it’s Generation Y who are most likely to fall out over money.

As rent is the biggest regular expense for many, and the one people are most likely to struggle to pay, a flatmate may seem the natural person to turn to when someone feels the pinch.

If you are the one who is tapped for cash, what starts as an act of goodwill can turn sour – what if your flatmate doesn’t pay the money back?  

However if the loan is well managed there needn’t be any cause to come to blows.

When the loan is agreed, make sure a repayment plan is understood and agreed by everyone involved. The sum could be paid back incrementally or all at once, depending on circumstances, but either way make sure firm dates and sums are set.

If the loan is to be paid incrementally, arranging a standing order with the bank to make regular repayments will help put everyone’s mind at ease.

Crucially, make sure not to lend a sum that will put you in hardship – this is sure to worsen the blow if the money isn’t repaid. Similarly, neither party should feel they have been pressurised into the deal – this could lead to resentment even when the debt is repaid. Being honest about expectations upfront will help avoid this.

But perhaps a more difficult situation is not when a flatmate asks for money, but when they don’t pay their share of the rent or bills. As rent is frequently taken out of just one person’s bank account – that of the lead tenant – a flatmate who doesn’t contribute can leave the lead seriously out of pocket.

The date for transferring funds between flatmates should be set well in advance of the day rent is due. That way, if the flatmate doesn’t transfer the money at the agreed point there’s still time to gently remind them – maybe with a pointed joke or two – before the rent is due.

If that doesn’t work then perhaps the time has come to do what good friends do: find out if they are struggling, and see if you can help them find a better way to organise their finances. Finally, you might consider offering to help financially – but only if you can afford it, and you feel sure they will be able to repay. ​

What do you think? Get in touch and let me know what you think. ionabain[at]hotmail.com

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Students – what’s the strangest purchase you’ve ever made?

Iona Bain

A BUST OF ELVIS, A MONK’S ROBE AND KANGAROO STEAKS – THE NATION’S SECRET STUDENT SHOPPING LIST REVEALED

  • One in five students has bought at least one unusual item with their student loan

  • The same number admit to lying to their parents about where their money goes

A new study, carried out by the free personal finance service Money Dashboard, has found that one in five students (20%) admit to buying bizarre items with their student loan. The strangest buys range from a life-size statue of Nicolas Cage to an elephant’s foot umbrella stand, decorative swords and a bust of Elvis Presley. [1]

Fancy dress parties are clearly still a major motivator for strange buys, which include a monk’s robe, a Where’s Wally onesie and a chicken suit. There is evidence of evening excess as well, in the form of drinking horns and a glass that can contain an entire bottle of wine.

TOP 10 MOST UNUSUAL STUDENT PURCHASES

  1. A bust of Elvis Presley

  2. An elephant’s foot umbrella stand

  3. A life-size statue of Nicolas Cage

  4. Decorative swords

  5. A monk’s robe

  6. Kangaroo steaks

  7. A giant inflatable bat

  8. Krill oil

  9. A Newton’s cradle

  10. A ceramic owl

The research also found that over a fifth of students (21%) admit that they are rarely or never honest with their parents when it comes to money. While almost one in ten (8%) never discuss their finances at home. 

Using your student loan to buy wacky items and extravagant outfits is understandable.

We are under constant pressure to keep up with our peers and be the life and soul of the party when we’re young.  Buying trophy items or splashing out on fancy dress shows what an absolute legend you are, and this helps to oil the wheels of your social life – crucial when you’re away from home for the first time, perhaps in a strange city, and needing to feel that you ‘belong’.

“Undergraduates also have the freedom and space to spend how they like, often for the first time in their lives. This can be very liberating but it can also present problems. Firstly, many students haven’t had the ‘talk’ about finances with Mum and Dad, and compulsory financial education on the English curriculum has come too late for many young people. They haven’t been well drilled about budgeting, recognising value for money and resisting frivolous purchases.

“We also feel grown-up and entitled to make our own financial decisions when we leave home. But for students, there is no connection between how much work they do and how much money they receive in the form of a student loan. This means that they can take their income for granted. Psychological research has also found that the adult brain doesn’t fully mature until the age of 25, which means that many students can’t handle their new-found financial freedom. That is very clearly demonstrated by worrying levels of unnecessary debt among undergraduates, caused by excessive reliance on payday loans, credit cards and bank overdrafts.

“Many believe that debt is an inevitable part of life once you attend university, due to the burden of student loans and so-called “higher eduflation”. But university can be a golden opportunity to find out what smart financial management entails. We’re bound to be experimental with our income, buy questionable items and make mistakes, especially when we’re young. But no-one has to learn about debt the hard way, and it’s essential to use our precious funds to fulfill our personal needs, not to fit in with friends or conform to materialistic expectations.

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Zero hour = zero ethics? The tricky politics of short-term working contracts

By Helen Lawless

ACCORDING TO SCOTTISH FIENDLY, unemployed people have 9.3 per cent of income left over after essentials are paid for – compared to 7.8 per cent for zero-hour workers. What does this mean for Britain’s army of young workers on short-term, short-notice contracts?

There has been a great deal of controversy around zero-hour contracts of late, and this condemning piece of evidence will justify many previous claims that the UK’s current economic recovery is uneven, and at the expense of those who had the least economic security to begin with. Zero hour contracts offer the false promise of a decent livelihood, taking advantage of those who need income the most, but they fail to provide the basic standard of living that unemployment benefits do. And young people are one of the most vulnerable groups in this skewed economic recovery, as they are more often likely to be reliant on part-time employment and zero hour contracts.

Part-time work is often taken up by young people because it requires less experience and because it can fit in alongside other commitments such as studying. Zero-hour contracts have become an increasingly common strategy amongst larger retail chains, namely Amazon, which brought them into the forefront of the public eye; as they help cut costs and allow retailers to flexibly adapt their workforce according to volumes of trade. Essentially not having to guarantee hours to workers, or let them know their shifts more than a couple of hours in advance, means that a firm rarely needs to pay more workers than it requires, or be short-staffed: both common problems in an industry as mercurial and fast-paced as retail. So from the employers’ perspective it makes perfect sense; but for the people who rely on this kind of work, it creates a great deal of psychological and financial insecurity.

The unpredictability of these contracts means that it is near impossible to plan your social life, studies, or basically anything else. You aren’t able to commit firmly to anything in advance or form a comfortable daily routine, because when you’re offered work, it is vastly too much of a risk to turn it down. It’s too high a risk not just because there is the phantom possibility that you will be fired for doing so, although that has been known to occur, but more saliently because you don’t know when your next shift will be offered, or how many hours it will be, so you can’t afford to say no to immediate income. Moreover, not knowing when your income is coming, or what it’s likely to be, makes it extraordinarily difficult to make sound financial plans about your spending and thus your life. Zero-hour contracts are also often associated with a lack of benefits or advancement possibilities, and an inability to attain credit.

This news comes as a damning edict to the current government, who will no doubt be running their re-election platform on the amount of jobs they have generated whilst in office. Not all employment is created equal, and zero hour contracts take advantage of people trying to make the best of things, and cope with rapidly rising living costs. For example, a recent report from Ofgem has shown that energy prices have risen twice as fast as inflation, and four times as fast as the average wage. Let alone a wage that is inferior to jobseekers’ allowance. This exploitative form of employment has been denounced by many activist groups and trade unions already, one of the most significant of which is the University College Union, which is campaigning to stop “casual employment” in university staffing. Another effort which has been growing in support and causing quite a stir as a result is a Christmas boycott of retailer Amazon, organized by a group called Amazon Anonymous, which pledged to spend nearly three million pounds with other retailers during Christmas.

Being a low wage worker, which so many young people are, affords you very few forms of workplace security: you are more replaceable to your employers, you have less experience to call upon, and you have fewer alternatives to fall back on should you need to. Zero hour contracts exponentially heighten this insecurity within the workplace, and make you even less likely to feel valued by your employers. Now the evidence confirms what many have long suspected: zero-hour contracts are an unacceptably insufficient form of employment. The recession and cost of living crisis are still very much aspects of the present for some, often along gender, geographical, and age lines. Young people are being punished for simply trying to work and secure their financial well-beings, whilst Amazon has been widely expected to make $23bn over the holidays alone. Happy New Year indeed…

The views expressed in this piece are those of the writer. This post is kindly supported by Scottish Friendly. Please do get in touch with your views or leave a comment below.

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Investigation: Is financial education being left to chance in Britain’s classrooms?

BY IONA BAIN

Herald Scotland

A leading financial education provider has warned that money can all too easily fall to the bottom of a vague “wish list” of topics to be taught in Scotland’s classrooms.

The Stewart Ivory programme has revealed how schools are still struggling to fulfil their statutory obligation to provide financial lessons, wrestling with a loose requirement to fit these into any of the core subjects on the Scottish Curriculum for Excellence.

The scheme’s chairman, Hamish Buchan, said many teachers “lack the confidence” to tackle this subject properly, while some fear that external teaching material offered by the banking sector is based on a “subliminal need to sell products”.

Mr Buchan called for more support and funding to be given to independent charities, which can provide the impartial resources and knowledgeable experts necessary to make financial education happen.

His view has been echoed by MyBnk, an English charity which is urging the government to introduce “a funded and kite-marked system” that helps schools draw on “tailored, non-profit services”. Plans for a rubberstamped database of reputable charities that could spread financial literacy have been recently shelved by the government-backed Money Advice Service, according to MyBnk.

The Centre for Social Justice has also warned that funding for this sector is “in short supply”, with many financial services organisations pulling the plug in the mistaken belief that “the job is done” now that financial education is on the English syllabus.

READ THE REST HERE

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Investigation: is customer satisfaction REALLY improving at Britain’s big banks?

Herald Scotland

One of the UK’s biggest banking trade unions has claimed that a “performance rating bias” against branch staff of Lloyds Banking Group is proof that a sales-driven culture still dominates retail banking.

iona bain

The allegation, made by Lloyds Trade Union in a recent newsletter, raises questions about how much customer service is improving in Scotland’s bank branches.

The Financial Conduct Authority said earlier this year that banks had all cleaned up their rewards systems to ensure staff were not motivated to push products to customers, following the PPI scandal which has seen the banks pay out £16billion, and Lloyds itself make provisions of over £10bn for mis-selling.

Banks have typically moved staff onto ‘balanced scorecards’ which put a strong emphasis on customer feedback.

But Mark Brown, general secretary of LTU, claimed: “Balanced scorecards are anything but balanced at the moment and sales performance is still the key driver of performance ratings.”

He went on: “During a wide-ranging discussion, last week we told the Financial Conduct Authority that if they were to ask front line retail banking staff in Lloyds Banking Group, and other similar organisations, which factors on their ‘balanced scorecards’ had more influence on their performance ratings, the overwhelming majority of staff would say it was sales performance, however it’s described.”

Read the rest here

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