As savers continue to battle with low interest rates and inflation eating away at their capital, we caught up with Simon Rose of Save our Savers, to find out more about their work and Simon’s view of the UK savings market.
Many people will have heard of Save our Savers, but may know little about you, can you briefly summarise your main aims?
Essentially we represent the interests of savers, whilst promoting the value of saving as well as making the ethical and economic argument for saving.
We know many savers feel there is no one currently sitting ‘in their corner’ and most are suffering in silence. We want to give silent, disenfranchised savers, a voice.
Is there any particular profile to the savers you represent?
We are here to support all savers, young or old. However, because of the financial pressures younger generations have had to deal with over recent years, it’s a fact of life that savers tend to be older, with a considerable number who are retired and at least part of their income made up from savings interest.
There is though one thread which links all savers. They believe they were doing the right and proper thing by prudently saving to provide for their later years and many feel betrayed that their capital is now being taken away through a combination of low interests rates and relatively high inflation.
Save our Savers believes saving actually helps the economy, but the government would rather people were out spending, who’s right?
There is no doubt the government and Bank of England would like to see consumer spending increase. In fact consumer spending accounts for around two thirds of our GDP (Gross Domestic Product), but in the years leading up to the credit crunch this spending was of course funded by huge amounts of debt.
In actual fact the level of savings in the UK has risen since the financial crisis, as people have preferred to take a cautious approach rather than spending.
Of course, savings used to help fuel growth, as it was savers’ deposits which banks lent out. Recently though the Funding for Lending Scheme (FLS) has rather undermined this approach. Indeed it seems clear to us that politicians failed to understand the unintended consequences for savers of the FLS and the hugely negative effect it has had on interest rates for savers.
So if the current crop of politicians failed to see the side effects of the Funding for Lending Scheme we have a general election to look forward to in 2015; do you think a change in government would be good news for savers?
Sadly no. We’ve not found a single Labour politician saying positive things about saving.
Frankly though, the issue isn’t the colour of the party in power, but the fact they are politicians, who, with one or two notable exceptions, do not understand the benefits of saving. The fact that they are undermining a savings culture now, is storing up problems and endangering future economic growth.
Of course one very positive thing politicians could do is to encourage greater financial education in schools. The benefits are huge, for example being able to spot financial scams, understanding the basics such as how interest is calculated and paid and understanding financial pitfalls, such as pay day lenders.
But of course most politicians are not interested in long term solutions.
Mervyn King leaves his post as head of the Bank of England in a couple of months, how do you rate his performance?
In short, lamentable but understandable.
We can only rate his performance on results and we have the worst performing economy of any developed country other than Italy.
We’ve had five years of no growth, which is perhaps unsurprising when the people who oversaw the period leading up to the financial crisis, have in large part been the ones tasked with pulling us out. There have been countries, for example Latvia, Estonia, Iceland, Norway and to some extent Canada, who have looked to the long term and are now reaping the rewards.
It’s clear you don’t rate Mervyn King, how do you think his replacement, Mark Carney, will shape up?
My sincere hope is that Mark Carney will have a different mind-set to existing central bankers; however he is clearly unsympathetic to savers.
My expectations are increasingly low and the great hopes held by many are not shared by Save our Savers.
So that’s your verdict on two central bankers, if you had a day in power over the Treasury and the Bank of England, what three things would you change?
So much to do and so little time!
The first thing I would do is to withdraw the basic rate tax band on savings interest; this was promised to savers but has not happened. In the meantime savers have borne the brunt of the financial crisis, with wealth transferring from the prudent and thrifty to the imprudent and the reckless.
Secondly, I would find a way of using the peer to peer model to match savers with businesses who want to borrow money.
Finally and in my most radical move, I would abolish the Monetary Policy Committee (MPC). How did we ever get to the position where the price of money, though base rate, is determined by a committee of nine theoretical economists with little understanding of human behaviour? The idea that the price of bread or cars, for instance, might be set, Soviet-style, instead of by the market, seems ridiculous.
Yet that’s what happens with our money and it distorts the whole economy
We’ve covered the big picture, what practical tips do you have for savers right now?
Clearly savers need to make sure their money is working as hard as it possibly can. This means avoiding ‘zombified’ accounts, where interest rates have plummeted after an initial introductory rate.
Secondly, be very mindful of the Financial Services Compensation Scheme (FSCS) and don’t hold more money with one institution than you are covered for.
Thirdly, always be aware of the interest rate you are getting, know when bonus rates run out and make the effort to get the best possible rate you can.
Use your Cash ISA (Individual Savings Account) allowance each year and be aware of other alternatives, such as peer to peer lending, whilst remembering of course that all alternatives to cash will expose your capital to increased risk.
There are of course very few ways to stop the real value of your savings reducing, the trick is to find ways of them falling in value more slowly.
Simon, thanks for spending time with us today. Savers the length and breadth of the UK should be thankful for the excellent work you and the rest of the team at Save our Savers are doing. Anyone interested in finding out more about Save our Savers can visit their website by clicking here.