Financial advice industry calls for new govt to create a new savings culture in Britain

Written by Ray Clancy

Monday, 31 May 2010 11:00

The new coalition government in the UK needs to build a new savings culture in the country and it should start with school clubs, an industry discussion paper suggests.

A joint White Paper from the Association of Independent Financial Advisers (AIFA), and AEGON UK, the leading life assurance and pensions company, points out that 13 million people in the UK are saving inadequately or not saving at all, and the UK has the second lowest saving rate of all OECD countries.

Saving can bring financial independence and peace of mind to individuals and families, free up scarce resources for the Exchequer and bring benefits to the economy in terms of more capital for investment. An economy that saves more is better balanced and more resilient in the face of future economic shocks, it says.

The document outlines eight practical measures that ministers could implement quickly, using current technology, infrastructure and legislation.

It says saving could be made easy by introducing the facility for people to ask for ‘save back’ instead of ‘cash back’ and thus using existing infrastructure to allow people to save at almost any time and at any location.

A savings culture among school children could be built through introducing school savings clubs and more demanding financial education targets.

It also suggest creating savings networks within the workplace or other groups such as extended family, friends or those with a common savings goal to reinforce positive attitudes to saving and provide ‘weight watchers-style’ peer support and pressure to save.

Another possibility it to reform regulation to boost the availability of professional and impartial financial advice and information.

‘Given the current economic challenges, we believe it is vital the new Government acts decisively to restore a savings culture in the UK. Individually, and as a nation, we need to rediscover thrift and true prudence. While politicians of all parties agree that saving is a good thing, no one has set out exactly how they would encourage it,’ said Chris Cummings, director general, AIFA.

‘This White Paper therefore brings fresh thinking to the debate and sets out a policy approach based on how real people think and behave. We must ensure that people have the knowledge and confidence to save for their financial future. Otherwise, as a society, we will all pay a heavy price,’ he added.

Francis McGee, head of corporate affairs, AEGON, said that previous attempts to boost saving in Britain have focused on very conventional approaches like tax breaks and product regulation. ‘I don’t think these can work on their own. A savings culture is built on attitudes and behaviour. Understanding how people naturally think and interact with one another is the key to a new, inclusive, savings society,’ he explained.