A budget for a balanced economy that lacks support for savers

The Emergency Budget this week did what many expected it to; cut deep and cut rapidly. The extent of the financial problem facing our nation is starting to be fully realised by the population.  Without a credible plan to tackle the deficit our credit rating will be at risk, our debt will spiral and as markets lose confidence in our ability to marshal our economy prudently, interest rates will escalate. Greece and the wider Eurozone crisis stand as a stark warning of the perils that could lie ahead.

So action is necessary. This premise, at least, has moved beyond debate. But for a Budget that promised fairness and to raise a balanced economy where “we save, we invest, we export”, there was markedly little in it that was fair to the savers of this country.

After scrapping government contributions to the Child Trust Funds, Mr Osborne has now cancelled Labour’s Saving Gateway scheme designed to help those on low incomes build up a small savings pot and announced plans to introduce reforms to reduce tax relief on pensions for higher earners. The only concessions have been to index link the ISA limit and a commitment to raise the age at which you must buy an annuity with your pension. With such low returns for annuities this is welcome, but does not tackle the fundamental problem which is those low returns for annuities.

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Exactly what was in the budget for savers?

The full report for the June 2010 budget was 112 pages. On page 35 there is a summary of the policies that affect Savings and Pensions.

It starts with this statement…

As part of its commitment to achieving a more balanced economy, the Government is committed to creating the conditions to support higher savings. For individuals and families the Government wishes to encourage financial responsibility, and saving for retirement, through well targeted and affordable support.

Five policy statements follow….

1. The Government has asked the Consumer Financial Education Body to develop a new annual family financial healthcheck. This will be introduced in spring 2011 as part of the national financial advice service. … Continue Reading

How old are you before you are dependent?

The current retirement ages are 60 for women and 65 for men. There are plans in the pipeline to change these, with the retirement age for women increasing to 65  by 2020 and for both men and women to 66 by 2026. Although the new government has committed to reviewing the date at which the increase to 66 takes place, guaranteeing it will not be earlier than 2016 for men and 2020 for women.

The Office of National Statistics (ONS) calculates a statistic based on the retirement age called the old age dependency ratio; this is the number of people old enough to be entitled to the state pension per thousand of the population.

The ONS reported that in 2008 there were 310 people of state pension age for every 1000 people in the population and this has remained relatively steady for the last 20 years.  Looking forward and taking into account the currently planned increases in state pension age they have estimated that by 2021 the will be 311 people of state pension age by 2021 and 343 by 2051.

This may not seem too bad, but the ONS also calculated what would happen if state pension age was to remain as it is. Then the ratio would grow to a whopping 376 by 2021 and a massive 495 by 2051!

A call to action

Confused.com very kindly invited us to tell their members why the  Save Our Savers action group is essential to protect the interests of savers, this is how we replied;

Is it time for savers to take a stand?

It is time for savers to fight back. There are over 24 million savers in the UK; our savings provide the working capital for the economy, yet time and again successive governments have removed the incentives to save, promoting a culture of borrowing and consumerism over that of saving and responsible spending. The prudent are now being punished for the excesses of the few. Save our Savers is the first organisation to bring savers together into a union to defend themselves.

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Welcome to Save Our Savers

We are the official blog of SaveOurSavers.co.uk, a new organisation dedicated to bringing the millions of UK savers together into an action-focused affinity group that will fight for real and lasting change in the way our money is treated.  With your input we can ensure that the powers that be recognise how important we are to the economy – especially now that the cost of welfare provision is increasingly moving away from government and onto the shoulders of individuals.

On these pages you’ll get regular news and updates on our own informed commentary on the situation facing savers and our savings. We also aim to provide a public forum for new thinking on all kinds of savings issues from leading members of the financial services industry, politicians, economists, independent financial bodies and perhaps even the odd celebrity or two.

But most importantly … … Continue Reading