How to switch service providers
Even with good intentions to switch - be it to save money or escape from poor service - many of us are put off by the perceived time and effort involved in changing providers. But Andy Cumming, managing director of Scott-Moncrieff Wealth Management, says we shouldn't be deterred.
"Comparison sites make it much easier to find a better deal and move your business. But what you need to do and how easy the transfer will be depends on the product."
So how do you go about changing providers? We explain the process, depending on the type of financial product.
Insurance is probably the easiest product to switch. As the vast majority of products have a one-year term, once you get your renewal documents, you can look around for a better deal.
By far the quickest way to do this is with online comparison sites, which help you compare a large selection of policies at once. "Use a few comparison sites to cover as much of the market as possible and contact providers such as Aviva and Direct Line that don't feature on comparison sites," says Cumming. "Also make sure you're comparing like-for-like products as cover and options can vary a lot."
Switching can be done quickly but it's important not to leave yourself without cover so make sure the policies run back-to-back. And, as many insurers will automatically renew your existing policy if they don't hear from you, contact them to cancel it too.
The only product where you might be more tied in is private medical insurance. If you've made any claims you could find that the new insurer doesn't cover you for these pre-existing conditions. So, if you have a recurring problem you might be better sticking with your existing provider.
Savings are also relatively easy to switch. Once you find a more competitive deal, simply fill out the application form - either online or in branch. You will need to provide proof of identity too. If you hold your savings in a cash ISA the process is slightly more complex.
Kevin Mountford, head of banking and credit cards at Moneysupermarket.com, explains: "Don't close your existing ISA and transfer the money as you'll lose the tax-free status. Instead, contact your new provider and it will arrange the transfer on your behalf. New guidelines mean this shouldn't take more than 15 days to complete."
The other rule to be aware of when switching an ISA is that although you can transfer existing cash ISAs into stocks and shares ISAs, you can't move it back into a cash ISA.
Although rates increase as you get older, competition in the protection market, especially life insurance, means you may be able to bag a bargain.
Again, the internet is a good way to compare rates, with websites such as moneysupermarket.com, comparethemarket.com, defaqto.com and confused.com allowing you to search for the cheapest rates. Some protection products like income protection and critical illness can be quite complex so it may be worth speaking to in independent financial adviser first.
Although you might find a cheaper deal, Cumming warns against cancelling any existing cover you have. "The premium could increase once you've been underwritten, especially if you've had any health problems, so don't cancel existing cover until you've taken out new cover," he says.
How long it takes to switch will vary. If you're healthy and have no family history of major medical problems it could be a matter of days, but add in some health issues and you may find yourself waiting weeks for GP reports or even medicals.
The savings you can realise by switching mortgages are usually the largest but it can also be one of the more labour-intensive processes.
First you need to check whether there are any penalties for switching out of your existing deal. Some deals, especially fixed and discounted rates, can have early repayment charges. It may be worth waiting until the end of your current deal or you might decide to take the hit to switch to a lower interest rate.
Once you've found a mortgage to switch to, your new lender will run the process for you. This will involve a valuation, which is usually based on property price data rather than visiting the property, some legal work and checks on your suitability for the loan. "It should take a couple of weeks to complete but you can speed this up by chasing the provider," adds Mountford.
Although current accounts generate plenty of complaints, many people are put off switching providers as they've heard horror stories of salaries going astray and direct debit payments not being made. "It can happen but don't let this put you off," says Mountford.
To switch, you'll first need to apply for a current account with your new bank. It will ask you for details of any standing orders and direct debits you want to transfer and will contact your existing bank to arrange this. It will also arrange for your balance to be transferred to the new account.
Under banking industry guidance, your new account should be up and running within 10 days of your application being approved. Mountford recommends putting a safety net in place too.
"Get interest-free temporary overdrafts on both accounts and don't close your old one until you're sure everything's transferred to your new account. There is a psychological barrier to switching current accounts but the process has improved massively."
A catch-all phrase that can range from assessing the price of a property or vehicle before offering it for sale or the net worth of assets in an investment portfolio to the prices of shares on a stock exchange.
Private medical insurance
PMI allows you to skip the NHS waiting list and arrange treatment at a time you choose. With most PMI policies, you pay a monthly premium (the older you are, generally the higher premium) and the policy will then pay out, up to specified cover limits and after an agreed excess, for any treatment you might need. Not all conditions are covered by PMI and you get what you pay for: the more cover you want, the higher your premium will be.
Generally thought of as being interchangeable with life assurance, but isn’t. Life insurance insures you for a specific period of time, at a premium fixed by your age, health and the amount the life is insured for. If you die while the policy is in force, the insurance company pays the claim. However, if you survive to the end of the term or cease paying the premiums, the policy is finished and has no remaining value whatsoever as it only has any value if you have a claim. For this reason, life insurance is much cheaper than life assurance (also called whole of life).
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.