As interest rates rate out up for the third time since January, Britons are struggling with affordability, especially in terms of their homes. Gordon Brown has put affordable housing at centre stage, but investment specialists F&C warn that there is a national crisis in personal savings that also needs to be addressed.
Recent data compiled by the Office of National Statistics reveals that the UK Household Savings Ratio for the first quarter of 2007 was 2.1%, the lowest level since 1960, when the country was emerging from a period of post-war austerity.
ONS research also shows that the number of people paying into private pensions is also falling – from 5.7million in 2000 to 4.4million this year, and F&C says people really need to start taking steps toward better savings and better preparing themselves for retirement.
"Between 1979 and 1997 the UK Household Savings Ratio averaged around 9.5% but since then it has averaged less than 5.5%," said Jason Hollands of F&C Investments. "With rising life expectancy, it is a matter of critical importance that action is taken to encourage people to save for their retirement."
Mr Hollands brands the combination of easy credit, reduced tax incentives, benefit traps, poor financial education and mistrust in the financial services industry a "cocktail of reasons not to save".
"In particular there has been a shift in cultural attitudes towards debt,” he said. “Being pumped up on easy credit no longer carries a social stigma. We are not just talking about those struggling to make ends meet either.
“Items that just a decade ago would have been regarded as luxuries – foreign travel, the latest mobile phone and must-have gadgets – are widely considered a much higher priority than resolving the conundrum of how to survive in retirement. This is like watching an accident happening in slow motion," said Mr Hollands.
"As Chancellor, Mr. Brown regarded the abolition of duty on betting as a higher priority than the removal of stamp duty on share dealing,” continued Mr Hollands. “As Prime Minister he has a chance to drive savings higher up the agenda."
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