Oligopolies– as my old school economics teacher used to say – are not good news for consumers. By controlling markets, they are able to dictate prices while keeping all but the most tenacious of new competitors at bay. Profits boom, shareholders smile and most customers grudgingly accept their lot.
Sadly, horrible oligopolies are now part and parcel of everyday financial life. They are prevalent in banking, energy supply, broadband and phones.
They have even leaked into the accountancy world, raising concerns over the diligence the big auditors now apply to the scrutiny of client businesses.
Money for old rope I would say – you could go on a world cruise for the amount a senior partner of an accountancy business is charged out at for a mere hour’s work.
Burning money: Switching deals could save you £300 per year
Yet it is the big energy suppliers which are currently under the spotlight for their bad oligopolistic ways.
British Gas has taken the fiercest stick in the wake of its decision to raise dual fuel (gas and electricity) bills by an average 5.5 per cent – equivalent to an annual increase of £60 and taking the average household bill to £1,161. Some 4.1 million customers are impacted and it follows in the wake of the supplier’s 7.3 per cent price increase last September.
Although British Gas’s move is partly in response to higher wholesale prices and government levies, it has quite rightly been lambasted for profiteering.
Even Energy Minister Claire Perry expressed ‘disappointment’ at the move and suggested customers should switch supplier.
Others described British Gas’s decision as unjustifiable and deeply cynical while one price comparison website said it was evidence of a broken market. And yes, we must not forget that Centrica, British Gas’s parent company, is desperate to maintain its reputation in the City by not cutting its dividend payments. Ever-rising standard variable tariffs are a sure fire way of boosting revenues.
Of course, oligopolies maintain their grip on markets by working in tandem. So it was no surprise that in the wake of British Gas’s move, EDF decided to announce a 2.7 per cent dual fuel price rise – as well as discriminate against cheque or cash payers by imposing on them additional charges.
The other big suppliers, bar E.On which increased its prices last month, will follow like lemmings.
The Government is hoping to introduce a price cap on standard variable tariffs this winter. Indeed, as this threat looms ever larger on the horizon, it is likely that British Gas et al will keep pushing prices up.
Why? First, to make as much profit from diehard stickers (non-switchers) as they can before the Government pulls up the drawbridge. And secondly, to persuade others to move on to other deals that will not be affected by the price cap.
For households still sitting on a standard variable energy tariff this weekend from one of the Big Six suppliers (British Gas, EDF, E.On, Npower, SSE and Scottish Power), may I suggest you switch soonest. The savings you can make are just too good to miss out on.
According to experts at price comparison website energyhelpline, annual savings of at least £300 can be made by getting shot of a standard variable tariff in favour of a fixed deal.
You may have to turn to a supplier that you have never heard of before – the likes of Avro Energy, Outfox the Market and Utility Point – and you will probably have to set up a direct debit. But it will be worth it. Money for old rope.
Ford Money pays 1.44% interest on its one-year fixed rate monthly income Isa account. The provider offers flexible accounts that allow withdrawals without affecting your annual tax-free allowance. It requires a minimum deposit of £500.
Aldermore pays a rate of 1.4% AER fixed on its one-year Isa account. Interest can be paid monthly (1.39%). Minimum deposit is £1,000, allows transfers in.
Wyelands Bank pays a top rate of 2.15% AER interest (2.13% paid monthly) on its two-year fixed rate bond. The minimum deposit is £5,000.
Nationwide pays a top rate of 1.4% AER variable interest on its Loyalty Single Access Isa Saver if you have been a customer for a year or more. If you make more than one withdrawal interest drops to 0.5%.
RCI Bank pays 1.3% AER variable interest on its easy access deal. Deposits in its Freedom Savings Account have no FSCS protection, but you are covered for up to €100,000 by the French equivalent (FGDR).
Naughty ICICI Bank. It is currently advertising HiSAVE Bonus Saver as offering an annual equivalent rate of interest of 1.35 per cent.
This AER figure is meant to show savers what they will earn if they leave their money in the account for the next year. But no one opening this account today will enjoy such a rate.
This is because the bonus part of the offering – 0.7 per cent – only lasts until the end of January next year. Thereafter, the rate becomes 0.65 per cent. So, if you had opened an account at the end of last month and ran with it for a year, you would receive 1.23 per cent, not 1.35 per cent. Open it today and you would get 1.21 per cent.
It is for this reason that rates scrutineer Savings Champion has excluded the account from the ‘Best rates for your savings’ table. A wise decision. Naughty ICICI Bank.
If you have been stuck with the same provider for some time, chances are you could shave hundreds off your energy bills without having to opt for a smart meter.
Millions of households are sat on their provider’s most expensive, out-of-contract deals. But switching to a better deal can instantly save you money.
According to This is Money and MailOnline’s expert partner service, energyhelpline, one in ten families could cut their annual dual fuel bill by £537 a year by ditching an switching.
You can do your own postcode comparison in minutes using the tool above – or here – to find the best price.
Alternatively you can sign up to our no-obligation Collective Energy Switch which uses people power to go straight to the suppliers themselves to negotiate an exclusive deal.