How to calculate PPI claims for yourself

Consumerist

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If you've arrived from Google, our Reclaiming PPI guide may also help.

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There seemed to be a number of questions on this forum concerning the calculation of PPI reclaims so I thought this post might be of some use.

For more information from the FOS website see:
How does the ombudsman approach redress where a PPI policy has been mis-sold?

A claim for repayment of a mis-sold PPI has, primarily, two elements;

(1) all of the PPI premiums actually paid and
(2) the compensation for interest which could have been earned on those premiums

There may also be an element of compensation for "distress and inconvenience" if you are forced, by the actions of the financial institution, to refer the claim to the FOS.

(1) Reclaiming the PPI premium payments

This calculation is purely the sum of all PPI premiums you have actually paid; it doesn't matter when they were paid – the compensation for lost interest covers the time element.

So if, for example, you have paid 47 PPI premiums of £50.00

then your claim will simply be 47 x £50.00 = £2,350.00 plus interest.

(2) Compensation for interest lost on PPI premium payments

Compensation for lost interest depends on :-

(1) the amount of each PPI premium
(2) the number of months the financial institution has held each individual premium and
(3) the interest rate set by the FSA for the compensation – currently 8% pa simple.

The calculation for this compensation is best explained using examples

Compensation for interest lost on PPI premium payments ‒ Example 1

You have paid 27 PPI premiums of £47.65 at monthly intervals up to the present date
(to simplify the calculation, it will be assumed you last paid the premium exactly one month ago)

The total premiums paid = 27 x £47.65 = £1,286.55

The 8% per annum simple interest is equivalent to 2/3 of 1% per month.

Monthly compensation on each PPI premium = £47.65 x 2 / 300 = £0.31767 (i.e. about £0.32 per month)

The first PPI premium was paid 27 months ago,
the second PPI premium was paid 26 months ago,
the third PPI premium was paid 25 months ago,
and so on until
the last PPI premium was paid 1 month ago.

Total interest payable = £0.3176 x ( 1 + 2 + 3 . . . . + 25 + 26 + 27)

Adding all the numbers from 1 to 27 gives a total of 378 monthly-interest payments.

So the total interest due on the PPI premiums is £0.31767 x 378 = £120.08

Therefore, the total refund & compensation = £1,286.55 + £120.08 = £1,406.63

Compensation for interest lost on PPI premium payments ‒ Example 2

You have paid 27 PPI premiums of £47.65 at monthly intervals, the last premium was paid exactly 18 months ago.

The total premiums paid = 27 x £47.65 = £1,286.55

Monthly compensation on each PPI premium = £47.65 x 2 / 300 = £0.31767, as for Example 1.

The first PPI premium was paid 44 months ago. (= 18 + 27 –1), yes, subtract the one,
the second PPI premium was paid 43 months ago,
and so on until
the last PPI premium was paid 18 months ago.

Total interest payable = £0.3176 x ( 18 + 19 + 20 . . . . + 42 + 43 + 44)

Adding all the numbers from 18 to 44 gives a total of 837 monthly-interest payments.

So the total interest due on the PPI premiums is : £0.31767 x 837 = £265.89

Therefore, the total refund & compensation = £1,286.55 + £265.89 = £1,552.4

Compensation is payable, in theory anyway, up to the date of actual payment so you should count the time in months up to the date you are paid. This could be several months after the date of your claim.

Speeding up the addition

If you want to quickly add: ( 18 + 19 + 20 . . . . + 42 + 43 + 44)

If you add the first number and last number, 18 + 44 = 62
If you add the second number and second-from-last number, 19 + 43 = 62

You get the picture - each pair of numbers adds to 62

Since there are 27 numbers to be added, there must be 27 / 2 pairs.

So the total of all the numbers is 62 x 27 / 2 = 837

di3004

Thank you so much indeed.:T:beer:

n99

Hi

I'm new to all this and now this is an old post.
But google found it for me and so I read through it.

I've a question about example 2 when the PPI payments ended x months ago.

the example says:

"So the total interest due on the PPI premiums is :‒

(1) up to the date of the last premium paid = £0.31767 x 837 = £265.89, plus

(2) 18 months interest at 8% pa simple on £1,286.55 = £1,286.55 x 18 x 2 / 300 = £154.39"

Hasn't the interest for on the full amount of payments for 18 months already been included in calculation (1)?

in calculation (1) you have started at 18 months and progressed to (18 + 27 –1) months, rather than 1 month and progressing to 27?

sorry if I'm being dim

cheers

n99

Consumerist

n99 wrote: »

. . . Hasn't the interest for on the full amount of payments for 18 months already been included in calculation (1)? . . .

Quite right. I modified calculation (1) and forgot to take out part (2). Must be more careful in future!

I didn't realise that this post was still on the radar but I have amended the post to correct it. Thank you for your comment.

Given the time it takes to process claims, claimants were probably receiving even more than the calculation suggested so, hopefully, no disappointments.

Rhothgar

This is a really useful thread. Thank you for posting Consumerist.

I've just filed some PPI claims with a loan provider from 1989 so I've used your method and I cannot quite believe that I may be in for such a windfall.

I have no idea why they agreed to provide me with 4 loans as I was a student at the time. Maybe I had a guarantor, I cannot honestly recall.


On one loan, the premium loan was £595.76 and a total charge for credit was £274.96 according to the Credit Agreement.


I hope I've done right by calculating the interest on the total £870.72 figure and not the basic premium?

Anyway, as I understand it, interest before 1993 was set at 15%.

Despite this, I have used your calculation method and it gives me 16272 monthly premiums for an agreement which started in May 1989.

The monthly premium for the insurance was £18.14.

So by your reckoning, £18.14 * 2/300 = £0.12093333

This equates to £1967.83 plus the principal of £870.72 = £2838.55?

Am I dreaming?

So if 15% is applied for the full term, this would increase to £3689.68 plus the principal!!!!

As James Bond once said, "I MUST BE DREAMING!"

Bermonia

You are dreaming!

You have totally misinterpreted the calculations and all this is on the basis that you MAY be awarded an uphold.

Besides all that this is an ancient thread!

[Deleted User]

I'm certain the sudden bumping of some of these old threads is just a result of the school holidays rather than the approaching deadline....