Will progressive policies be fair to savers?

This coalition Government puts much store in talk about fairness and progressive policies. But how fair have they been to savers? Fairness isn’t about taking from those that have and giving it to the poor; things are a little more complex since Robin Hood was faced with a tyrannical Sheriff of Nottingham.  Fairness should be about ensuring that those who try to help themselves and provide for their own future are encouraged and rewarded or, at the very least, not being penalised for doing so.

The Government is responsible for taxation rules, it borrows, it regulates and it sets targets for inflation. It has all the tools at its disposal to make a fair and level playing field for savers. Whilst it is prepared to pay lip service to the need for people to save and has proposed to make it compulsory for everyone to contribute to a pension it has not committed to doing anything that will ensure that the people who have saved will be better off for doing so and won’t end up being penalised for it.The stock answer from the Government will certainly be that there is no money in the kitty. So for now, pensioners who reach their retirement after saving up a small pension will still find they are disproportionately worse off than their neighbour who hasn’t saved and therefore qualifying for additional support from the state. And pensioners who have saved more will continue to find that if they have put too much into a pension then their additional age related tax allowance is taken away.

The Government will still receive approximately £2.4 billion in basic rate tax alone from savings account interest this year, despite the fact the interest received is insufficient in mitigating the effects of inflation. Savers are being rewarded by being taxed on a loss.

Most savers simply want to put money aside, where they know it will be safe, they will receive a reliable and reasonable rate of return and will be protected from inflation.

This was demonstrated when NS&I were allowed to withdraw their inflation matching investments because of increased demand. An example of the Government supporting a move to the detriment of savers; of course the Government continues to raise billions of pounds by selling index-linked bonds to financial institutions. Would the cost of making these available in an easily accessible way to its own citizens outweigh the benefits?

The relationship between the consumers and the banks is also one that has been allowed to become too one-sided. Banks and building societies have long cottoned onto the fact that many savers fail to proactively manage their savings. They blatantly exploit this inertia and compound it by adding a complexity through bureaucracy, continually introducing new products, introductory rates and often poor communications. The end result is that take your eye off the ball and before you know it your savings end up in a backwater receiving little or next to no interest.

They have even been allowed to undermine the Government’s premier savings product, the ISA. Once ISAs offered good rates of return in relation to comparable normal savings accounts, now the rates are, more often than not, lower instead relying on the tax exemption, a time limited allowance and introductory rates to lure in savers.

Surely regulating the banks to ensure that savers are treated fairly is an affordable step after a banking crisis that has seen returns for savers plummet to all-time lows. Before the election, Cameron campaigned on a ticket to “turn Britain from a spend, spend, spend society to a save, save, save, society”. Now, more than ever, savers need him to deliver.

Jason Riddle is a co-founder of Save Our Savers

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