A reader asked:
I’m worried about my first IVA annual review. How much detail will they go into? I’ve found the year tough with a few car problems. I switched gas and electric to try to save money but it hasn’t helped much.
This is one of the many IVA issues where I have to start by saying that there is no definitive answer for everyone. It depends on the terms of your IVA, your IVA firm, your own situation and on how much your situation has changed over the year.
If not much has changed
Unless your income has gone up or your expenses have changed a lot, the annual review is often pretty painless.
You will normally be asked for some bank statements (or, sometimes, direct access to your bank account), some payslips and any P60s/P45s. Some firms want you to complete a new Expenses form – you can use the one agreed at the start of your IVA or the previous year as the basis and then look at your recent bank statements to see how much has changed.
If the overall picture and the bigger items such as mortgage/rent, travel costs, utilities look much the same, not many lenders will go deeper. They don’t want to spend any more time on your annual review than they have to! You are very unlikely to be asked what you bought at John Lewis for £120 in September or challenged about £20 spent on bingo in May.
You have had extra income (or lower expenses)
Your income may have gone up because of a payrise, better job, bonus or overtime. Most IVAs are similar to the 2016 IVA protocol to cover this so what I am describing here follows those standard terms.
Increases in your pay will result in your future IVA monthly contributions being increased, unless your expenses have also increased, see below.
You should have reported overtime and bonuses to your IVA firm during the year if they exceeded 10% of your normal take-home pay. If you didn’t do this at the time, this will be looked at in the annual review and you may now owe some money for last year, typically 50% of the amount over the 10% you are allowed. If you had put that money aside, you can simply pay it. If not, your IVA term may be extended by some extra months to allow you to pay the extra.
If overall your expenses have gone down, this increases the amount of “surplus income” you have in the same way that a pay increase does.
This comes as an unpleasant surprise to some people who thought they just had to make the “agreed payments” for the five years of their IVA. It should have been explained to you before the IVA started – it probably was, but you may have thought it wasn’t important small print.
Your expenses have gone up
Although it may feel that IVA firm just wants to do the annual review to get extra money from you, increases in your expenses also need to be taken into account. It is to your advantage to make sure this is done!
Think about recent changes in particular. For example if your council tax or water rates have only just gone up, the annual total for last year may not be very different to the budget, but you now know that next year’s expenditure will be higher so this needs to be pointed out to your IVA firm.
If your income has gone up, increases in your expenses may mean that you don’t have to increase your IVA monthly payment.
When your income hasn’t increased but your expenses have, you may be starting to find it hard to manage. The annual review is a good point to talk to your IVA firm about this, before you hit a crisis and can’t make your monthly payment.
They have the discretion to reduce your payments by 15% from those originally set in your IVA. Larger reductions may be possible if your creditors agree. These reductions are more likely to be possible if you are paying £200 a month than if you are only paying £70, where there is little room to reduce the payments.
Dealing with the B team for Customer Service?
After being cherished and valued while you were in the process of signing up for an IVA, the annual IVA review process may feel very different. You get a curt email telling you to produce six pay slips and three bank statements and to fill in an Income & Expenditure form.
Even the most factory-like IVA company actually would rather your IVA succeded than failed, as it means less work and more fees for them. But many large IVA firms do not have a good reputation for customer communication. It’s hard to talk to anyone on the phone and emails sometimes seem to be ignored.
If this happens to you, don’t panic, it doesn’t mean your review is going to go badly.
But if you don’t agree with the proposed monthly payment at the end of the review, be prepared to keep restating your point. Start to do this in writing (email is fine) and insist on getting a reply if you think they are ignoring something important.