In short
The Martin Lewis Podcast - Episode Summary
Episode Title
Millions can now reclaim student loans! | Savings safety limit to rise | Will energy prices go up?
Episode Description In this episode, Martin Lewis discusses significant financial updates affecting university leavers and the general public. Martin highlights four reasons why many individuals may reclaim hundreds or even thousands of pounds from student loans. He also addresses changes to savings protection limits, previews the upcoming energy price cap announcement, shares amusing stories about customer returns, and introduces a segment on retail gift aid.
---
Key Topics Discussed
- Student Loan Reclaims
- Overview: Up to 5 million people may have overpaid their student loans.
- Reasons for Overpayment:
- Income Fluctuations: Individuals who earned enough to repay in some months but not over the year.
- Incorrect Repayment Plans: Employers may misclassify which repayment plan a borrower is on.
- Early Repayment: Some may start repaying before the April after leaving university.
- Post-Payment: Some borrowers continue to pay after their loan has been fully repaid.
- Action Items:
- Use the Student Loans Company app or request a refund form to reclaim overpaid amounts.
- No deadline for past claims, but you cannot request a refund for the current tax year until it is completed.
- Savings Safety Limit Increase
- Current Protection: The savings protection limit increases from £85,000 to £120,000 per financial institution starting December 1st.
- Lifetime Events Limit: This limit, which protects temporary balances from inheritances or house sales, increases from £1 million to £1.4 million.
- Energy Price Cap Predictions
- Upcoming Announcement: The new energy price cap will be revealed on Friday.
- Current Predictions: It is expected to decrease slightly (by 0.5% to 1.25%).
- Advice: With prices likely to remain stable for the next nine months, Martin suggests fixing energy tariffs now, which can save consumers up to 10% compared to the price cap.
- Customer Returns Anecdotes
- Martin shares humorous listener stories about minimal-value returns, emphasizing consumer rights and the sometimes absurdity of store return policies.
- Money Mastermind Segment
- Focus on Retail Gift Aid: How it works when donating items to charity shops and the implications for tax claims related to these donations.
---
Audience Engagement Listeners are encouraged to submit questions for Martin to answer in future episodes through the provided email address.
---
Key Takeaways
- Many university graduates are likely eligible for refunds on overpaid student loans.
- Consumers should be aware of the increased savings protection limit for better financial security.
- The energy market remains complex, but locking in a fixed tariff now may yield savings in the long run.
- Light-hearted anecdotes from listeners about returns reveal both consumer quirks and the need for clear consumer rights education.
---
Conclusion This episode of The Martin Lewis Podcast offers actionable financial advice and insights into current economic changes relevant to listeners. Martin's engaging style and wealth of information ensure listeners are well-equipped to handle their finances effectively.
For additional questions or topics for discussion, reach out to Martin's production team!
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Transcript
Automatic transcript. May contain errors.0:01This is something that you should only be considering if you're in the midst of repaying student loans. It's very likely you will save substantially by getting a fix. Do you need to pay the street load if you go abroad? Yes. Then expect for them to prosecute you over it. I should just stop, I don't know why. Well, let's be really blunt about this. You see why I say it's a philosophical conundrum? I do. Hello, I'm Martin Lewis and this is the comingly named The Martin Lewis Podcast. I do wonder what that's going to be about. Usually, much of it comes from our BBC Radio 5 Live show with Adrian Childs, but there's also bonus money-saving tips just for you, lucky, lucky podcast listeners.
0:41In today's pod, up to 5 million people have overpaid their student loans, hitting those who went to university who are now in their 20s, 30s and 40s mainly. I'll talk you through the four reasons why and how to get hundreds or possibly thousands of pounds back. The saving safety protection limit is to be increased from£85 ,000 to£120 ,000. I'll talk you through all you need to know on that The new energy price cap will be announced this coming Friday So I will be doing my Mystic Meg To predict what it'll be And talk you through what you need to do This week's Tellers is What's the cheapest thing you've ever returned to a shop There are some very funny ones Including the handle broke on my 25p bag for life That is And this week's Mastermind is all about charity shops, mate Play the theme tune.
1:48So we'll start with the savings limit that's going on. What's that mean in practice? Right, so on the 1st of December, the safe savings limit that we often talk about, this£85 ,000 that you're protected per institution that you put your money in, is going to increase to£120 ,000. It's been the first increase in a long time. It's not been going up with inflation. At the same time, the lifetime events limit, which is one most people don't know about, but this is if you were to have an inheritance or sell your house, you're actually currently protected up to£1 million in any one institution for six months.
2:22So it's a sort of a temporary balances limit. That's going to go up to£1.4 million. So what does it mean in practice? Well, for many people, nothing, because they don't have that amount of savings. But for those people who do have the savings, whether temporarily or permanently, I always talk about, you know, the best way to mitigate risk is not to have more than£85 ,000 in any one individual institution. Well, from the 1st of December, that rule would be not to have more than£120 ,000 in any one individual institution. Because if in the unlikely event your bank were to go bust, you would get back at least£120 ,000.
2:53In practice, when we did see banks going bust in 2007 during the financial crash, what happened in virtually every case was they actually ported the book of savings from the bank that was going bust to a new bank. So they didn't really pay it out in those circumstances. You just kept your savings account and things carried on as normal. But this is just sort of the backstop protection, the government guarantee, if you like, is moving up from£85 ,000 to£120 ,000. OK, and we've got a question from Rose Wetherill on this. Does the safe savings limit only cover one account per person? It's not about accounts.
3:30The 85 ,000, soon to be 120 ,000, is per person, per financial institution. Now, the phraseology financial institution is important because some financial institutions are the same. So Marcus and Saga have the same underlying protection, for example, or, you know, that some of the big banks are joint banks. So you always need to check who your savings safety protection is shared with. But in general, the way to think of it is 85 ,000 per person per financial institution. Now, that does interestingly mean going up to 120 ,000. If you have a joint account, so let's say right now you have 160 ,000 in a joint account, that's demarked to be half each.
4:12So you each have£80 ,000 in that account. So you would be under the current safe savings limit. So it's not about accounts. I just used the phrase accounts. I shouldn't. It's about institutions. Just to be really clear, let's do a simple example. You've got money in Lloyd's. You've got money in their cash ISA. You've got an easy access savings account with them. You've got a fixed rate bond with them. They're all different accounts, but you would total all those together because it's your protection within Lloyd's that is what counts as the limit. Let's go on to the energy price cap announcement for January.
4:46It's on Friday. Let's go back to the basics. This is where you call it the pants cap. I do call it the pants cap. So the energy price cap, two thirds of homes are on it. And this is what dictates the price that you will pay. It's set by the regulator Ofgem. It moves every three months. And it's a cap on the standing charge and unit rate you'll pay. And we'll hear the new one for January will be announced on Friday. Now, what I do is I look at the predictions from the various different analysts that are out there, and some of them update weekly, some of them update monthly, and I average them together.
5:20Based on the average prediction of British Gas, Eon and EDF at the moment, they are saying that on Friday we're going to hear the energy price cap is coming down half a percent. Not very much. It's basically no change. Now, if you look at the range of predictions, just to be accurate, they range from literally one is predicting no change to Cornwall Insight, who's saying it will go down one and a quarter percent. Now, you might say, why aren't they more accurate now? The assessment period, because it's assessed on wholesale rates over three months, that assessment period has finished. So they're working on the same data.
5:51They're working on the same data. Because, well, let's be really blunt about this. 40 % of the energy price is made up from wholesale rates. Some of the rest is retailers' profits and network costs, and a lot of it is policy. So policy and taxes, if you like. So policy coming from Ofgem, policy coming from the government. That is a lot of what is on our energy bill. People will know, you know, whether it's the green levy, whether it's a warm home discount. So some of the change we saw last time, actually on a wholesale rates, we wouldn't have seen a change, but because of changes to network costs, the moving electricity around, it went up by 2%.
6:25So that's why, that's where the variance comes from, is what their assumption of what Offgem will do is. But I mean, the big picture in reality is not going to change very much. It's going to stick roughly where it is. What's really interesting though is if we then look at the April predictions. Now the predictions for the next price cap coming in April, again, were very early in terms of wholesale rates because it's only that assessment period is only a couple of days into the three month period. But there's big assumptions that coming next April they're going to be quite big increases to those policy costs.
6:57So the average prediction for April is up 5 % and then down in July. If you want this in numbers, I'm going to use the typical use number that I hate, but it just is a way to illustrate the scales of magnitude we're talking. So for someone who is currently paying£1 ,755 a year, the average prediction is from the 1st of January, you'll be paying£1 ,748 a year. But none of these are actually per year. and then from the 1st of April it'll be 1 ,833 a year and then it'll go down to 1 ,814 a year. So basically April and July are predicted to be substantially above where they are now. And the reason I say it's not a year is that's what you would pay if you were paying over a year but these things only last three months.
7:42So if we actually look at the mass of if it is half a percent on the typical use figure that's£7 a year cheaper but this is only for a quarter of the year though it's a heavy use quarter of a year So this may be effectively a two or three pound reduction in your bills over that three months, which is why I'm effectively saying it's no change. The big message from that, though, is prices are not dropping if you stay on the price cap. And the cheapest fix is 10 percent cheaper than the price cap right now. So if those predictions are right, it is an absolute no brainer to get yourself onto a fixed tariff.
8:14And the price cap is still a pants cap. OK, got it. So, Andy wants to know, is it worth fixing, especially for April when it shoots up, as you've just said? But presumably the fix reflects. Whoever's setting the fixes is also aware that they're likely to go up in April. No. That's a very common misunderstanding of the situation, so I'm quite glad you did it, Rob. I'm not having a go. No, please do. That's what I'm here for. We have to look at this. the price cap is set based on a time lag. So the wholesale rates that matter for the current price cap is September, October and November's prices, effectively, roughly.
9:00It's the average of the prices over September, October and November. That is what will dictate what is going to happen on the 1st of January. What happens on the 1st of April is dictated by December, January and February's prices. So that time lag is very important. The rate at which fixes are set generally change by the week based on the wholesale price at that moment. So I do not know what fixes will be in April. I can only tell you what fixes are now. And so what you tend to have is you tend to have a real disparity between the price cap. If you have a moment where the wholesale rate's gone down, fixes can be offered more cheaply.
9:41But the price cap could still be rising because it's gone down from when it was higher in the past. So the two are completely delinked. So you ask me, the questioner is asking, is it worth fixing now thinking about April? Well, it's worth fixing now thinking about now. In fact, the reason this is really interesting, of course, I need to say these are only predictions. We don't know what off gem is going to do on Friday, but it's going to be something close to this. I mean, I would be gobsmacked if it wasn't between no change and down 2%. I'd be really gobsmacked. It could happen, but I'd be really gobsmacked.
10:11So let's just look at what we know. We know the price will stay as it is until the end of this year. So that's about, what, five weeks? We know that the price is going to stay roughly what it is until the end of March. So that's four and a half months and the highest used period of the year, which is really important. We then think that unless something changes, and there could be a budget change. I'll talk about that in a moment. Unless something changes, it's going to go up in April and up in July. So we have a pretty good idea. Even if I don't forget it's going up, we have a pretty good idea.
10:44Prices are staying where they are right now for the next nine months, including the high use period, which is over winter. And the cheapest fixes are 10 % cheaper than the price cap. And you can lock in and get that guaranteed rate. So on the very strong basis of probability, there are no guarantees because there is some crystal ball gazing. Fixing now is going to save you immediately. It's almost certainly going to save you until the end of March, but we'll know that for sure on Friday. so you might want to wait a few days. And it's very likely going to save you through April and through the July price cap.
11:15And then the next October, it starts to get a little bit crystal ball-gazy, but that's only a couple of months left. So it's an absolute no-brainer to fix. There are some other options. There's some other clever tariffs out there for people on EVs or people who want time of use tariffs. But the sort of simple solution is to fix. If I mention the budget, because there's a lot of talk in the budget about the Chancellor. Well, the talk is about the Chancellor cutting VAT. I don't think that's what they're going to do. I think they are going to reduce energy bills. I think they will either do it via the standing rate or maybe cutting some of the renewable stuff that's on there.
11:46I think it will be done by a different mechanism than VAT, in fact. What I have said is if they do do those things, they must make sure it applies to all tariffs, not just the price gap. It should apply to fixes as well. OK. Jen says, my price fixed tariff ends in early Jan. Would you stick or shift before Friday or do I like to get better nearer of the time? Current quotes are between 15 % and 25 % more than I am paying. The most important thing you need to remember is you can't be charged exit penalties on a fix in the last 49 days. So work out when is 49 days from the end of your fix period.
12:20And from that moment, you're free to do a comparison. If you do a comparison and it is cheaper than your current tariff, which you're indicating to me it isn't, then you may as well shift straight away because you may as well pay less straight away. If you're going to have to pay 20 % more to fix, and we're talking over the high use period, and again you'd pay 30 % more in that case if you went on the price cap. So a fix is still cheaper than what you could get even though it's more expensive than you've got right now. Then I think the risk of fixes going up very substantially by the end of July is relatively slim.
12:50I would probably stick with the devil that you know and stay on the cheapest price as long as you can and only move to your new fix a couple of days before the existing fix ends because it only takes five or six days to switch over. Brent from Sheffield asked the question I'd ask if I was sitting at home, Does anyone else get the feeling that this whole energy pricing system has been made far too complex by people on purpose? There's simply no need for this level of complexity or bills which you need a degree to read. I mean, I hope you don't need a degree to read bills. And look, the honest answer is you get yourself on a comparison site and a good comparison site will tell you what's likely to come and how much you can save.
13:25And that's a simple thing. Maybe it's my fault because I'd like to make sure people really understand what's happening. I could. I could. I mean, if we start this again, what's happening with energy prices? Oh, energy prices are going to be about the same, but you can save 10 % by getting a fixed tariff that keeps your price still for the next year, and that looks like it's going to save you money. I mean, I could have just done that. And to be honest, that's what you tend to get in most other places. But my whole thing is I want to educate you of understanding why I'm saying what I'm saying. Now, the price cap, I mean, I was not in favour of the price cap when it came in, and I was very much not in favour of them doing a three-monthly move system.
13:58They used to be six-monthly, so that we have to have this every three months. I mean, there is one advantage that it becomes a clarion call when prices are moving that people check and switch and change. The system, I mean, the whole standing charge unit rate interaction, yes. I mean, many companies would like us to get rid of the standing charge. That's regulator enforced on the price cap. Because ultimately, if we could just say, here's the unit rate, here is what you pay for each unit of gas and electricity you use. Well, that would actually be quite simple. You wouldn't have to start doing comparisons and things like that.
14:27Although we're moving to time of use tariffs. So I don't think, I genuinely don't think it's deliberately to confuse people. I think there's a policy element to try and make it fairer, but that adds a level of complexity. And the big problem is that the price cap moves, right? So you don't have consistency. So what we can't do, which we say, here's what you're going to pay for the next year, compare it to a different deal, because nobody knows what you're going to pay for the next year because the price cap moves every three months. And that frequency of moving is what adds to the complexity of the system.
14:58Well, that was fun. It was fun. Should we move on to student loans? Yes. So 1.1 million people overpaid on their student loans in the 24-25 tax year. You've had loads of questions in about this. Derren Rhodes, how do you know you've overpaid and when can you claim? So let's just go back to basics. So this is for people who have left university and started repaying their student loan. You're generally going to be in your 20s, 30s and 40s, but you could be older if you were a mature student. The new stats, and I've done this before, so lots of successes I suspect will come in, because I do this as an annual piece of housekeeping for me that I do for people, are 1.1 million people.
15:41But from information requests that we've put in in past years on the student loan company, there were at least 4 million people overpaid before that, and there is no deadline to back claiming. Now, there are four different reasons you may have overpaid. I'm going to talk you through each one in turn. But by far the biggest is reason one, which just in 2425 alone was 1 ,070 ,000 people overpaid due to reason one. So I'm going to take this slow because this is this is the one that counts. So this is it, Adrian. Let me do the concept first before I do the detail. you only have to repay your student loan if you earn over the annual threshold within the tax year so there's an annual threshold but your student loan payments are taken through PAYE based on what you earn each month so if you have uncertain income at the best example and I'll go through it in more detail in a minute but just so people get the concept let's say you weren't working for three months of the year, and then you got a job for the remaining nine months of the year, which pro rata was above the annual threshold, you would be earning enough each month to repay your student loan, but your total earnings in the tax year would not be over the annual threshold, so you should not have repaid the student loan.
17:05And that is the biggest reason. Now, the complexity is your annual threshold depends on which plan of student loan you are on. There are five plans. I won't talk about the fifth one because that's only for current students and everybody on plan five is not yet repaying. So it's not relevant for this case. This is going to be a bit boring, but it's so important I need to do it. So you need to listen to which plan you are on. And then I'm going to talk to them in the name. I'm going to call them plan one, plan two, plan three, plan four after that. Plan one is for people who went to university and started between 1998 and 2011 and are from, not where you studied, are from England and Wales.
17:48It is for Northern Irish postgraduates from 1998 onwards as well. And the plan one threshold is you pay on earnings above£26 ,065 a year. Plan two, this is the big one, so I'm going to use this as my example throughout. This is the one that most people are on. It's for those who started from England between 2012 and 2022 and all Welsh starters from 2012 onwards. You repay 9 % of everything you earn above£28 ,470 a year. Plan three is England and Welsh postgraduates. you repay above£21 ,000. And plan four is everybody from Scotland who has started university anywhere in the UK from 1998 onwards, and you repay above£32 ,745.
18:43You with me? So let me do an example now based on plan two. You don't work for three months of the year. you then get a job that pays you for ease of maths£36 ,000. So you earn£3 ,000 a month for the remaining years. £3 ,000 is about, the monthly threshold is£2 ,372. So it's about£600 above the monthly threshold. So you pay 9 % of£600. You're paying about£55 a month. You get to the end of the year because you only work for nine months. You earn£27 ,000. The annual threshold is£28 ,470. You earn less than the annual threshold. You should not have repaid your student loan. But taken from your payroll was£508 of student loan repayments.
19:37You are entitled to the entire£508 back. Make sense? Yes. The way that you get that money back. So who's it coming for? Anyone who's got, who only worked part year, it's come for anyone on commission or with variable income who had some big months, some small months and didn't earn over the annual amount. This is the easy one to get back. You either go through the app at the Student Loans Company or you use Student Loans Company refund request form at gov.uk and you can do this for every year except the current tax year because that's not finished yet. You can do it for every prior tax year. What is the do nothing option on this and the other ones?
20:13would you ever see the money again? What's that? If you just didn't do anything, would they sort it out in the end? No. No. It's incredible. No, well, it isn't. And I was going to come to this later. Right, fine. But let's do it now because it makes sense. And this applies to all the other reasons I'm going to do, which is why I was going to do it later. The issue here is you have overpaid your student loan. Now, if we were talking about a normal loan, I would, of course, be encouraging you to overpay because the quicker you repay a normal loan, the less amount of interest you repay in total, the less your total cost.
20:50The same is not always true on student loans, but it is sometimes true on student loans. So on plan two, that's the big one. Remember England, England starters between 2012 and 2022. Only one in three are predicted to pay their loan in full before it wipes after 30 years due to the size of the loan and the fact that they have above inflation interest. So if you've overpaid by£1 ,000, right, and you take that £1 ,000 back now, if you were in that two-thirds who won't repay in full in the 30 years, the fact you've taken£1 ,000 back does not reduce what you will repay in future. You'll still repay the same in future.
21:33So it's better in your pocket. If, however, you were a high earner or you're on one of the other plans where more people are likely to repay in full because the interest rate is lower and the original borrowing is lower because tuition fees in Scotland, you don't repay them, you only repay the maintenance loan, then the overpayments can be good because they reduce your interest. So that's why it's not an automatic default payback. Although I would still say for all the other plans except plan two, the interest rate is set at the rate of inflation, which is currently for this year 3.2%. That is cheaper than most commercial debt out there.
22:08It's certainly cheaper than most mortgages and it's got far better terms. So even in those circumstances, even if I was likely to clear the loan in full over that time period, I would probably take my money out now if I had other debts to reduce my other debts because they're priority over the student loan. So that's the reason why. Does that make sense? That does make sense. Mind you, I can hear Brent from Sheffield now saying, does this have to be so complicated, just like he said about bills? But look... This is definitely way too complicated. It's something I've campaigned on for years. But this is how it works.
22:40OK, we've had some successful claimants. If you like, Stephen Major did it on a whim. They're refunding£250. Joel did it very early on, requested it through Twitter. They told me how much I was owed, just£400 or so. It was sent to me a week later, very easy. I think it was because I worked part-time and got some bonuses some years which put me into the bracket that month. Tezza, retired halfway through the tax year and my total yearly income didn't meet my payment threshold. Went online, claimed back by payments in my bank account within days. I've had masses of successes on this over the years, honestly.
23:11I mean, some have been in the thousands. I think 3 ,000 is my biggest. I mean, this can be really substantial money for some. And Ethan Baker says he's claimed twice, once because I started taking money before the April after my graduation and didn't earn enough anyway. Second time, I did earn over the threshold. I worked out I've been charged 13%, not 9%. This is where I learned that it's worked out monthly, not annually. So, no refund. Okay, so that last is very interesting. And that catches many people out. You heard my clear rule of reason one. If you earn under the annual threshold, but paid disproportionate months, you can reclaim.
23:51But that does not work if you earn over the annual threshold. I will give you an example to try and explain what I'm talking about. So let's again go on to plan two, which is£28 ,470 a year. Imagine someone who earns in a typical month£2 ,000, but they get a£5 ,000 bonus in December. So that means their total earnings now are£29 ,000, which is about£500 above the annual threshold. So you would think they repay 9 % of 500 quid, which is what, about£45? You'd think that would be their total earnings. But no, because if you earn over the annual threshold, then you pay by the month. So if you're earning£2 ,000 in all the months except for December, you don't pay any student loan repayment in all of those months.
24:48But in December, your total earning is£7 ,000. £7 ,000 is well above the£2 ,370 monthly threshold. So you're going to be repaying on£4 ,600 worth of income. 9 % of£4 ,600. Well, we're getting on for about£400 there. So in December, you'll have£400 taken from the payroll. And because you're over the annual threshold, even though on the annual basis you should be paying far less, it still counts as the month and you can't reclaim it. So you will still have to pay based on the monthly amount. Did you understand that? Yes. So by the year, you're only£500 above the threshold. It should be£45. quid but because you got it all in one month you're actually going to have to pay 450 quid back and you can't claim that difference back which many people find quite unfair and frustrating but those are the rules um this is what tommy said here's the issue martin let's say you work and get paid weekly one week you earn 2k they take a chunk the rest of the year you earn nothing you can't get that chunk back until around august the following year one time i earned less than minimum wage but paid one and a half thousand that is an unfairness in the system yes as i said earlier you cannot claim back the current year until the current tax year is over because they don't know your total earnings in the current year and that is the way that it works and i can absolutely understand your frustration unfortunately i don't have a way to fix it shall i move on to my next reason yeah let's go on to and i'm going to do these ones quicker because they're far fewer people the first one is that you're on the wrong student loan repayment plan if your employer doesn't know which plan you're on, it must assume you're on plan one, which is where you repay above £26 ,065 a year.
26:33But the enormous number of people are on plan two or plan four, where the threshold is higher, so you shouldn't be repaying as much. If that happens to you, then you're going to have to call student loan company for a refund, but also talk to your firm's payroll and say, no, I'm not on plan one, I'm on plan two, and you should be taking it above the plan. Is there an easy way of finding out which plan you're on? They are absolutely strict. You know, if you were in England, you started university and you're from England between 2012 and 2022 or Wales from 2012 onwards, you're on plan two. In Scotland, if you have been to, if you're from Scotland, you went to university at any time, it's the year you started from 1998 onwards, you're on plan four.
Read the full transcript
27:12Let me go to reason number three. I've got a question from Nicola Cassell. Graduated in 98, started voluntarily paying back student loan two months later when started new employment. Is the reclaim scenario applicable for me? That was my warning for a key word. Voluntarily. If you choose to overpay your student loan, you cannot change your mind. Once you do it, it's a done deal. It's one of the reasons I always tell people to be very cautious about overpaying their student loan, because if something changes later when you wouldn't be repaying, you can't get it back. These are about non-deliberate overpayments.
27:51overpayments. Well, it's counterintuitive that, isn't it? When you think you're doing the right thing, the prudent thing. I've spent 10 years trying to communicate the dangers of it to people because while it seems like exactly the sensible thing, you know, you have to change your brain to understand how student loans work in a practical financial way. Okay. Reason three. You started repaying the loan too early. Dead simple. 36, 37 ,000 people in the tax year 24, 25. So here's the rule. When you leave university, whether you graduate or you leave university, because some don't complete their courses, you do not have to start repaying your student loan until the April after leaving the course, until the start of the next tax year.
28:28So let's put this really plainly. If you do traditional graduation in July, you will not start repaying until the following April, nine months later. But if your employer has the wrong info about when you graduated, they can start taking payments too early. again to reclaim call the student loan company on this one the only one that you can do it easily for is the first one where you can just simply go onto the app and sort it through call the student loans company but it's quite common that people start repaying too soon and you don't need to repay okay um says he said i've just done one but feel like they've only refunded my overpayment for the last year not previous years can i go back and ask them to check you absolutely you have a right to go back as long as you like or go and do the checks yourself through the app, make sure that it's right and that you've got the material you're sorted on and you can ask them to refund previous years too.
29:17Absolutely, yes. Have we done Reason 4? No, I'll do Reason 4. You'll probably get most complaints about this one because this is one people realise is happening. This is when money is deducted after you've fully repaid your loan. 60 ,000 people in 24-25. So the loan is wiped after 30 years. I say that slightly because it's not 30 years. It depends on the plan and when you started and there's even more variance on 30 years. But let's say after a set period, often 30 years, the loan is wiped. It depends on the plan. But PAYE takes time to catch up because they're not notified by the student loan company.
29:49If that happens to you and you keep paying too long, this is the one where you are automatically repaid. So you don't have to reclaim. But a tip for you, if you're in the last couple of years, or it looks like you're in the last couple of years of repaying your loan, then you can go to the student loan company and you can request to repay by direct debit rather than through the payroll. And that way, the moment you've repaid, no more money will be taken. OK. Emily Hancock's received a letter earlier this year from the student loans company telling her that she'd overpaid and received a refund.
30:23Does this mean I don't need to check as I've done it already? I mean, I don't know what the refund is for. I don't know what reason it was for. I would always, because I'm that type of person, do the checks myself as well. But possibly it will be a spurious waste of your time, but personally I would prefer to know. OK. Michelle, my son lives in Australia, only works part of the year. The fund is travelling the rest of the time. He informs student finance when he moved abroad and tells them each time he works. He doesn't earn anywhere near the British threshold when he works, but each time he works they send him a letter with an amount to pay every month while he is working.
30:57Is this because he's abroad or have they billed him incorrectly?
31:04So, I'm just trying to work through this. If I understand correctly, he's in Australia, he has irregular work. Yes. Now, the first thing people always say, do you need to pay your student loan if you go abroad? Yes. You have a contractual relationship, you have to pay your student loan, but the thresholds are different. So not just what plan you're on, but which country has a different threshold. But how do they... So the threshold is based on the cost of living in that country. But how do they know that you've been paid in Australia? OK, can I come back to that? I'm happy to answer it. So, in Australia, because it's quite a high cost of living country, the threshold might even be higher in equivalent Australian dollars for earnings than it is here.
31:43I don't know. I would guess it is. If you went to a very poor country where the cost of living is lower, then you actually have to repay on much lower level of income. That's how it works. But if he has, you're saying to me he's got irregular income. So I think he may be a reason one issue because they met. I'm guessing here because this is overseas. It gets quite complicated because, remember, you have to pay by the month. So they may be trying to take money based on his monthly earnings, just like happens here, even though he is below the annual threshold. So he would have to reclaim it. I would ask them.
32:18I would simply say this. Why are you asking us when we're below the annual threshold? It may be because they have to ask you for the money by the month, which takes us into your question, Adrian. The real issue is how do you enforce it? Well, first of all, I mean, the argument is you have a contractual relationship with the UK state to repay this money. And therefore, you should notify them of their earnings and they set up methods how to pay. But absolutely right. In practical term, there are many people who have studied in this country and go abroad and do not repay their student loans. The real issue is if you come back to the UK.
32:50If you come back to the UK and you have not repaid when you were abroad, when you should have repaid abroad, then expect for them to prosecute you over it. OK, but how do they know you've been working? Because there's some reciprocal arrangement. In some countries, there are reciprocal arrangements. In some countries, they aren't. They try to tighten it up within the European Union. There are a whole variety of different methods out there. OK. It's something I don't understand. The students loan company as a whole. Yeah. What happens at the end of the day when a certain, you know, Who knows how much of the loan isn't repaid to them?
33:24OK, so we're going to get into sort of philosophical terms now, because what people do is they think of a loan and they think it's a debt. And they think, therefore, if it isn't repaid, it's losing money. Now, the first thing we need to go back to is I would rename this a graduate contribution system. What this system works and the equivalent systems in other countries are called graduate contribution systems. when you go to university, you have to contribute in proportion to your earnings afterwards. Now, the first thing to remember when you start to see the fallacy, when we talk about the amount that is repaid, is that is purely a function of interest.
33:59So let me give you an example. If we have the student loan as it now and every student went to university and the interest rate was set at 0%, would more or less people than now repay with a lower interest rate before the loan wiped? More. More, because there's less interest, so they'd repay in full. Now, let's imagine the interest rate was set at 100 % a year. I mean, ludicrous. Would more or less people repay? Now. Is this the mastermind? No, no, no, don't worry. You're doing very well. You understand, and hopefully people at home understand. Now let me ask you a question. If we set the interest rate to 0%, would the state gain more or less money than it does right now?
34:41More. No, less. It's not charging interest. Oh, that cost, yeah. And people are repaying more quickly. If we set the interest rate to 100%, would the state gain more or less money than it does right now? Or less, because... More, it's charging 100%. But nobody's going to put... It's charging 100 % interest. Basically, it means everyone will repay 9 % of their earnings above the threshold for 30 years. It'll never wipe. Or 40 years into the new system. It'll never wipe. Right. Charge the interest to 100%. So, if we reduce the interest to 0%, more people would repay in full, but the state would get less money.
35:11If we increase the interest to 100%, fewer people would repay in full, but the state would get more money. So this whole concept that there's this link between how much you repay of this nominal amount plus interest that you've borrowed, it isn't. It's a function of interest. Now, we go back to before we had student loans. The state paid the entire amount and nothing was claimed back. The student loan system was brought in so the state could reclaim some of the money from the people who were more financially successful. And over the years, what's happened is they've swung the pendulum more from the state contributing the most and the individual contributing some to the state contributing 50-50 and under the new Plan 5 loans the state's contributing about 20 % and the individual 80%.
35:51So what we're not doing is looking what is the cost of the lending? We're only looking at what is the nominal interest rate. Is the student loan company a company or a government run company? The student loan company is not a company. It's a government owned institution that manages student loan repayments. Some of the earlier loan books have been sold off to private companies. Not the collection of it, but the actual underlying debt, on the terms of the underlying debt. But I sort of go back again. When people say, all these people not repaying, who's going to repay? You can't think the concept that this is a real thing.
36:23It's just a function because the government chooses to set the interest rate to the government's interest rate. We could make more people would repay if you just cut the interest rate, but then the state would get less money. There's some good... You see why I say it's a philosophical conundrum? I do, yes. Tell us, what's the cheapest thing you've ever taken back to a store to complain about? Sophie took a value tin of beans that had been reduced because they were dented, but when I got back in the car and checked my receipt, I'd been charged full price. I went back in and got my refund. How much?
36:5213p. Well done. Lynne, I took a loaf of bread back once because it was completely hollow. Presumably a large bubble formed during cooking. I was a student and every penny counted. Brian, a KTEL record back in 1974 cost£1.99. The Outer Rim fell off. Ended up going to small claims with the help of a teacher from school as the retailer wouldn't refund. They didn't turn up to court, so I got rewarded. The refund plus cost. And Daniel's is my favourite. Love this. Go on. When the handle broke on my 25p bag for life. Quite right. It's nice. It was. I mean, they couldn't argue that, could they? No, no.
37:32Do the next one. I like that as well. Go on. OK. A Matalan carrier bag, says Jan Hooper, still in perfect condition, transported the clothes to my car, took bag back into the store. That's very interesting. Jan, you have no right to do that under the law. Anything you buy in store as opposed to online, unless it's faulty, you have no right of return. Jan, you could have gone back and the store could have legitimately, within its rights, depending on its published returns policy, said, no, Jan, this bag is in perfect condition. This bag is not faulty in any way. You have no right to return it. Matalan are coming for you, Jan.
38:03Or, Jan, whatever you paid for that carrier bag, you may have held the cost. Jan, you were lucky. Yes. You were lucky. Speaking of luck, play the theme tune.
38:18Hello, welcome to Martin's Money Mastermind, where I put a three-option multiple choice to Adrian. The current score is Adrian has got 13 right and 26 wrong, which means, Adrian, I have a new sting for you. Which means, Adrian, here you go. N-B-R-C. That's you, Adrian. No better than random chance. That's our new sting whenever you're in this position that you are now no better than random chance. You want to do that, tell us desperately, don't you? Go on. Sharon got a packet of crisps which just contained one large potato. I received a letter of apology and a box of 32 packets as a goodwill gesture.
39:00Brilliant, Sharon. Lovely. All right, let's get on with the mastermind. All right. So here you go. I'm walking around my house and I see a set of books lying around, mostly in pristine condition as no one has ever bothered to read them. There's one called The Good Drinker, How I Learned to Love Drinking Less, which is a sobering title. There's one called We Don't Know What We're Doing, which could have been written about this show. And finally, there's another one by the same author called The Curious Columns of Adrian Childs, which was disappointing as there was neither a Doric nor an Ionic in sight.
39:35Anyway, that's a little classical joke there. I was pleased with that one. Anyway, I decided to do some good and donate them to the local Lost Causes charity shop. It felt appropriate. The shopkeeper smiled with his crinkly eyes and said, It's funny, I've never seen a copy of any of those books that hasn't been pristine. Luckily... Oh, can you stop? How much more stick do you want to give it? Go on. Luckily, he accepts them anyway and asks me to sign up at that point to the retail gift aid scheme, which last time we talked about charity, you mentioned, so I know you know about it, so I'm giving you a question.
40:09Well, I've signed it. I wouldn't say I knew about it. Normal gift aid, as you know, allows a charity to claim back the basic rate tax someone has paid on a donation. But when you're giving a product like books, not cash, what is the claim based on? Is it A, the estimated price you, the donator, paid for the book? B, charities are expected to calculate a fair valuation and claim based on that? Or C, the eventual price the charity sells the book for? So is it the price you paid, the price they estimate they'll get, or the actual price they get only after sale? I think it's got to be after sale, so I'll go see.
40:50Final answer? Yeah. Play the Hallelujah. Hallelujah! Hallelujah! Does that mean I lose that random chance, Steve? You mean you're off random chance until you go back to it. You can now get too wrong before you go back. OK, so look, this is actually quite important to understand. The retail gift aid only kicks in when the charity actually sells your donated item, which means in the case of these books, there may never be any gift aid on the back of it. Now, in a way, you need to think that the charity is acting as your agent to sell the goods. And then when it does, it can claim gift aid of 25p per pound that you donated.
41:29And it will generally notify you at that point, which this is what people have to understand. The reason it will notify you at that point is you can only claim gift aid if you've actually paid that amount of tax. So if it's in future, it could even be in a future tax year and you hadn't paid tax that year. and someone claims gift aid on your behalf, you would actually have to pay that extra gift aid in terms of tax, which is why there's sort of a sloth in this system that when you give a product, you might have to wait for notification of what it earned and then recheck that you gave the gift aid and you could then opt out at that point of the gift aid that came through, if that makes sense.
42:04But you sparked that question by mentioning it when we talked about it, so I did a little bit of research on it. I thought that was quite interesting. And now the score is 14 right, 26 wrong, Adrian. Wow. Okay. Well, didn't you? I just want to get this one. Helen Meggett. Who loved this teller. I took back a giant whoopee cushion. It wouldn't work until I got to the shop. But the woman was using brute force with her hands. I got my five pounds back. So if you sat on it, it wouldn't whoopee. But the woman used brute force. I like that. Well, quite a serious one from Denise Roberts. My hubby bought 200 pounds of clothes a few years back and they offered him a paper carrier bag.
42:40On checking the receipt, I saw they charged him 5p, plastic single-use bag, We were still in the shopping centre, so I marched back to the shop and demanded either reimbursement of the 5p, or I wanted a full return and refund on the clothes. The charge wasn't meant to be applied to paper, reusable bags. The manager refused, but sarcastically got me five pence out of her handbag. If you need it that much, she said. So I took the 5p, stuck it in the charity pot, but she lost a repeat customer, and the shop eventually closed down. Let it go, Denise. Let it go. Let's go back to the one. OK, so that's the main pod done and I'm now with podcast producer Matt.
43:20Hello, Matt. Hello. Before, I know you've got energy questions and I think we've managed to get through all the student finance points. There is one final point I would like to make, though. When I'm talking about reclaiming your student loan, I'm talking for people who are still paying their loan off. If you have already paid your loan off in the last couple of months and you realise that you overpaid so you could get some money back, I would think quite carefully about that. Remember, when you reclaim, then the amount that you've overpaid, you get it in your pocket, but it goes back onto your student loan account.
43:52Well, clearly, if you have paid off your student loan, you're going to pay that anyway, and you're going to pay interest on it, and you're then going to have the hassle of suddenly having to reignite your student loan repayments. So for me, this is something that you should only be considering doing if you're in the midst of repaying student loans, not when you're at the very end of it. And I just wanted to make that clear because I'm not sure I made that completely clear. And again, just at that point, it goes back onto your loan account. So if you reclaim, you will see the amount you owe getting bigger.
44:23But as I explained with Adrian earlier, there are many people who won't clear what they owe in full before that student loan wipes. And therefore, even though your loan account is getting bigger, because what you repay is based solely on what you earn above the threshold and 9 % of that, and then it wipes after a set period, let's say 30 years, although it does depend, you won't repay any more because of the fact that you reclaim some. Some people will, and in that case, it's a different decision, but that's where we're going. Oh, it's complicated. I'll stop there, Matt. We're moving to a different subject, aren't we?
44:56Yes. Shall we do a couple more energy questions? Of course. What have you got for me? Get to them all. First one from Farrell. Looks like this could be a decent time to lock into a 12-plus month month fix? Am I right? Well, the plus is always the interesting question. Certainly 12 months or some of them go up to 15 months. That makes sense. What it is always more difficult for me to answer, because I'll just reiterate so that you remember, we're expecting to see the energy price cap hardly move when it's announced on Friday for the 1st of January price cap, but then it's expected to go up again in April.
45:26So we're expecting static or slightly increased prices over the next year. and the cheapest fixes at the moment are 10 % below the current cap. So based on all the predictions, it's very likely you will save substantially by getting a fix. What is more difficult to know is the longer you go out, the predictions available from the analysts only go up to a year. So once you start to go out beyond a year, we're in the mists of nobody knows. We don't know what energy policy will be. We don't know how things are going to move. We don't know what's going to happen to the wholesale markets. At the same time, if you fix longer, then prices tend to be higher.
46:06The longer fixes aren't as cheap as cheaper fixes in general. Occasionally, there's an outlier. And the lock-in penalties, the early exit penalties, if you want to change a bigger. Now, of course, that's more important in a longer fix, because on a short fix, you're probably going to keep it for the year. The price is pretty decent. And if you had to leave, 50 quid isn't too bad. But if you're paying a£200 early exit penalty to leave a longer fix because that fix no longer looks competitive, then that changes the maths, which is the reason why they put a bigger fix in, because they know that's more likely to happen on a long fix.
46:37So if I go back to Farrell's question, which I think was, is this a decent time to lock in a 12 plus month fix? It's certainly a decent time to fix. It's certainly a decent time to lock in a 12 or 15 months fix. But I always struggle to answer for a time period longer than that. Not because it isn't a decent time, just because I don't have any data to make that assumption on. Understood. How long is the longest fix you could get? Oh, I mean, we've seen in the past three or four years. I don't know what the longest on the market is at the moment. I'm sure there are some two year out there. I don't know if there are any three year at the moment.
47:13OK. Another question. Georgie, if the 5 % VAT is removed, as the budget has speculated, what chance is there that the cap goes up by 5 % by the energy companies to make more profit? None. So energy companies don't set the price cap. Two thirds of homes are on price cap tariffs. The price cap is set by the energy regulator, Ofgem. So, and it limits the amount that they can charge on their standard, their default tariffs, the tariffs that you're on if you've never switched, the tariffs that you're on if you're on a special tariff that comes to an end that you'll automatically be moved to. They're the do nothing tariffs.
47:46If you've done nothing, you're on the price cap, which is why two thirds of the country are on the price cap, and it's a pants cap and you should get off it. But that price is set by Ofgem. If we take the example that 5 % VAT is brought off, well, that would come straight off the price from the 1st of January, I would suspect. I don't know about the timings. That would be my guess. I think it is more likely we see a different mechanism for reducing energy bills. I'm expecting to see something. It could well be that they reduce a chunk off the standing charge, which is what I would like to see, because then everybody benefits by the same amount.
48:19or they reduce a chunk off some of the green charges on the unit rate that you pay. So you might reduce the unit rate by two or three pence by getting rid of some of the green charges, in which case it's not a flat amount that everybody gets. Higher users will gain more because you have a reduction in the unit rate. So I suspect if they do that, that would come in from either the 1st of January price cap or the 1st of April price cap, and the regulator would factor that into its prices. So if it is the 1st of January because the budget's after the price cap announcement because the budget's so late this year, they could always say, well, we're just changing that January price cap.
48:55That wouldn't be particularly difficult or onerous to do. Where it gets more interested is for the non-price regulated tariffs. So the fixes, the variable, the special tariffs that are outside the regulated price cap mechanism, the non-standard charges. Now, here, there is a chance that there is some profiteering and whatever the reduction that comes, if there is a reduction in the budget, is then they regain or recoup some of it. I wouldn't expect to see that at a large scale, though, because the market is effectively split. You have the do-nothing people who are on the price cap, you know, and you're on the price cap because you've not done anything either ever or when your special deal ended.
49:38And you have the active churning customers who are the ones who pick the other tariffs. And the active churning customers tend to be more price sensitive. So there's a more competitive market for those people. So I don't think that firms will be able to get away quite as much as profiteering and taking some of that gain back on those tariffs than they would have done on the price cap, but the price cap is regulated. So I'm less sceptical than you, Georgie, but you never know. Gavlar has tweeted. Gavlar, that's Governor Stacey. Gavlar. Gavlar. Pretty sure I'll be hitting pension age by the time we get this£300 off your energy bills implemented.
50:14Yeah, but Gavlar, what I don't know, right? He didn't talk like that, did he? Yeah, yeah, yeah. Gavin did. He'd rather do it like this. No, Gavin was from Essex. I'm doing the other way. Now, maybe Gavlar, but I don't know. I should just stop accents. I don't know why I didn't. What I don't know is how old you are. I mean, you might get hit pension age in six weeks' time, for all I know. But however old you are, I think it will be quite a long time, if ever, before we get the£300 of energy bills. The latest independent reports out there is the investment that we need in our infrastructure, both in our infrastructure generally to get it up to scratch but also if we're going to continue the government policy of renewables is going to add more to our bills than it's going to save us until at least the mid 2030s.
50:58So I think there is a real question over that£300 off your energy bills promise and we certainly haven't seen it delivered yet but that's getting a little bit political for me so I will leave it for others. But I don't, Gavlar, I don't think you're wrong. Don't think. I won't do it either. Final one from Mandy. She says the price cap should be scrapped. It's artificially keeping prices up. Energy firms go up to the limit, not down. They have a monopoly. Allow competition and prices will come down. Well, I said before I wasn't in favour of the price cap when it came in. And it's still, I call it a pants cap.
51:32But I actually disagree with your analysis, Mandy. I'm sorry. what the price cap was brought in to do was to be a backstop for those people who don't switch and it was to be a backstop that the people who don't switch many of those who are outside of the ability of being within the competitive market at least will not be ripped off now the relative prices of standard standard prices compared to other prices has come down because of the price cap. So, you know, your 93-year-old grandfather with onset dementia, who is not going to be going onto a comparison site and finding their cheapest prices, does get some protection from the price cap.
52:14The big problem with the price cap now is it was meant to just be a backstop for those people, but way too many people are on it, and we don't have a competitive market. And one of the reasons I objected to the price cap in the first place was not because I didn't think it would limit prices for those people. It's because I thought there should be a social tariff for the people who are vulnerable and unable to switch for themselves, which would be substantially cheaper than the price cap. And then I would leave the rest to the open market. Because what you need to encourage people to switch is big differentials.
52:45You need to have big price differences and bigger savings. And therefore, what we've done is we've interfered within the market. We've got rid of some level of competition. We've regulated some form of prices. We haven't really protected that well the most vulnerable in society and it is all a bit of a pig's ear. So I sort of agree with you but I wouldn't scrap the price cap without a form of social tariff and I have to be fair you're right that the price cap they all price to the maximum but if we didn't have a price cap based on what was happening before we had one they would most of the big monopoly old monopoly type providers would be pricing even higher than that on their standard charges, in my view.
53:23That's based from intuition. I'm having looked at it over the years. I haven't done a data find on it, but it's an opinion thing. Do you have any more for me? I don't. You're done. I'm done. OK, well, look, I think it's a really interesting show. Lots of different subjects in there. We'll be covering energy more because we'll know what that price cap announcement is this Friday, or maybe you're listening to the podcast after this Friday, in which case you know and I don't. And as for student finance, do me a favour. There are so many. It's over 1.1 million people who overpay just in the 24-25 tax year alone.
53:53So if you know someone in their 20s, 30s and 40s who is still paying off their student loan, why not suggest that they have a listen to this pod because it could be very lucrative for them. And that's it for this week. If you've enjoyed it, please do tell your friends you've been listening to the Martin Lewis podcast and why not subscribe and then your pockets will be pleased with you. We tend to put out a new episode every Thursday and now on Mondays too in the form of our Question Time podcast, where you can ask me absolutely anything and everything you want. If you've got a question for that, then just send it to martinlewispodcast at bbc.co.uk.
54:29And if you haven't enjoyed it, then ask yourself the question, turn the mirror on you. Why are you still listening after one hour if you haven't enjoyed it? You maybe need to look at your decision-making skills. They're not working that well. There is a knob, you know. You can turn it off.
54:48So I'm going to work for the world every day. I got a mouth. I got a feet. 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. You 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.
From the publisher
Martin goes through the four different reasons why many university leavers in their 20s, 30s and 40s may be able to get £100s or even £1000s of student loan money back. Plus, what’s likely to happen when the new energy price cap is announced this Friday, Martin goes over the now bigger protection for people’s savings, you tell us the cheapest item you’ve ever taken back to a store to complain about, and Martin’s Money Mastermind is all about retail gift aid.
If you want to ask Martin a question, you now can! His Question Time podcast lets you ask Martin absolutely anything and everything (within reason!) – so if you’ve always wanted to know his favourite song, what he does in his spare time, or have a very complicated question about your finances, email it to MartinLewisPodcast@bbc.co.uk.