Savers lack of confidence in Government policy
The last decade has seen a massive growth in the level of personal debt and we are faced with a generation who have been encouraged to borrow first and save or rather pay back later. Neil and Margaret Bloomer, supporters of Save Our Savers, express their concern at how this was allowed to develop and call for a return of financial responsibility.
The situation will not be stable and sustainable until the correct balance is achieved between consumption, borrowing and saving. This was the established rule accepted by previous generations, both the general public and professionals.
At this time, however, we have no faith that the “powers to be” will deliver this and reward responsible people for being sacrificed over the last decade or so for the irresponsible (“Savers sacrificed for borrowers”). We feel let down and angry at this situation and suspect that many, many others share the same views as us and would support a focused and intense rally for a return to rewarding financial responsibility.
Our fears are as much for the precedent being set for future generations regarding prudent “whole of life” financial planning. We benefited from our own financial discipline and the management by our employers, the Government, banks and building societies of our financial requirements related to pensions, house purchase, savings and investments. The current apparent “free for all” and abandonment of common sense and sound principles related to saving and debt have led to the situation where we no longer trust the financial market to manage the financial future of this country with any degree of justice.
Promoting consumption over saving is building up problems for the future
The current eagerness is to promote consumption at the expense of saving. This is flawed in two major ways. Not only will it worsen the inevitable pension crisis which we feel will eventually prove to be far worse than the recent banking problems, but also, it is being promoted to the wrong section of the people in this country.
The older element of the population are currently being penalized for financial planning with low returns on savings to the benefit of many people with mortgages linked to base rate through no positive planning of their own. We know several families who obtained ‘tracker’ mortgages for large sums of money (up to 125% property value and/or up to 6/7 times unproven income) only because they were considered to be too risky for fixed rates at the time of rising interest rates. These people are now being encouraged to carry on consuming with the money “saved” on their mortgages as though the current situation is the future norm, whilst the very people who have shown responsibility in consumption are now being forced to cut back.
Even though we are financially comfortable, we are reigning in our spending because of our lack of belief that anyone has a plan to correct the imbalance and return to a situation where thrift is rewarded and the responsible once again can reap the reward of sound financial planning. This is potentially a real future problem as the growing population of older people have less to spend, and are more fearful to spend, thereby depressing future sustainable economic growth as the acceptable alternative to irresponsible consumption.
It is not just bad economics, it is ethically wrong
An example of the current imbalance is the pressure that reducing returns is putting on older people to spend their “nest egg”. When instead there should be support directed at the financially responsible to spend by rewarding their prudence, not by encouraging the irresponsible to boost their consumption even more.
Two statements sum up our feelings on the current situation; ‘spending money you do not have will always have to be paid back by someone’ and ‘the people who have sinned the most are suffering the least, and vice versa’.
Efforts should now be focused on pressing Central Government and associated responsible organisations to set out a timetable and strategy to return to a balanced economy.
Savers have only been stoical about the current imbalanced situation because they thought that the “light at the end of the tunnel” would have been seen by now, but their patience is being tested. Spending is related to confidence and only when there is a return to rewarding financial prudence and responsibility will savers again have the confidence to spend.