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Press comment: PPI deadline one week away - What to do with your PPI windfall

If you are writing about the upcoming PPI claims deadline on 29th August, please find below commentary from David Gibb, chartered financial planner at Quilter Private Client Advisers. With just over one week to go to the deadline, David outlines his five top tips for anyone receiving a windfall following a successful PPI claim and why they would be better off not spending it immediately.

PPI deadline one week away: What to do with your PPI windfall

Consumers have just one week left to make a claim for mis-sold Payment Protection Insurance (PPI), as the latest FCA figures show banks have paid out £35.7bn since January 2011.

The average pay out is £1,700[1], but media reports suggest some have received considerably more, with one business owner recouping £247,000.[2]

As providers must respond to a claim within eight weeks wealth manager Quilter looks at best place for the money when it hits people’s bank accounts.

David Gibb, chartered financial planner at Quilter Private Client Advisers, says: “Any windfall people receive will feel like free cash, something they never knew they had and can spend immediately on their lifestyle. However, there are many opportunities to turn this lottery-like win into something greater. It might seem boring and not as enjoyable, but being fiscally responsible will likely make all the difference to your future prosperity in the long term and allow you to achieve financial independence at an earlier stage in life.”

Gibb continues by offering his top five tips on what to use your PPI windfall on:

  1. Pay off expensive debts
    “This should be priority number one. List out all the debts you have and start with the ones with the highest interest rates. These are punishing and will cost you much more than any savings can earn. Once you get them cleared then you are already better off each month.”

  2. Save and/or Invest in an ISA
    If you have no debts then some of the money would be ideally placed in an ISA. Any interest earned will be tax free and the power of compounding will mean this will build up considerably over time. If you think you don’t need the money in the short to medium term then investing in a stocks and shares ISA gives you the best chance at achieving significant returns.”
  3. Make an additional pension contributions
    “Pensions can be a complicated and confusing subject to talk about, but they needn’t be. Any contribution is immediately boosted by 20% thanks to government tax relief if you’re a basic rate tax payer, or 40% if you pay the higher rate of income tax. Additionally, given it won’t be required until retirement, this money has plenty of time to grow. Our figures show that if you invested the average PPI pay out of £1,700 in a pension at age 40, it could boost your savings pot by £5,665 by age 65 if you are a basic rate taxpayer or to £7,553 for higher rate tax payers*.”

  4. Get proper protection
    The whole PPI saga started with mis-sold payment protection, a form of insurance that covers debt repayments if you are unable to work. Even if you have been burnt by PPI, it would be a mistake to think that all protection is a bad deal. In fact protection is crucial in almost every step of life. In particular if you have a family you will want to know they are looked after and the bills can be paid should the worst happen to you.

    On average at least one child in every classroom will lose a parent, so protecting them with a life insurance policy is really important.[3] Life cover is a relatively inexpensive way to get peace of mind about your family’s financial future.”

  5. Gift the money to family
    “Inheritance tax rules mean you can gift up to £3,000 tax free to family members. Therefore not only can you save on your tax bill, but you could potentially give your children a decent start to saving and investing by making use of these allowances. You can even put money into a child’s pension pot and let the wonders of government tax relief and long term investing grow it into something substantial for when they are older.”

 

*Assumed growth rate of 5% and charges of 1%

 

[1] https://www.thetimes.co.uk/article/act-now-time-is-running-out-for-ppi-claims-h7xn6vgjg

[2] https://www.moneysavingexpert.com/news/2019/08/-i-reclaimed-a-quarter-of-million-pounds-in-ppi---and-i-ve-given/

[3] https://www.winstonswish.org/wp-content/uploads/2019/06/COCB.pdf p.19

 

For more information contact

Kathleen Gallagher
023 8072 6293 
079 9000 4932
kathleen.gallagher@quilter.com 

Gregor Davidson
020 7002 7164   
079 1752 2784
gregor.davidson@quilter.com

Notes to editors:

Quilter Private Client Advisers is a national advice business and part of Quilter plc. 

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £118.4 billion in investments (as at 30 June 2019).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions; and discretionary fund management.

The business is comprised of two segments: Advice and Wealth Management and Wealth Platforms.

Advice and Wealth Management encompasses the financial advice business, Quilter Financial Planning; the discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.

Wealth Platforms includes Old Mutual Wealth UK platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

The Quilter plc businesses are being re-branded as follows: 

  • Quilter Financial Planning (previously Intrinsic)
  • Quilter Private Client Advisers (previously Old Mutual Wealth Private Client Advisers)
  • Charles Derby Group (becoming Quilter Financial Advisers)
  • Quilter Financial Adviser School
  • Quilter Cheviot
  • Quilter Investors
  • Old Mutual Wealth (becoming Quilter Wealth Solutions in 2020)
  • Old Mutual International (becoming Quilter International in 2020)

This press release is for journalists only and should not be relied upon by financial advisers or customers.

Please remember that past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back any of the amount originally invested. Exchange rate changes may cause the value of overseas investments to rise or fall.

This communication is issued by Quilter plc.  Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270.  Registered in England.