How times change. Five years ago, my morning ritual used to comprise a bowl of Quaker’s porridge oats at 5.30am on the dot – to the accompaniment of Radio 4 bursting into life - before heading off to work in my battered Renault Megane.
Bar the occasional hiccup such as a puncture, I would be at my desk before 6.30, raring to go, so I could tackle the key personal finance issues of the day.
But no more. Now, I avoid the porridge because of a ‘no food before one o’clock in the afternoon’ policy instigated to lose weight in the wake of a dog attack early this year that left the dog sated but me facing a long layoff from running after a rather galling skin graft.
The Renault has also gone, with the result that I now walk to a tube station every working day. The porridge has been replaced by a daily copy of the free – and non-edible – City of London newspaper CityAM.
For a free paper, CityAM is a surprisingly good read, especially the forum page, where City experts, economists and policy specialists discuss key topics.
For example, a recent forum column threw the economy forward to 2030 when, the author predicts, cars will be driverless, we will have a female chancellor at Number 11, and sterling will have been converted to a digital currency. Thought-provoking.
Another riveting recent forum column – this time from Steve Hughes, head of economic and social policy at think tank Policy Exchange – explained the economics manifesto that the next government should pursue. There were three main prongs: “create the most innovative and competitive economy in the world”, “build a capital-owning democracy” and “deliver a value for money government’”.
Grandiose objectives, you might think, but it was the Policy Exchange’s specific ideas on creating a capital-owning democracy that I found intriguing, if only because they should stimulate debate among those who believe a vibrant savings culture should lie at the heart of a thriving democracy.
The Exchange firmly believes, quite rightly, that we are not saving enough as a nation – less per household than in France, Germany and China. A future government should look at ways to boost the savings habit.
It is music to my sensitive ears, and I am sure music to the ears of all financial planners, whose prime purpose in life (correct me if I am wrong) is to ensure people accumulate sufficient assets in their working lives to see them through a long and hopefully prosperous retirement.
Some of the proposals outlined by the Policy Exchange to stimulate the savings habit are a little left-field. But they are certainly worthy of consideration, at the very least. Among them is the idea of private sector premium bonds – savings accounts whereby holders are given the chance to “randomly win a set cash prize alongside, or in some cases instead of, a fixed interest rate”.
There is the idea of a ‘bonus’ Isa that enables savers to roll over any unused Isa allowance from previous tax yearsI heard this idea eloquently expounded late last year by Peter Tufano, professor of finance at Said Business School, University of Oxford. He was speaking at a conference organised by Tisa at which the day’s theme was encouraging the UK to save more. Tufano’s extensive research in this area indicates that prize-linked savings accounts do stimulate savings.
Other Policy Exchange proposals are more mainstream. Among them is the idea of a ‘bonus’ Isa that enables savers to roll over any unused Isa allowance from previous tax years into a separate tax-friendly account. This would enable people to better shield one-off financial windfalls such as an inheritance, house sale or redundancy payment from the taxman.
The think-tank suggests an initial contribution cap on this ‘bonus’ Isa of £10,000, which seems a bit low, but the idea is a good one. It would be empowering for investors.
Another idea is to make auto-enrolment into pensions compulsory, ending opt-outs. Simultaneously, the overall contribution rate should be pushed up to 12 per cent. Only by getting to this higher contribution rate, says Policy Exchange, would help people to retire on half-decent incomes.
As I say, the Policy Exchange’s proposals are interesting, and they deserve to be debated rather than gather dust. It is a shame therefore that as we run up to the election, some political parties are doing their level best to kill off the savings habit. Labour is at the forefront of this anti-savings assault, with its proposals to raid pensions to fund lower student tuition fees.
Among its raft of silly pension proposals is to reduce the lifetime allowance to £1m. Stephen Womack, a former journalist now chartered financial planner with Northampton-based David Williams IFA, said such a move would not only hit the mega-wealthy but also erode the pensions of anyone who is even moderately successful.
Mr Womack said that if someone had a £1m pension pot and took no tax-free cash, they would be able to purchase an index-linked single life annuity of £32,565. Under Labour’s plans, this would then get taxed at 45 per cent.
If Labour gets its way, Mr Womack predicts that the next generation of savers are going to “get clobbered”. Shame on Labour, I say. Savings should be encouraged, not discouraged at the whim of politicians who, incidentally, enjoy some of the best pensions currently available in the western world.
Jeff Prestridge is personal finance editor of the Mail on Sunday
