The fee you receive from a successful PPI claim might be a bit confusing. In this article, Canary Claims explain the fees included in a PPI refund.
The clock is ticking for submitting PPI claims. The Financial Conduct Authority (FCA) deadline of 29th August is now less than four months away, and consumers are urged to claim as soon as possible. Those who have already made successful claims have received thousands of pounds in compensation. Many individuals also found multiple mis-sold PPI policies — resulting in an even greater payout.
But, knowing how much you’ll get from a PPI refund, plus interest, taxes, and paying a claims company can be confusing. Below, we break down each part of the sum you will receive if your claim is successful.
The FCA has recently revealed that in 2018, the average PPI claim amount was £2,004. This sum of money is not guaranteed, but with a deadline in place, it’s worth taking the time to find out if you could be due this much money, or maybe even more.
Remember, you can submit a PPI claim yourself directly to the bank or use a trustworthy, FCA-authorised company. All companies should operate on a no-win, no-fee basis, meaning you won’t pay unless the claim is successful. Please be aware that cancellation fees may apply after the 14-day cooling off period.
Breakdown of PPI Claims Fee
Here, we outline each part of your refund as well as additional information, such as paying taxes and fees for PPI claims companies.
PPI Policy Plus Interest
How much did you pay for a PPI policy? This sum of money may have been paid upfront or in monthly instalments. The cost of the policy will be refunded to you, plus any interest you paid. If you paid your PPI over several years or months, this interest could be significant and will also be returned to you.
This type of interest is applied when an individual or company is deprived of money that is rightfully theirs. The government decides how much statutory tax is and it’s currently at a rate of 8%. This means the policy amount plus interest will also add another 8% to your total refund amount. Be aware that before 1994, statutory interest was 15%. If your PPI policy was before this date, you will receive the higher rate of statutory interest.
Paying Tax on the Refund
Some of the banks may automatically take tax away from your refund. However, the personal savings allowance that was introduced in 2016 means most taxpayers can receive up to £1,000 interest on savings tax-free. If you qualify for this, you can reclaim the tax from your PPI refund.
If, however, the banks did not automatically take off the tax, you will need to calculate whether you need to pay to HMRC. Always seek further guidance from HMRC if you are unsure whether you need to pay tax.
If you are claiming PPI due to high levels of commission (also known as Plevin), the fee refunded will be slightly different.
The Plevin rule states that if over 50% of your PPI policy was a commission, you will be refunded on anything over that amount. It was common for banks to have 67% commission on policies, resulting in a 17% refund.
PPI Claims Management Company Fee
If you choose to use the services of a reputable PPI claims company to handle your case, a fee needs to be paid for their work. All claims companies must charge no more than 20% + VAT (24% total). At Canary Claims, we charge below this maximum amount, just 15% plus VAT (18% total).
If a claims company works on your behalf, you must pay them — as per a contract you signed. The claims company should send you an invoice with the amount due to pay once you have been refunded. Once this is paid, the remainder of the refund is yours.
PPI Refunds When in a Debt Management Plan
It is possible to claim while in a Debt Management Plan (DMP). However, it’s important to note that if you claim against one of the lenders in your DMP, the refund amount will automatically be offset against your debt and refunded to the lender — so you won’t receive the money.
If you receive a refund from one of the banks that is not in your DMP, you can choose to use the money to offset the debt or keep some of the refund money yourself.
When you receive a letter from the bank about your claim, it will send a breakdown of the refund. If you are unsure about any of these fees, you can ask the bank to explain it in further detail. It’s essential to make sure your refund amount is correct as you can’t claim again once refunded (unless it’s for a different policy).
Act now to make sure that you can submit your claim before the impending PPI deadline.
Canary Claims is the leading PPI claims management company. Based in London, we’re ready to start your case today. Claim PPI using our quick and easy online form.