The October deadlines that could hit your pay
It’s more than six months since the government, lenders and financial providers introduced special measures to help support customers struggling during the coronavirus crisis.
But Saturday 31 October is a key date as a number of schemes are due to end then.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, lists five schemes coming to an end that you need to know about and what you can do if you need further help.
Furlough – Coronavirus Job Retention Scheme
The furlough scheme initially offered 80% of wages (capped at £2,500 per month) before being wound down each month until it ends in October. Around one in 10 workers are still furloughed.
It will be replaced by the Job Support Scheme. Employees who work at least a third of their hours will receive full pay for those hours. For the time they aren’t working, a third of the rest of their wages will be paid by the employer and a third by the government.
For an employee working a third of their hours, employers will pay 55% of wages and the government 22%. This means an end to support for those who cannot return to work at all, and for those whose employers are not prepared to pay for more hours than people work.
In local lockdown areas, where businesses are forced to close by law, the government will pay two thirds of wages, and employers will pay national insurance and pension contributions.
End to free overdrafts
Banks won’t have to offer a £500 free overdraft. It will be subject to their usual charges – which can be 40% or more.
Mortgage payment holiday
People struggling because of the crisis have been able to defer mortgage payments. Initially this was for three months, but the regulator, the Financial Conduct Authority (FCA) agreed that anyone coming to the end of a first deferral and still struggling could take a second break. Interest would roll up throughout any mortgage holidays.
At the end of a second break, no more blanket deferrals were on offer, but those who were still unable to pay were encouraged to make individual arrangements with their mortgage company – although it will affect their credit rating. Payment deferrals can be requested any time before the deadline.
Help with other borrowing
Anyone struggling with loans, credit cards or most other debts could apply for a three-month payment freeze. At the end of the first freeze they could apply for a second. If they were still struggling at that point, they would need to come to separate arrangements with their lender – which would affect their credit score. Interest would continue to mount. You can apply to take a payment break any time up to the deadline.
For high-cost short-term loans, like payday loans, interest was also paused, but was limited to one month. It can also be taken any time up to 31 October.
End to free childcare
Update: 26 October 2020: The government confirmed that from Sunday 1 November, eligible working parents who receive support through the government’s new Job Support Scheme and extended Self-Employed Income Support Scheme (SEISS) will continue to receive their childcare entitlements. See YourMoney.com’s Parents working fewer hours still entitled to free childcare for more information.
The usual rules require parents to earn at least the equivalent of 16 hours at minimum wage a week to qualify for the 30 hours of free nursery care. During the crisis, if your working hours or pay fell because of the virus, you were able to continue to claim – as long as you still had a job. From 31 October, the old rules will apply again, so those whose work has not recovered will lose this free childcare.
Coles said: “If Halloween threatens to do serious harm to your finances, it’s worth doing what you can to protect yourself. If you’re worried about paying debts, you can apply for a deferral before the deadline. If you miss it, you can still speak to your lenders. The official coronavirus help may be coming to an end, but the FCA expects banks to work with people to try to find a sensible solution.
“If you are using your free overdraft, don’t just fall into paying through the nose for it. You should switch to a cheaper form of borrowing, and make a plan to pay it down as quickly as possible.
“If you’re worried about losing work, there is still hope. Vacancies are certainly much thinner on the ground, and competition is fierce, but employers are still recruiting, so it’s worth getting your CV up-to-date and signing up to job hunting websites – so you’ll be the first to hear about any opportunities.”