The prime minster claims that all but the very rich have seen improvements in their standards of living.
At the same time the leader of the opposition says he will support the middle class, while the shadow chancellor says Labour will re-establish the 50p tax rate for the “super-wealthy”.
Inflation is currently running at 2 per cent and unemployment has fallen, yet there does not appear to be a change in the public mood. UK business leaders may be the most confident in Europe but the man and woman on the street seem less optimistic. In 2015, as in previous general elections, the standard of living and people’s hopes and fears for the future will win or lose the election.
Typically, elections are fought in the centre ground and there is much talk about the so-called ‘squeezed middle’. But who are they and what can the savings and investment industry do to help them?
Food and energy bills have rocketed, the state is unable to fund all the responsibilities of the welfare and benefits system, but the cost of living has, for some, become unsustainable. All this has coincided with relatively stagnant wages that are squeezing middle-income families to their financial limits. If this is the case for those with middle incomes, what about the bottom 20 per cent who have had no increase in their real incomes for 40 years? For them, getting by day by day is a struggle. There is no hope of them saving and so it is the responsibility of the rest of us to keep them above the poverty level.
So while Britain appears to be clawing its way back to economic recovery, the reality is that the trend of each generation being wealthier than the preceding one is reversing. Couple this with the fact that many of us have grown used to spending as much or more than we earn and you can see we are confronting a major societal and economic problem.
Some members of the ‘squeezed middle’ believe it is impossible to save enough or that it is too late to turn around their personal finances. Others may have left saving too late to avoid an impoverished retirement.
As an industry we have to get people to understand that their future financial wellbeing is in their hands rather than in their employers’ or the state’s. This is why leading companies in the industry, under the auspices of Tisa, have launched a Savings and Investments Policy Project to help secure the nation’s personal financial health through a new approach to policy that has consumers’ interests at the heart of its proposals.
The project will put forward plans for new savings and investment policies and seek to exert greater influence over the direction and future of financial services to help rebuild consumer confidence. Its findings, conclusions and recommendations will be used to work with all the political parties, consumer groups and regulators.
Proposals
Our initial research reinforces the belief that the UK is heading towards a future where a lack of savings and an overreliance on the state is likely to result in significant disappointment and hardship. The project will therefore focus on researching the root causes of Britain’s current low levels of savings and the short, medium and long-term impacts this is having on society. The findings will underpin strategic proposals we will make later this year.
The situation demands fundamental change, such as:
■ Moving UK consumers from a culture of debt to one of savings;
■ Increasing the overall levels of individual savings;
■ Addressing the savings needs for an individual’s whole life, and;
■ Leveraging savings by investing in ways that create wider economic benefits.
This is a unique opportunity for the industry to combine its knowledge of consumers, service and product design to create proposals that will improve the financial wellbeing of the UK’s citizens.
Financial advisers, particularly, have an important role to play providing expert advice and offering appropriate savings or investment products to this squeezed middle.
We hope that you join us on this important journey.
Tony Vine-Lott is director-general of the Tisa
