Savings need to be on election agenda

Encouraging people to save should be further up the political agenda, according to F&C Asset Management.

The company points out that politicians of all parties need to be questioned over their plans in the run-up to the general election - set to announced today for May 5.

"The household savings ratio [has] fallen from around 9.9 per cent before the current Government took office to 5.9 per cent today," noted Jason Hollands of F&C.

"Many people are simply not making adequate financial provision for their retirement. As an ageing nation we are storing up massive problems for the future and therefore policy makers need to place this further up the agenda. The forthcoming election provides an opportunity to focus attention on this issue," he added.

The latest data from the Investment Management Association reveals a 59 per cent year-on-year drop in net sales of Individual Savings Accounts (ISAs) for the month of February, F&C notes, despite strong performance from stock markets over the year.

And F&C are not alone ion their concerns.

Invesco Perpetual found that three quarters of investors believe there is a "crisis of confidence" in long-term savings in the UK, and that Government action might be needed to rectify this problem.

"Investors have lost all faith in long term savings and it is up to the political parties to try and rectify this," said Rick White, marketing director at Invesco Perpetual, last month.

The Turner Commission's report into the UK pensions crisis uncovered a £57 billion a year shortfall in pension savings and predicted a 30 per cent decline in relative incomes for pensioners.

Additionally the Financial Services Authority has described the pensions savings gap as one of the major threats facing the UK economy.

"We see more evidence of a 'savings gap' - with consumers' expectations for retirement and their saving and borrowing behaviour being out of line," the FSA said in Financial Risk Outlook 2005, which details the risks that it sees facing the financial sector and its customers.

Invesco Perpetual found that a price matching scheme, where the Government matches contributions made by savers, found favour among 43 per cent of people.

Other options included an extension of ISA limits - backed by 21 per cent of savers - and tax incentives, which 27 per cent said would make them more likely to save. Just three per cent of savers said they would save more if more flexible pension options were available.

There are large political gains to be made from the right policy as well, Invesco found, with half of those people surveyed saying they would consider changing their party allegiance if they were offered completely tax free savings.

The Conservatives and the Labour Party both have savings schemes that seem to meet the requirements laid out above.

Under the Tory Lifetime Savings Accounts scheme, an individual's savings would be matched in cash by the Government - in a similar way to 'Buy One Get One Free' offers available from supermarkets.

Savers would have immediate access to their cash when needed, the Conservatives added.

For its part, the Labour Party is offering its Savings Gateway scheme. This is a proposal for a savings account providing a pound for pound Government-funded match for all money saved, up to a limit. This product is currently being piloted in a number of areas.