Cut your outgoings by more than £1,000 a year

Household finances are under increasing pressure but many people could offset rising food, fuel and energy bills and slash their monthly outgoings significantly by spending a few hours going through their financial products and switching to a better deal.

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Here at moneysupermarket.com, we decided it was time to practise what we preach so we took up the challenge to see how much we could save Tony and Nicky Agrippa, pictured with their two daughters, Chelsea, 14, and Tegan, 5.

Using the price comparison tools available on our website we found that they could save £1,100 a year if they switched to more competitive products.

The Agrippa family stand to save £1,100 a year by switching to better financial deals.

Tony, a 36-year old sales manager, and Nicky a 35-year old quality control manager, live in a four-bedroom semi near Chester. They are currently tied in to a five-year fixed rate mortgage so we couldn’t save them any money on that and they have no credit cards or loans, but there are savings to be had if they switched most of their other financial products.

Home insurance
The biggest saving the Agrippas could make is on their home insurance. Like many people they have most of their financial products with the bank they hold their current account with. In the Agrippa’s case this is Halifax.

They are currently paying £50 a month - £600 a year - for buildings and contents cover. However, they could cut this to £165.45 if they switched to Homequote Direct. This assumes a rebuild value of £180,000, £40,000 of contents cover and an excess of £200. The excess offered by Homequote Direct is actually £50 cheaper than the £250 they would have to pay if they made a claim on their Halifax policy.

Total annual saving: £434.55

Car insurance
Tony and Nicky have two cars – a Landrover Freelander and a Mazda 323. The Landrover is insured in Tony’s name and the Mazda in Nicky’s name, although they are named drivers on each other’s policy. They also both have nine years’ protected no claims discount.

They are both insured with Direct Line and currently pay £38.25 a month - £459 a year – in total. However, Tony’s premium will rise when he comes to renew because he has recently made a claim.

If they remained with Direct Line, their total annual premium would rise to £659.40, but they could bring this down to £454.51 if they reinsured with different companies. Swinton gave the best quote for Nicky at £178.81, while Ibuyeco, which is part of Budget group, came out cheapest for Tony at £275.50.

Total annual saving: £204.89

Mobile phone
Like millions of other mobile users, Nicky pays more than she needs to for her phone tariff. She is currently with O2 and pays £30 a month. Her monthly package includes 400 anytime call minutes and 500 text messages, but she never uses that amount. On average she sends around 200 texts a month and makes 150 minutes of calls. If Nicky switched to 3’s Mix & Match 500 tariff, she would pay just £18 a month and receive 500 minutes or texts, or any combination of the two. The minimum contract length on this deal is 18 months.

Tony has a company mobile so we couldn’t save him any money. However, he uses his phone a lot so a tariff offering a large number of inclusive calls and texts would be most suitable. Orange’s Dolphin 40 is great for heavy users. It costs £40 a month and includes 750 minutes of calls and unlimited text messages. Orange is also offering a free HP laptop to people who sign up to this deal – the minimum contract length is 18 months.

Total annual saving: £144.00

Broadband and home phone
The Agrippa’s currently pay £20.49 a month for phone and broadband – their line rental costs £10.50 a month, while the phone and broadband package costs £9.99. They are on Talktalk’s Talk 3 International package, which includes free calls at any time to local and national UK landlines and landlines in 36 countries including the United States, Australia, New Zealand, Spain and Germany. They also receive 8 megabit (Mb) broadband with a monthly download cap of 40 gigabytes (GB).

However, because they are out at work during the day and have calls included in their mobile packages, free day-time calls are not essential. They could cut their average monthly bill to £14.89 if they switched to Talktalk’s Talk 2 International call plan. This is the same as Talk 3 International, although free calls only apply at evenings and weekends. Moneysupermarket has an exclusive offer on this deal at the moment – the monthly cost is £3.89 for the first nine months, £2 a month cheaper than the standard monthly cost of £5.89. Tony and Nicky could switch over to Talk 2 International although they would have to sign up to an 18-month contract with Talktalk.

Total annual saving: £67.20

Gas and Electricity
Tony and Nicky pay Npower £80 a month by direct debit for gas and electricity. While this is a cheaper option than paying quarterly, they are on Npower’s standard tariff and could bring their annual cost down further if they opted for an online tariff.

By switching to Npower’s SOL 10 tariff they could reduce their annual bill from £960 to around £823, a saving of £137 a year. And if Tony and Nicky switch before April 1, they will also benefit from Moneysupermarket’s cashback offer.

Total annual saving: £167.00

Current account
The Agrippa’s earn just 0.1% interest on their Halifax current account. They deposit about £3,000 a month into the account. They do not have a savings account but Tony said an easy access account would be useful as his work bonuses are paid into their current account. Even though they don’t have any long term savings as such, they do save towards a family holiday every year.

Assuming an average current account balance of £200, Tony and Nicky could earn an extra £16.80 a year in interest if they transferred their current account to Alliance & Leicester’s Premier Direct account which pays 8.5% on balances up to £2,500. The high rate of interest applies until 30 April 2009 after which it switches to one percentage point below Bank rate (4.25% based on the current Bank rate of 5.25%).

Kaupthing Edge’s instant access account would be a good option for their savings. The interest rate is 6.5% on balances of £1,000 or more. There are no withdrawal restrictions and the rate is guaranteed to be at least 0.3 percentage points above Bank rate until February 2012. Over 12 months they would earn £65 gross interest on a balance of £1,000, compared with just £1 if the money was held in their Halifax current account.

Total annual saving: £84.00

Overall saving: £1,101.64

Many people never get around to switching providers because the financial benefit of switching individual products often seems quite small and therefore not worth that hassle. But as you can see, if you work through everything the savings soon mount up. You may find your annual outgoings can be cut by even more.

Remortgaging often offers the greatest savings. If you are not tied into your current mortgage deal or are about to come to the end of a fixed or discounted period, look to switch to a different provider. Most borrowers move on to their lender’s standard variable rate (SVR) when their introductory term ends. Someone with a £150,000 interest only mortgage, paying the typical SVR which is 7.25%, could save £2,052 a year if they remortgaged on to First Direct’s two-year fix at 4.75%.

Childcare vouchers are another thing many families overlook. This is a salary sacrifice scheme, backed by the government, offered by some employers. If you pay for childcare but do not currently claim vouchers, find out if your employer offers them – if it does, then it is definitely a benefit worth taking advantage of.

Under the scheme you swap part of your salary for vouchers worth up to £55 a week. These must then be put towards a government-registered child minder, nursery or nanny.

The money is paid before income tax and national insurance are deducted from your earnings. The vouchers are available per parent and not per child, but they represent a saving of £1,195 a year for higher-rate taxpayers and £962 a year for those in the basic-tax band, according to accountancy firm Grant Thornton.

Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.

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