This week is UK Savings Week – an initiative which seeks to raise awareness of the importance of financial resilience and the benefits of saving. It also provides an opportunity for people from across different groups, organisations, charities and authorities to come together and think seriously about how we can cultivate a positive culture of saving in our country.
Even though the UK has a world leading financial services industry, which produces £100 billion in tax revenues to support public services, and employs 2.5 million people – with two-thirds based outside of London, and several hundred here in our local area – for many on a day-to-day level, they feel that their money manages them, rather than the other way around.
Yet whether it’s an ISA for your first home, or pension for your retirement, we all have an interest in saving. This is the bigger meaning of a ‘property owning democracy’: not just bricks and mortar, but investing in our national economy and having a stake in its success.
So I was delighted to get involved in this week's events by making a speech in Parliament to share the progress being made to improve financial inclusion, encourage responsible habits, and ensure that achieving security and prosperity through saving is something that is accessible to everyone.
A good example is the Help to Save scheme, which supports those on lower incomes to make a start with savings. Those who are eligible can save between £1 and £50 each calendar month over four years, and at the two-year mark the Government pays a bonus of 50% on their highest balance in that time, with another 50% bonus at the four-year mark on additional savings above that balance.
For example, if someone saved £400 during the first 18 months, but then had to withdraw £200 to meet an unforeseen expense, they would still receive a £200 bonus (50% of £400) at the two year mark. If that person continued to save and had a balance of £600 after four years, they would receive a further £100 bonus (50% of the £200 additional balance).
Last year there were 359,000 Help to Save accounts which held more than £257 million in savings – providing peace of mind and a bank account boost to those, including nearly 5,000 in our region, who might not have thought saving was an option for them.
Another policy which has defied expectations to improve financial inclusion and resilience is automatic pension enrolment. This was first introduced in 2012 so that employees and employers set aside some of their earnings toward their pensions by default. Since then, pension participation has risen from 55% to 88%, and an additional £33 billion has been saved in real terms towards retirements.
Until now, this only kicked in at the age of 22, and I had called in Parliament for this to be extended to those aged 18. I am delighted to report that legislation was passed this week to empower the Government to make this a reality. This will help young workers develop savings habits sooner, and mean those savings go further thanks to compound interest.
Whatever your age, it’s never too late to start saving, and I would wholeheartedly recommend the Government’s free guidance service ‘MoneyHelper’ as a first step to find out more: https://www.moneyhelper.org.uk/en/savings.
