If you are successful in your payment protection insurance (PPI) claim, and a significant majority of claimants are, then if it is the firm itself that has upheld your complaint, you will receive a explaining how much compensation the firm is prepared to offer you. If you have had to go to the Financial Ombudsman Service (FOS), then the FOS will inform you of the amount it has ordered your lender or broker to pay in redress.
Either way, the amount should be sufficient to put you back in the position you would have been in had you not purchased the insurance. Standard practice is to offer a ppi refund of the PPI premium plus interest paid on it, with interest calculated at 8%. Credit card PPI claims often involve payment of larger amounts, as here the borrowerís ability to make repayments on the card will have been affected by the need to also pay for PPI. An additional amount should be offered by the provider in these circumstances to cover the amount the card balance would have reduced by had you not been paying PPI.
How much can I expect my PPI Refund to be?
The average PPI refund is estimated as £2,750, but some customers have received much larger amounts, especially on PPI sold with credit cards.
If you have debt arrears with the lender paying the compensation, they can insist that your PPI compensation is used to clear or reduce this debt, but otherwise you are free to use the money as you wish. You are of course free to splash out on a special holiday or luxury items, but especially in the current economic climate, it may be wise to consider other uses for the money:
Possible uses for your PPI Refund
Emergency fund ñ financial advisers recommend you retain three months essential expenditure in an easy access account to cover household emergencies. However, many people find it difficult to save for emergencies, so why not use your PPI payout as an emergency fund?
Pay off other debts ñ reduce the balance and lower your repayments. Some debt management firms, like the award winning Debt Advisory Line, offer a full & final settlements service where they negotiate settlement with your creditors to clear your unsecured debts. When repaying a mortgage, ensure there are no early repayment charges - these are most likely to apply when the mortgage is on a fixed or discounted rate.
Open a savings account ñ your PPI payout can increase if you invest it. Research by the bank ING Direct found that the average savings balance rose by 18 per cent in the first quarter of 2012, and it believes that the amount of PPI compensation being received is a key factor here.
Make a pension contribution ñ the state pension only meets basic living expenses, so in order to truly enjoy retirement, you need to make additional provision. All personal pension plans accept lump sum contributions as well as monthly contributions. Tax relief is available on pension contributions, so for every 80p you contribute, the Government adds another 20p, and for higher rate tax payers the relief is greater
These are just some of things you may do and its important you do whatís suitable for you, taking advice wherever suitable.
Haven't got your PPI Refund yet?
As a specialist claims management company, PPI Claimback would love to help you reclaim any mis-sold PPI. We have a wealth of experience completing ppi refunds, so simply fill in the form on the right and weíll crack on and get your claim processed straight away.
All information presented in this article is accurate as of January 2013