Top Nav (alt)

For Intermediaries only. Not for public use.

“This is not a savings gap. It is a savings crisis.”

This is not a savings gap. It is a savings crisis

Mind the gap…

“This is not a savings gap. It is a savings crisis.”

Strident views in a report from the (small c) conservative accountants KPMG imploring the Government to address, with clarity and alacrity, “the cultural shift that’s led a nation of savers to become a nation of consumers”.

KPMG’s report The emerging savings crisis pulls no punches. At 3.8 per cent the savings ratio is its lowest in 53 years of measurement. Low investment returns are hurting annuities. Owner occupation is tumbling. Unfunded public sector pensions and the triple lock state pension are affordable long-term only with “Alice in Wonderland” accounting, say the accountants.

So what did the Chancellor do in the last Budget? Announced the new Lifetime ISA (LISA), an invention so complex that its design is not yet agreed. I concur with KPMG that LISA could be shunned by savers due to its complexity. It could also provoke more opting-out of the auto-enrolment pension model that is not yet fully bedded in.

The savings crisis

The savings crisis has been turned from a molehill into a mountain by seven years of the lowest Bank of England base rate for three centuries. Borrowers have won, savers have lost.

Given we are a mutual with five or six savers for every borrower, the majority of our members have had to pay for the mistakes that led to the Bank of England seeking to encourage spending in the economy via the barely-there base rate.

Competitive savings rates

We’ve done what we can – competitive rates for customers new and old, even better exclusive rates for loyal savers – but the market is fiercely downward. When in 2009 base rate was cut to 0.5 per cent we were paying 3.0 per cent for a one year fixed rate bond. Today we pay 1.35 per cent and that is one of the higher rates on offer from the high street banks and building societies. Too many products everywhere are now sub-one per cent.

KPMG asks the question: how do we get Britain to save, and particularly to save for retirement?

Whatever answers emanate from Whitehall must address making saving more attractive to more people and both more comprehensive and comprehensible. LISA is not answer enough.

Hinckley & Rugby Building Society chief executive Chris White.

, ,

Comments are closed.