How to cope during the Economic Downturn

 

The odds can seem to be against you during an economic downturn.

Surviving the downturn will be easier if people face up to any financial issues before they get out of control.

An array of information is available to help you. Here is a guide to some of that advice and information.

•    Savings
•    Mortgages and Repossessions
•    Redundancy
•    Debt
•    Pensions
•    Looking for a job


SAFE SAVINGS

• The banking crisis has brought the safety of savings into sharp focus, especially after the Northern Rock rescue.

• Savings up to £50,000 per person per licensed bank are guaranteed, should any UK-regulated bank or building society go bust.

• A couple with a joint account is covered per person. So each person in a couple would have £50,000 covered in the account - so up to £100,000 in total would be protected.

• Schemes in the EU have to offer compensation for at least the first 20,000 euros (£16,300), although they may offer significantly more than that.

• For further advice start with this guide to the safety of savings.

• If you are worried about your deposits, see this question and answer explanation of savings protection.

• The UK programme is run by the Financial Services Compensation Scheme.


MORTGAGES AND REPOSSESSION

• The number of properties repossessed by mortgage lenders in the UK rose by 48% in the first half of 2008.

• Contact a lender immediately if facing trouble making mortgage repayments, preferably with a detailed proposal.

• Lenders must only turn to repossession as a last resort, after considering repayment holidays or extending the term or type of mortgage.

• First-time buyers and those remortgaging should choose the correct mortgage to suit their financial situation.

• For further advice, start with some typical advice about avoiding repossession in England and Wales. Homeowners in Scotland have slightly different rules to be aware of. You can also read readers' stories.

• Housing charity Shelter offers advice to householders in England and, because of different rules, separate advice for homeowners in Scotland.

• To see advice from mortgage providers, check this Council of Mortgage Lenders' guide.

• To find the level of mortgage to suit you, use the BBC mortgage calculator to help guide you.


NEGOTIATING REDUNDANCY

Lots of advice is available for coping with your personal finances

• If you have worked continuously for the same employer for two years or more, you are likely to be entitled to statutory redundancy pay.

• The first £30,000 of redundancy pay is tax-free but the rest, including unpaid wages and bonuses, may be taxed.

• Check out what happens when your employer goes into administration.

• There are also complicated rules for employers on income tax surrounding redundancy payments.

• But there are also opportunities for businesses to strengthen their position.

• If you are being made redundant, there are tips on negotiating redundancy payments available from the TUC.

• Employers can read this guide on the tax pitfalls of redundancy.

• There is advice and training available from the conciliation service Acas.

• There are also strategies for businesses giving them the opportunity to strengthen their position.


FACING DEBTS

• The number of people seeking advice from Citizens Advice bureaux about how to manage their debts surged by a third in the past year.

• Experts urge people to be honest about money problems. For starters, you may want to take the BBC's Debt Test and Financial Healthcheck.

• Keep up to date with priority debts, including housing, heating and council tax.

• A good place to start is the Citizens Advice website.

• Those facing serious financial difficulties could talk to a licensed insolvency practitioner.

• There is help available if householders are struggling to pay their utility bills.

• Advice groups include the Consumer Credit Counselling Service or the National Debtline.

• The Consumer Credit Counselling Service is also offering an interactive Debt Remedy advice tool.


PENSIONS

• The recent downturn in stock markets may have undermined the finances of your employer's scheme. There is little you can do about it, because the responsibility for ensuring your scheme has sufficient assets to pay future pensions lies with the scheme trustees and your employer.

• If you are saving in any form of private pension, where its value is more directly linked to the stock market, things may be looking a bit bleak. Unless your investment manager had already moved the bulk of your money into bonds or cash, then you have probably suffered a sudden large loss in your pension pot. One way to make this up would be by working longer and saving more. Of course over the long-term, markets could well recover.

• Your state pension may be small, but it is funded by the government directly out of taxation and goes up with inflation each year. Unless the government goes bust (most unlikely) or reneges on its promises to update pensions each year (unlikely too), then this is one aspect of your financial life that has not been altered by the credit crunch.

• All investment funds backing personal pensions will have been dented recently, but right now might, in fact, be a good time to turn that into a pension, by buying an annuity. Annuity rates for, say, a 65-year-old wanting a level income are hovering around the 7.7% to 7.8% level. That is high by recent standards, but some experts expect that rate to fall sharply in the coming year.

• Spending your life at work? Read about the average retirement age.

• The Pensions Advisory Service offers free guidance about pensions, and the Financial Services Authority explains the jargon in its money made clear website.

• You can read more about annuities.

• The Department of Work and Pensions has information about the state pension and other benefits.


LOOKING FOR A JOB

• The number of people out of work in the UK rose to 1.79 million and the unemployment rate to 5.7% by August.

• But Jobcentre Plus says there are still 600,000 job vacancies in the UK at any time.

• Most people are only out of work for a short amount of time, the Department for Work and Pensions says. Four out of five people who make a new claim for jobseekers' allowance are off it within six months.

• People looking for a job can start with a database of jobs held by Jobcentre Plus.

• Careers advice is available, with bilingual advisers on hand. There are websites for people in England, in Scotland and in Wales.

• For information about training or learning new skills, there are also websites for people living in England, in Scotland and in Wales.

 

© BBC 2009