Industry and government must work on policies and products that can help close the savings and investment gap, the Tax Incentivised Savings Association said.
The latest consumer survey from Tisa’s savings and investment policy project group revealed that out of 2,161 people 19 per cent do not save, whilst around 11 per cent just set money aside at home.
The research revealed that a quarter of people would start saving if offered an explicit, one-off lump sum of money. On average, the amount which would spur people to start saving would be £87, with women needing a slightly lower financial incentive (£82) than men (£95).
With this in mind, Tony Stenning, chairman of the policy project and head of UK retail at BlackRock, called on industry and policy makers to create solutions that meet the needs of future savers and investors.
“Essentially, we need to create a culture where it is as easy to save as it is to get into debt.
“Over the past 25 years both the State and employers have significantly reduced the levels of income that people can expect in retirement. This means people need to save more just to maintain the same standard of living as their parents, meanwhile given increasing longevity their retirement pot will also have to work much harder to support their longer lives,” he pointed out.
“The generations impacted most are those aged 35 or younger as they face rising housing costs, less generous pensions and are saving less. If nothing changes we could be destined to benefit from longer, healthier lives, yet suffer financial hardship in old age.”
Tisa stated that there is a “once in a generation opportunity” to change people’s attitudes to saving and to develop long-term policies to avert a looming social and economic crisis. Whilst the group welcomed the pension changes, it expressed concern that policies are not addressing the fundamental issue of people not saving enough money or starting early enough to fund their future.
Of those who do save, almost a third are saving or investing £50 or less each month. The majority (54 per cent) are depositing this money in a bank or building society, 34 per cent are investing via Isas, 12 per cent into a pension and 3 per cent through a company Save As You Earn Scheme.
For those who do not currently save, the single biggest factor in making them start to save or invest would be better rates of returns on savings (30 per cent), followed by a lump sum incentive from the government (24 per cent) and then free financial advice (12 per cent).
Earlier this year the project group published research which suggested that personal saving will reach a tipping point in 2035 when those entering retirement will be increasingly less-well-off than earlier generations.
It is now developing strategic proposals for new savings and investments policies to help rebuild consumer confidence and trust in long-term savings.
peter.walker@ft.com
