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The possible impact of the squeeze on your Scottish trust deed

6th April 2011

The BBC Panorama program has commissioned research into the impact of current economic conditions upon the public in the UK. This research casts a new light on the personal financial pressures being felt by different sections of society. In this article we look at the specific impact which might be felt by anyone already signed up to a Scottish trust deed.

The headline figures are stark. An average worker in the UK earned £20,149 at the start of 2011. If you take into account inflation you find this figure represents a 5% reduction in real terms since 2009, making us £1,000 worse off than we were. In fact, if we look even further back we can see real earnings are now running at levels below the 2004 average.

Inflation recently hit a new peak. The Consumer Price Index is running at 4.4%, whilst the Retail Price Index (including housing costs) is at 5.5%. Food, clothing and fuel are driving the increases. The threat of increased mortgage costs is clear and imminent.

Upon signing a Scottish trust deed you commit to paying a certain amount each month for a term which generally lasts three years. Real term reductions in income (due to wage stagnation and inflation) will inevitably make it harder over time to keep up with the trust deed payment. A greater percentage of income is required for essentials, thus reducing the spare income available to fund a trust deed.

A trust deed payment is often reviewed biannually. This should enable rising costs to be factored into the monthly payments. However, a reduction in the monthly payment risks an extension to the original term of the Scottish trust deed. Such a reduction may be necessary if income has not risen in line with costs if sufficient savings cannot be sought elsewhere.

The trust deed review should be conducted with the expenditure ‘trigger’ guidelines in mind. These guidelines set a range of ‘acceptable’ expenditure which creditors and debt solutions providers should use. Those producing the expenditure guidelines have recognised the drastic cost of inflation in operation and accordingly have fashioned a new set of guidelines which come into effect on April 1 2011.

The success of these guidelines relies upon provider firms ensuring they are factored into the reviews. Anecdotal evidence from our forum suggests such a practice is not consistently applied. Some individuals have disclosed that their trust deeds provider has, in the past, insisted on the removal of necessities, such as modest telephone usage, in an attempt to maintain monthly payments. This would appear to ignore the fact that the arrangement was set up to solve a financial problem rather than create fresh ones.

Any individual currently signed up to a trust deed and who is experiencing the general ‘squeeze’ being applied to millions of UK workers faces some tough choices ahead. Is it worth cutting the monthly Scottish trust deed payments at the risk of subsequently extending the term? Individuals facing such a decision must ensure their basic needs are covered and that at no stage will they need to source new forms of credit to get by. This could cause problems which greatly outweigh those created by simply extending the trust deed term by a couple of months.

If you are facing important decisions regarding your Scottish trust deed , look no further than Trust-Deed.co.uk for a reputable source of assistance and advice. Whether you call our helpline and speak to our team of experts or browse our forum and read those entries which apply, we provide you with the help you need.

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