Life lessons for all ages! A warning if you’ve booked a holiday, and no standing charge tariffs?

28:02And I have this five minutes to have my food before we carry on. There's absolutely no... And I like that five minutes downtown. And it came and he started chatting with me. And he's a lovely fellow, but I just wanted to say, this is my five minutes of processing time. Just this one time I'm not doing anything and I just need to get everything right in my head. I do think it is important. Yeah, anyway, we'll move on. OK. I mean, if I'd bothered you at that time, you would have certainly told me to belt up. So I must meet this man who's got this level of authority on you. That's interesting. Emma Rommel says, start saving, pay a pension at 18, always have 1 ,000 back up in the bank, get those driving lessons and tests, take your holiday entitlement and also think about moving out of London to get on that property ladder.

28:45Well, there's a lot in there, Emma, and that got a lot of likes on social media. So pay a pension at 18, I'll just take that one. So we have auto-enrolment in this country that means if you're an employee, then and you're earning over£10 ,000, your employer, you will automatically be contributing to a pension and your employer will have to match to an extent those contributions. You put 5 % in, they put 3 % in. If you're 18 and you're earning over, I think it's roughly£6 ,500, you are not opted into a pension. But if you do opt in, your employer still has to do the matching contributions. Now, I actually think we should pre-stend the rules because it starts at 22, auto-enrolment.

29:23because the earlier you start putting money in your pension, the longer time it has to compound. So I totally agree with that. The£1 ,000 backup in the bank, the only disagreement is I would say three to six months' worth of bills is a better aim than a set£1 ,000 because it depends on circumstances. But absolutely, Emma, good for you. And Elise Everett-Steven says, look after your mental health. It takes strength to ask for support. Good managers don't make you feel worthless. Stand up to them if you can or change jobs. I agree. and hasn't society changed in the 30 years since we started work with mental health.

29:56I obviously have a money and mental health charity. It's a big part of my life and I've had my own dark days. And I think that, you know, it is important that we acknowledge that we're not always having a good day. I just think it'd help if, you know, when we're thinking what we want to do when we're like 20, 22 years old, whatever, you think, I want to be successful, I want to be successful. And you're told, you can be as successful as you want to be. You can achieve what you want to achieve. I just think the best thing to say would be you can be as happy as you want to be. I agree. And actually, I think it's interesting, the people who say, don't let them stop you.

30:32You can do anything and look what happened to me. And I'm just like, we never hear from the people who were brilliant and hardworking and focused and who weren't successful. And not everyone is going to achieve that. So, you know, happiness is where I sort of started as a better aim. Should I do mine next? A bit for the mind now. Yeah, go on. So my next thing that I said to the graduating class is, protect your reputation now for later life. Those leaving university at the moment are the first truly online generation. Every moment recorded, every second mapped. What you do now will likely last in perpetuity.

31:11It can be used when you apply for jobs, when you write your first article, when you run for office, when you release your first album. So enjoy yourself, but be circumspect. Don't screw over your future self with five minutes of madness. And it is a changed world that we live in. We were very lucky when we grew up. There weren't cameras recording every single moment. And some of those moments, if they came out now in our careers, would be very unpleasant for us. But the younger generation don't have that luxury and they need to be aware of it. Interesting. Russell, when choosing a career, don't worry about what you're good at.

31:47humans become good at everything with practice. So just pick something you enjoy. In 10 years, you'll be incredibly good at it. And when you're good at something you're passionate about, things get really interesting. Well, there's a lot to unpick there. Well, I think there's certainly wisdom. I actually might move to one of my other tips on the back of that because I think it links. This was my fourth one, but we'll do it third because we're nothing if not flexible age-wise. We're not. You know, there's another life lesson. Yes. Don't be afraid to change path. I did. When you leave school or university, you are being born again into a world of work.

32:26You are a newborn just starting out. I hope that whatever you choose to do goes well and you're happy and content with your choice. But after a couple of years, once you start to have an understanding of the world of work and the way it operates and what's going on out there, it is worth assessing again is what you're doing really right for you before you get locked in forever and if you're waking up miserable going to work don't feel locked into the unhappiness see what else you can do test the waters and be fluid yeah i changed career at the age of 25 i was working in financial pr i got told i would maybe one of the youngest partners ever at the firm.

33:07And I always say in my head, I left the next day. What happened in reality is I said, I don't want that. I don't want this. And I don't want to stop being paid too much where I feel I can't leave. And so I applied to go to journalism school to do a postgraduate journalism school and had to go through that whole process and was eventually accepted and got in. And it was six months later when I actually resigned because, but in my head, that moment of dawning realisation when I was told that my future would be a partner at that firm, and it was an incredible firm to work at and I'm very glad I worked there.

33:38It just wasn't right for me personally was the moment I thought actually I don't want this and this isn't right for my image of myself. It's interesting because in some careers you've kind of decided at 18 what you want to do if you go into the professions or medicine and it's harder to back out. It's funny you know I was talking to a guy who taught dentistry and he said there was one lad he never forgets the conversation you had with him. He took him to one side and he said look and he was close to graduating this guy He said, look, you're good at this and you will graduate, but I can just tell you, you just don't like it, do you?

34:12You just don't like doing dentistry. And the guy went, yeah, you're right. I don't know how to tell my parents. I'm just going to have to go through with it. And so this friend of mine who was teaching him effectively talked him out of staying in dentistry. And he said he always thinks it was one of the wiser contributions he made. Well, I think, look, and whatever you've done, And even if you've gone to qualify for the high end professions like law or medicine, if it's not right for you, you've got quite a high end academic degrees that are going to be wanted elsewhere. I was talking to someone the other day who had been a doctor, but now, you know, worked in business for a pharmaceutical company.

34:48And that's what he found his passion was. And there are routes to go out. We're not saying it works for everyone. We're not saying the job market is that flexible or that easy. But my mainstay is test the waters and be flexible. If you're not happy early, don't think you have to stick with it. See what else is out there. Yeah, but don't sort of leave and then wonder what you're going to do. You know, have something to go to. Absolutely. But, you know, yes. OK. Harlow. Harlow, brush your teeth regularly. I mean, that's a place for advice like that. So you don't have to pay out expensive dental repair bills.

35:22Staying with the dental theme. Brush your teeth. Make sure you know how to brush your teeth. I was listening to the other day. you're meant to do it for two minutes and you're meant to do it at a certain angle and you're meant to be mindful when you're done. And one tooth at a time, front and back. Yeah, and it's meant to be good for your mental health when you do that. And floss as well. My wife is brilliant at flossing. I'm not a good flosser. Are you a good flosser? Oh, absolutely. I'm well known for it. Peerless. How regularly do you floss, Adrian? Are you a daily flosser? Oh, yes, every evening.

35:49Yeah, you see, I'm not a good flosser and I know I should be. But you're quite right. Are there bits of meat and stuff between your teeth? I would have you down as an absolutely fanatical flosser. I'm not a fastidious flosser. I'm a fastidious brusher, but I'm not a fastidious flosser. You disappoint me. I'm so sorry. I'm so sorry. But actually, it is truly expensive. I mean, some people do everything right, and they still have expensive dental repair bills. I quite like that tip. What have we got next? Emma, learn about tax-increased savings and avoid short-term debt, especially debt you won't be able to see, tangible assets you bought with it five, ten years from now.

36:24Well, I mean, you're all over that one, aren't you, Marta? Well, yeah, learning about tax, I am still gobsmacked. The number, I mean, I've even had it, people who are about to go into the state pension age and they ask the question about tax, income tax, and they still don't realise that income tax is a marginal issue. I mean, so I'm going to phrase this the way I most commonly get it, but it happens at all ages and all stages in life. And young people need to be taught this at school and there is the Your Money Financial Education textbook that's available for free that I was involved in and funded that we got into schools and you can download that for free that goes through tax and pay slips and how they all work.

37:00But it staggers me that I will get people saying they're about to make me a higher 40 % rate taxpayer by giving me a salary increase. Should I turn it down because I don't want to pay 40 % tax on all my income? And of course you only pay 40 % tax on the amount above the threshold. You're still earning more. And the fact that we still have people in society who don't know that means we have a really poor educative process. So do make sure you understand about tax and you understand about your payslip and you understand what your pension is and look to save or even better in the long run, look to invest.

37:33Do avoid short term debt. You know, debt, there are reasons and times that debt is going to be necessary in your life. If you're if you're buying a house, you're going to have to have debt. If you want to go to university, you're going to have to have what they call a debt in most cases. and sometimes you, you know, if you need, you've got a new job and you're going to need a car to get to work and there's no other way to do it other than getting that car, you might have to have a debt for the car too. But those are investment, asset-type debts. It's willy-nilly, you know, debt for a holiday, debt for Christmas.

38:04Those are the things I really don't like. So, Emma, I'm with you. Silent Bob says, My advice to me on the day I left school, I should definitely go to that disco at the church in Sheepwash Lane because I will meet a beautiful girl who will make me so happy for the rest of my life. Ah, you old romantic Bob. Do you know what? I thought I'd look up where Sheepwash Lane was. And they're everywhere. Grantham, Barrington, Southchard, Burstock, Tipton, Wolverley, Godseal Southwick, East Lavant, Denmead, Great Corby and West Wittering. There's a lot of Sheepwash lanes. And somewhere Bob met his, now we presume, wife or partner there.

38:43But you would think it's not surprising, Sheepwash Lane, because clearly that was in old agricultural land, something you had to do with the sheep. And that's where they did it. Do you want to do one of your other life lessons? Yeah, my next one, I went a bit more practical on this one with my life lessons in for these graduates. If you're self-employed, a third of what you earn isn't yours. For employees, you're paid via the payroll and that means taxes normally taken off. So what goes into your bank account is your money to spend. Yet if you're self-employed or freelance, you're normally paid before tax.

39:18Misunderstanding that causes huge problems for many young and some not so young people. So for every£100 you earn, put£30-ish straight into a separate bank account, preferably a high interest savings account. Then at the end of the year, when your tax bill comes, you've got the money sitting there to pay it. And you might have a little left over and that's the time to go and treat yourself. But do not touch that account until your tax is paid. It is do not think of it as your money. It's no longer your money. You sort of paid it into that account. And that's just preempting what you're going to pay in the tax bill.

39:49If there's any spare, it's great. But I just think that's one of those things, especially if we want an entrepreneurial society and we want people to go and work for themselves and set up their own businesses. The fact that we don't give them this very simple tip and really warn them, you know, you've been paid 100 quid, but it's not really 100 quid because you're going to be earning 30 ,000 pounds over the year. you're going to be paying a level of tax and national insurance. Have that money put aside to do it, because it's absolute hell if you haven't and suddenly you're having to find that whack of cash.

40:19Shall we get the flipping mastermind out of the way? Oh, of course.

40:29Welcome to my money mastermind. Adrian, the score stands at 15 right and 30 wrong. in this three-option multiple-choice quiz, which means you are... N-B-R-C. Yeah, I'm afraid you're back to no better than random chance. Not good. And for the year, you're 2-0 down. So let's see if we can improve that, Adrian. Are you ready? You up for it? Yes, I'm ready. You sound so enthused. No, I am. Hang on, I don't do enthusiasm really. I'm ready. I'm right up for this. Yeah, my yin, your yang. Adrian, you've finally decided it's time to treat yourself. Not a holiday, not to a new boiler, not even to one of those mattresses that claim to change your life.

41:19No, you have set your sights on the ultimate Val Dunican collection. Every album, every single, every compilation, every obscure B-side that sounds like it was recorded in a cardigan shop on a windy Tuesday. Let's just hear a little of the maestro now. Walk tall, walk straight and look the world right in the eye. That's what my mama told me when I was about me high. Yes, indeed. Adrian, you want to become the Don of Valdunican. But the Don don't come cheap. So, I was very pleased with that line. The Don, I'm going to say it again, I was so pleased. But the Don don't come cheap. So you'll need to borrow for it.

42:03Small public service announcement. borrowing money for Valdunican is not generally considered a fat sound financial strategy. You've triggered me a bit, you know, because my Croatian grandmother couldn't speak English. She'd come every Christmas for two or three months and she used to flip in love, Valdunican. Ah, I've still got a good one. I'm so pleased. Yeah. Lovely. But still. It takes me straight back. Anyway, go on. To go on with the question, the long set-up was just for this. You need a loan. So what's cheaper? I can't believe I've done all that set-up and this is a question. So what's cheaper for a loan of£5 ,000?

42:34Should you get a five-year loan at 7 % or a three-year loan at 10 %? Yes, indeed. The question is only scarcely Valdunican adjacent. But I need... It's a lot better. So, that's your question. What's cheaper for a loan of five grand? Get a five-year loan at 7 % or a three-year loan at 10 %? Is it A, five years at 7 % is cheaper? Is it B, three years at 10 % is cheaper? Is it C, the same? They're both the same. I needed to work this out Do you even know how you would work it out if I allowed you time with a calculator I think you'd need a

43:14would you need to calculate the compound interest Well interest is certainly compounded that's true So I would so it's 5 years 7 % or a more expensive 10 % loan but you'd borrow that over 3 years

43:34I can't sit here and work it out which is good because if you did give me time I'll probably work it out and still get it wrong so at least I've got the excuse here that I didn't have time to work it out or are they the same I know because you've suggested that you've reminded me that it's not the answer but I'm going to say it anyway I know what you're doing I'm just trying to remember that there are three options if that wasn't the right answer you wouldn't have said it then I'm sorry for what that implies about your character, but it's cynical, absolutely cynical, and I'm going for the one you've just reminded me of, just to show you up.

44:12I think they're both the same. So final answer, C, you say the cost of those two is the same. Play the uh-uh. I hope you're happy. I only threw that in because I wanted to do a comparison, but it's a three-option multiple choice, so I needed a third answer. Right. OK, so I'm going to do the shortcut, then the long cut. So, first of all, the answer is that the three year loan at 10 percent is cheaper in total than the five year loan at 7 percent. And the reason I wrote this question is many people think that cost interest rate is what dictates the cost of borrowing. No. On a standard loan, it's interest rate and the length that you borrow, which is why when some people put their debt on their mortgage and go, hey, I'm moving my debt to my mortgage at 5%, well, you were moving a 10 % debt over five years onto a mortgage of 4 % over 25 years, you're actually going to pay more.

45:06And you therefore need to factor in that the cost of a loan is a function of the interest and the borrowing time. So the actual answer here is on the three-year loan, you pay 5 ,800 back in total. On the five-year loan, you pay 5 ,940 back in total. So 130 quid more interest, although you have lower repayments. So the cash flow is easier because you're spreading over a period. So there's two ways. I can teach you one, the shortcut way, and then the better way to have worked this out that you could have done. Go on. So the shortcut way to give you a relative cost, and it's not perfect, is literally multiply the two figures together.

45:48So five years times seven is what? 35. And three years times 10? That's 30. This has got to be worth a point, this. I mean, that mental arithmetic. It was superb. But that's a very rough rule of thumb for people working this out. Of course, use a loans calculator on how to do it. Now, your question about compound interest. If you ask me to work out three years at 10 % in my head, in fact, you can give me another one. Give me a loan amount, not relatively simple, and a number of years and a percent, and I'll try and give you a rough idea of what it is. OK, let's stick with£500. £500. What did we say?

46:25£5 ,000. OK, let's say£5 ,000 for 10 years at 2%. OK, so here's what I would do. I would say my average balance over the time, because you pay a loan off in set rates, on a£5 ,000 loan over 10 years is£2 ,500. thousand pounds. So I would then work out what is 2 % interest on two and a half thousand pounds. So that's 50 pounds a year interest on two and a half thousand pounds over 10 years. My interest is 500 pounds. I would then, because compounding happens, add a little bit for compounding. So I'd make it 550 pounds of interest. So I'd say your total repayments in that case would be around £5 ,550 in interest, maybe£5 ,600 in interest.

47:17That would be my rough guess. If you want to talk for a second, I'll go on to a loans calculator, which I haven't prepared to do, and I'll see what it actually is. Go on, Adrian. Phil, you read one of the tellers at OAT. Yes, I'll read. Yes, good idea. Donald says, save 10 % of everything you earn in an ISA. Use index funds to do this. That way you get tax-free growth and access it any time you want before retirement. Absolutely. I mean, investing is something that we need to teach our young people. If you're putting the money away for a long time, money that you don't need to touch, investing will generally outperform savings.

47:53I'm just pressing calculate.

47:57And I put the wrong interest rate in. I just got a shot that I got it so wrong and it's because I put the wrong interest rate in. In total, over the 120 months of your loan, you'll repay£5 ,520. I said£5 ,550. so in the right ballpark and that's how you do it so your 10 times 2 thing still works 10 years times 2 interest the key that people get wrong in personal loans is they think I'm borrowing£5 ,000 over 10 years it's 2 % interest on£5 ,000 but you're not because you're paying it off which is why I take the average balance which is basically take half the balance and assume that you had half that balance for the whole 10 years and put 2 % interest on that that's the real trick to working it out in your head ok look it's fascinating And we've got plenty of other suggestions.

48:43Do one more because I've lost my place in it. OK. Heather, treat others as you would like you treated yourself. Doesn't take much to be kind. Make this world a better place to live in. Well, we couldn't say anything nicer than that, especially in a social media age. We all need to be a little bit nicer, a little bit kinder. And remember, there's often real people behind it. Coming from the bloke who sets the mastermind questions for me. Yes, but that's done with love, Adrian. That's done with love and kindness. Toff love. Toff love. And that's all we had time for in the show with Adrian. We're now in the pod only bit.

49:14I'm here with podcast producer Matt. Hello, Matt. Hello, you OK? Yeah, Adrian's 3-0 down for the year. I know. Even for me, I don't want that. I want him to get some right. Do you think you're throwing him off too much? I think he thinks I'm trying to say it. All I was actually trying to do is to say that there were three options he could choose from, not two, and just wanted to remind him. But he seemed to think it was a clue, which it genuinely wasn't. I wasn't trying to be off-putting. He just gets in his head too much, doesn't he? Yeah, I know. he should focus on answering the questions rather than trying to answer them by psyching out what I'm doing but anyway that's not what we're doing um so it's been a really interesting pod and so many of those tell us so I'd just like us to do a few more because we've got so many good ones I don't want to waste them uh in the pod only bit so hopefully you've got them in front of you I can see them why don't why don't you read them and I'll talk about okay cool um first one from let hold us if you get into debt and are struggling talk to them don't ignore the letters and phone calls.

50:04They're there to help you. It's in their interest to come to an agreement. Don't risk losing everything just because you didn't talk to them. That's very important information and not just about debt. I'm always surprised by people who send me questions saying, if I do this, can I do this with this firm? And it's one of those, it's subjective. It's whether the firm allows you to or not. And I said, well, what did they say when you asked them? And they go, I haven't asked them. I'm thinking, ask them. We mustn't be scared to ask people questions and talk to them. And often, especially in regulated sectors, if you're having problems, firms have duties and obligations to behave to you in a way that treats you fairly.

50:40So it's important to let them know that you are having problems. And then Andrew Ashworth, the importance of compound interest, he says. Absolutely. Everybody should understand compound interest. And it applies both ways round. It's bad in debt. It's good in savings because debt and savings are two sides of the same coin. So compound interest is where you get interest on interest. Let's just do it very briefly for anyone who doesn't know. Imagine you've got£1 ,000 in a savings account. If you earn 10 % interest on that£1 ,000, then at the end of the first year you'll have£1 ,100. At the end of the second year you get 10 % interest on the£1 ,000, but you also get 10 % interest on the interest you were paid the previous year.

51:26So 10 % interest on the£100. So you get£110 interest. So now you have£1 ,210. And the following year, you get interest on the£1 ,000, interest on the first£100, and interest on the£110. And that's compound interest. And it means that over time, the interest on the interest accelerates the amount that you're gaining. And that doesn't just work in savings, it works in investment too. So for example, imagine that you are invested in a fund that pays dividends. So that's a payment you get each year from shares or funds coming back towards the stockholders. Well, you could use those funds to buy more shares in that company.

52:06And if that company is doing well, because you've now got more shares and it compounds, so you get more dividends year after year after year, that grows too. Equally in debt, it works the other way around. It's because debt is effectively the lender is saving with you, if you like, and therefore you have to pay it compound interest back. So compound interest means the longer you're in debt for, it's almost like the mastermind question we were talking about, the longer you're in debt for, the more it costs you because you're paying interest on the interest year after year after year. So in some ways it's good, in other ways not so good.

52:37Well, you need to understand it. Like everything else, interest is great when you're saving and it's bad when you're borrowing. Fair enough. Ramsey Sharon, your job is not your personality or identity. You'll be replaced in a heartbeat. Endure what you do, but don't make it your reason for living. Put the effort into people and experiences instead. and pay into a pension to? Oh, yeah, definitely pay into a pension. It's slightly difficult for me because I can stop. I mean, in a way, my job is my identity for many people. But I think that's probably right outside of the weird world of broadcasting and being on telly and stuff.

53:11And Jane, this one got a lot of likes. 572, the last time I checked. If you are a woman, make sure you keep your own bank account. When you find a partner, have a joint account for shared expenses, but keep your own account. To be fair, it's a good idea for men too. And make sure you take time to understand pensions and start paying in early. Being retired with a comfortable income is a huge plus. Incredible how many people have mentioned pensions, isn't it? I think this is really interesting because 50 years ago, I don't think you would have got this. If we go back to the 19, maybe more than 50 years ago, 70 years ago, if we go back to the 1950s and 60s when we were in this sort of old style society where men were the primary breadwinners and women stayed at home to look after the house, then joint accounts were much more common because it was seen as a team unit, you're doing it together and therefore you'd have a joint account you both spend from it.

54:03These days we tend to couple up later and people are more financially independent once they get into a relationship and are used to having their own money. And differences in personality, money personality, one being a spender, one being a saver for example, can actually cause real frictions in relationships. So having a form of separate bank accounts is a good protection from that. You can still have a joint account for your bills, as long as you've both got a decent credit score, because otherwise that can affect your credit scores with each other. And there are some, you know, Santander Edge is particularly good for that, as it gives you cash back on bills paid by direct debit, and it's currently paying switches at the moment.

54:40But yeah, generally, I think for the modern generation, I'm with Jane. Keep your own bank account, as well as possibly having a joint one, if you trust each other. moots uh learn about finance mortgages taxes banking and savings and how they all work in detail learn a foreign language fluently i wish i'd have done that uh i'm trying though take what language i'm trying spanish well i know a bit of spanish um so i'm i'm doing that uh he goes on to say take calculated risks and stay single until you're in your 20s and andy says take more risks life's too short to worry about the negative sides of calculated risks believe more in yourself and your own abilities?

55:20Yeah, I think we are very risk averse as a nation, and it tends to make us, sometimes can mean we make bad decisions. And we often, I've talked about this before in the pod, we often confuse a bad outcome with a bad decision. You can do everything right. You know, you can make a decision that you're going to, whether it's fix your mortgage, fix your gas and electricity, marry someone, change job, and you do it based for all the right reasons after a decent analysis, but it doesn't turn out right for you based on unknowns that you could not have known when you made the decision. And we go, I made a bad decision.

55:54Well, no, you had a bad outcome. The way I often do it, Matt, I'll just do this quickly. I won't go into too much detail. As I say, imagine I've got a coin now and I'm going to offer you this bet. I wouldn't offer you this bet. If I toss the coin and you call it right, I'll give you a hundred quid. If I toss the coin and you call it wrong, you have to give me one pound. Would you take that bet? Yeah. Well, of course you would. Absolutely. So let's pretend we do it now. What are you going to call heads or tails? Heads. Oh dear, it's tails. Was it a bad bet? No. It was a good bet. You know, you had a hundred times gain on the way up than the way down.

56:33You could afford to make it and it was on a 50-50 probability. You had a bad outcome. And in that binary mode, it's very easy to see the difference between having a bad outcome and having made a bad decision. We're not as good at that with things where the decision has more finesse in it and it's not quite as obvious and it's not quite as binary. But there are times in our lives we have to accept, I did my best, I had a bad outcome, that doesn't mean I made a bad decision. Because if we start putting it down to bad decision making when we made the decision as well as we possibly can. We become too risk averse for later in our life.

57:07Anyway, next one. Jason, don't worry about a career. Travel the world in your youth, then go to university and study a subject you're passionate about. At 56 years old, I've only just learned that lesson, but I'll be starting my post-grad degree in September. Oh, well, it's such a lovely one. I don't want to say, you know, you need to think about what you're going to do in your career. I love the idea. You're passionate going back to university at 56. Jason, I wish you all the best with it. And I think that's rather a nice way to end this pod. Now, just before we go, on Monday on Radio 4, You and Yours, I did an interview about the promised Ofgem low or no standing charge tariffs that we were told would be coming in January.

57:49But so far, tumbleweed. We've not heard anything. Have a quick listen. From this month, there were meant to be options with the standing charges on energy bills for people in England, Scotland and Wales. Standing charges are the charges companies make to bring the energy supply to your home. They vary a lot and there was nothing you could do to bring them down. People who are low users of energy really resent that. Well, last year the regulator Ofgem promised change. Suppliers would have to offer at least one tariff with a lower standing charge. Now everyone would still have to pay for the energy to be brought to their home, but there'd be new tariffs with lower standing charges and higher unit prices for energy.

58:29so it would be a judgment for individual consumers. Here's Tim Jarvis of Ofgem telling us about that in September. I would say to people if you are interested in getting more control over your bill and you are perhaps a low energy user, you want to see a greater link between perhaps safely reducing your energy and the amount that you pay, then have a look at these tariffs, talk to your supplier and get some advice to see whether this is the right thing for you. Well, there's been no sign of these tariffs yet. Martin Lewis, the money-saving expert, has been campaigning about the unfairness of standing charges for years.

59:02Martin, hi and welcome. These new tariffs then, tell us a bit more about what they are meant to be going to offer us. Well, your September interview was already at the point when Ofgem had gone flaccid on what it was originally proposing to do. So I was one of the people behind pushing for this. Standing charges are a moral hazard. They disincentivise lower users from cutting their bills. They punish older people who only have their gas heating on during the winter because they've got to pay for it all year round. And they're absolutely too high. Now, this was about shifting some of the cost of the standing charge, the fixed charge, onto unit rates.

59:38There is nothing that defines, you know, when you go into a pub and you buy a pint, the pub has fixed costs. You know, it has the premises. It has all of the different things that are going on. But they don't say you have to pay a fee to be able to access the pub and then you pay for the pint separately. All those costs are factored into the pint. But on energy, for some reason, we say any fixed cost has to be put on the standing charge. And that philosophically doesn't work. Now, what I've been calling is a split price cap rate. And that was the original proposal. So there would be two price caps.

1:00:11There would be the price cap, the normal price cap, and then there would be a low or no standing charge price cap that each firm would have to offer. so that the vulnerable people would automatically be defaulted onto the right one for them, which means basically if you're a lower user, you'd be on the lower no standing charge price cap. If you're not, you'd be on a higher price cap. So when you were talking to Tim Jarvis then, they'd already softened that in a way I was very uncomfortable with. Yes, because it puts it all down to you, doesn't it, Martin, that you must decide. Yes, and many of the people who are the worst victims of this pricing policy are the people who never switch.

1:00:44And the whole point of the price cap, even though it covers far too many people now, it's a pants cap, most people shouldn't be on it, is the price cap is meant to be the backstop tariff for those who are unable to engage in the competitive market. But what Ofgem did is take that original proposal for a dual price cap and say that firms must offer a switchable low or no standing charge tariff. Now, that will help some, but it won't help many of the most vulnerable because they're the ones who never switch anyway. They're the ones on the price cap, which is why it should have been through a price cap tariff.

1:01:14So the energy firms hated the dual price cap system. So then you came and they said, well, let's do the low or no standing charge alternative. And then people like me were going, well, that defeats the whole point. And Ofgem, as it classically does, gone for a halfway house option that leaves nobody happy, which is probably why nothing is happening this month, even though it was all meant to be happening this January. So in the meantime, what do you advise someone who really wants to reduce what they're paying for their standing charges? Well, I actually think philosophically that's a poor question.

1:01:43You'll forgive me, because what you should be doing is looking to reduce your energy bills. and there is always an interrelation between the standing charge and the unit rate. So what you have to do, regardless of your usage, is you go into a whole of market comparison site. So that's one that doesn't hide tariffs that don't pay it. My cheap energy club, of course, doesn't do that. And you go onto that site, you put in your usage and it will calculate what the cheapest deal is on your usage, factoring in the interrelation between standing charge and unit rate. I know there are many people out there who go, I want to lower standing charge and I get it, But you don't want to lower standing charge if it ultimately means you will be paying more.

1:02:20So I think what this would have done is brought in more options that enabled people to switch to tariffs that were better for them. But at the moment, you just have to pick from what's available on the marketplace. And you can't just look at standing charge alone. You have to look at the rate for each unit of gas and electricity you use. And a comparison site will do that for you. Or you can go and check the rates for yourself and get on a spreadsheet and calculate it for yourself. Ofgem told us it had heard people's concerns about standing charges loud and clear. but that it needed to, and I'm quoting now, carefully consider stakeholder feedback on these proposals and that any changes don't have unintended consequences.

1:02:54What do you think that means? Well, look, when they first launched a consultation on this, I was encouraged people to feed in, and they had by far the biggest consultation by many factors of any consultation they've ever done. Standing charges are easily the biggest single complaint on any subject I get into my mailbag. I've spoken to the Secretary of State for Energy about it, spoken to Ofgem about it. People hate them. As I say, they're a moral hazard. I think what happened is they tried to put the original price cap proposal in place. Energy firms were up in arms and hated it. They tried to come up with some type of conciliatory switchers tariff.

1:03:29Nobody really liked that. And so they're trying to find a way that pleases the consumers who think that these charges rightly are rancid and too high. And then standing over£300 a year just for the facility of having gas and electricity is too much. it should be in the region of£100,£150. That would be, in my view, a balanced version. But also they have to appease the energy companies because they've got a remit to balance at the same time. And I don't think they've pleased anybody with what they were proposing to do. That's it for this week. We tend to put out a new episode every Thursday and Monday, which is our Question Time podcast, where you can ask me absolutely anything and everything within reason.

1:04:06So if you've got a question, send it to martinlewispodcast at bbc.co.uk. And if you've enjoyed today's podcast, please tell your friends you've been listening to the Martin Lewis podcast. And why not subscribe? Then your pockets will be pleased with you. And if you haven't enjoyed it and you're listening this far, you've only got yourself to blame. I got meals. I got to pay. So I'm going to work for the world. I got meals. I got to feed. So I'm going to make sure everybody eats. Martin Lewis is the founder of MoneySavingExpert.com. But of course, other consumer and price comparison websites are available.

1:04:47You can get in touch with Martin's podcast production team by emailing martinlewispodcast at bbc.co.uk. The offers and rates mentioned in the podcast are correct at the time of recording. However, if you are listening on demand, it's worth double-checking as details can date. Remember to subscribe on BBC Sounds and leave us a review however you listen.

1:05:10Bye.