Helping savers save

This post is from my colleague Sara Lyons:

On Wednesday, I listened with anticipation the Chancellors Autumn Statement. George Osborne’s message was clear “today we back aspiration – the aspiration to save, to work and to own your own home”. At the heart of Osborne’s speech was about rewarding savers and helping people to save.

Speaking from experience, saving is not easy no matter what age. Whether it’s saving for a holiday, car, property or retirement, it all comes at a price. We live in a disposable society, where we are driven by ‘wanting’ rather than ‘needing’ something. For those people that are trying to save for a property or retirement, they are calling upon government and the financial service industry to help encourage savers to make the right choices.

It doesn’t really get any better. Due to huge jumps in life expectancy (which is still a great thing), the state pension age will start rising to 67 for both men and women in 2026-28. It is possible that the state pension age could hit 73 for today’s 33 year-olds and even later for those in their early 20s – someone like me. As we are living longer, we can’t rely on the state to provide the majority of our income in old age. We need to find alternate ways to save.

Auto-enrolment has seen employees of the UK’s biggest companies automatically entered into their workplace pension schemes and will eventually extend to all other employers over the next five years. It requires employers to enrol workers over the age of 22 and earning more than £8,105 into workplace pensions. Employers and staff have to make minimum contributions. We live in a spending society and young people in particular are not thinking enough about how they are going to be able to fund for their retirement; auto-enrolment is viewed as a solution.

It’s not just about saving for retirement, it’s also about saving for things like a property. As a young saver it doesn’t come easy and as a result you are having to constantly make compromises. Buying a flat or house doesn’t come cheap; first time buyers are struggling to secure a mortgage and to raise the large deposits demanded. The young are becoming more reliant on parents, inheritance and other means.

Prior to the Autumn Statement on Tuesday, it was announced by the ONS spending by UK households in 2013 has grown at its fastest rate since records began in 2001; the amount spent per household rose from £501 in 2012. Housing costs, such as rent and fuel, were top of the expenditure list. These are essentials and increases in household expenditure is not making it any easier to encourage individuals and families to save.

However, we have seen some radical changes over the past year that have helped savers. Yesterday’s Autumn Statement follows a Budget in March that was packed with announcements affecting savings and pensions where he pledged to champion “the makers, the doers and the savers” of Britain as he outlined  “the most far-reaching reform to the taxation of pensions since the regime was introduced in 1921″.

One of the most radical overhaul announced at yesterday’s Autumn Statement was the sweeping reform to Stamp Duty, discarding the “badly designed” slab tax, and delivering savings for 98 per cent of home buyers. This has been welcomed – Aurora Financial Solutions IFA Daren O’Brien said the changes are “ingenious” as they make it cheaper for those people at the lower end trying to get on the property market, and penalise the ones on the top. For someone who is looking at property it provides some glimpse of hope and enables the money saved on stamp duty to be invested for other means.

Other encouraging changes include people will be able to pass on their individual savings accounts (Isas) to their spouse when they die. Carol Knight, operations director at Tisa said “Today’s announcement allowing the transfer of Isa assets to spouses and civil partners on death provides a fairer outcome, especially for women in retirement, and is one we have long advocated. Combined with previously announced measures to allow people to pass on their pension tax-free, Mr Osborne said the government was committed to “delivering fairness for savers”. Again, another encouraging measure for savers.

Additionally, it was announced that families will be better off as Air Passenger Duty for children under 12 will be scrapped, then under 16 next year. This will save a family of four up to £142 each time they fly from Britain. This is quite a substantial savings which would enable families to save for their children’s’ education or other aspirations.

As we approach the end of 2014 I ask myself will next year be any different? Will these changes encourage people to save more? Will it make saving a little easier? Or will saving just get harder and the reality is saving for that happy retirement is unreachable?  It’s hard for me to say but I suppose we can hope things get a little better.

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