Savings culture needs more work Go compare with our comparison table

Savings culture needs more work

05 November 2010 / by Paul Dicken

The government has yet to make good a Conservative party manifesto pledge to encourage saving and investment, according to a survey.

A survey of visitors to the F&C investment trust website during October showed 46 per cent felt it was too early to say if the party had delivered the manifesto pledge, while 42 per cent felt the government had not delivered on the commitment.

F&C Investment said the position of the 46 per cent was possibly vindicated by the announcement in late October that a Junior ISA would be created to replace the scrapped Child Trust Fund. Eight per cent of respondents to the survey felt the government had fulfilled the pledge and four per cent felt it had done so to some extent.

There has been mixed news for savers since the coalition government took office in May, F&C noted, with the curtailment of pension tax relief affecting some higher earners but with 2011 set to be the first year the Individual Savings Account (ISA) limit will increase in line with inflation.

Head of corporate affairs at F&C, Jason Hollands, said: “We welcome the news that the government is to develop a voluntary tax-free savings account for children. With the cap on university fees expected to be removed, such a scheme will play an important role in helping parents, guardians and grandparents to prepare children for potentially significant future financial costs, such as higher education or getting on the first rung of the housing ladder.”

Hollands said the extension of the ISA regime to children, particularly if stripped of some of the restrictions associated with Child Trust Funds, such as a low cap on annual contributions, would be welcomed by parents and encourage strong participation by the financial services industry.

A savings culture

During the party conference season this autumn, Fidelity Investment Managers set out how it thought the government could promote a savings culture. The firm said a single annual cap on tax-advantaged savings should be set to encompass both pension and ISA savings to improve simplicity and flexibility.

Earlier this year, the Department for Work and Pension (DWP) commissioned the National Institute for Economic and Social Research (NIESR) to produce a report on people’s short-term attitude to spending and saving, affecting savings.

The NIESR report looked at ‘myopia’ in the context of economic decision-making, defined as: ‘time-inconsistent preference that exhibit a present bias in consumption’, or a bias towards spending money rather than saving it.

The research found that this bias leads to more use of unsecured debt, delaying retirement saving and longer working to make up for a lack of savings. Conversely, a self-awareness of this tends to increase saving in pensions schemes that are locked-away until retirement or fixed-term savings.

Making pension schemes available to the population will increase private savings, increase labour supply in early life and bring forward retirement, the report concluded.

Co-author of the report, Justin van de Ven, said: “The view that at least some people are affected by myopia when planning for their retirement was cited as one of the motivating factors behind the pension reforms that will be introduced in the UK from 2012.  But little is currently understood about how myopia affects retirement savings decisions in a realistic policy environment.”

To encourage saving for retirement, the government announced on 27 October that it would go ahead with automatic enrolment in a pension scheme for employees earning £7,475 or more, in line with the income tax threshold from 2011.

© Fair Investment Company Ltd

 Product NameISA OptionIncome YieldMore Info
Henderson Strategic Bondyes5.7%More Info >
Income Paid Quarterly. Investing in higher yielding assets which will include most types of fixed interest securities, this fund aims to deliver a quarterly income to investors. See latest fund factsheet for details.
Newton Asian Incomeyes5.43%More Info >
Income Paid Quarterly.The objective of the Sub-Fund is to achieve income together with long-term capital growth predominantly through investments in securities in Asia Pacific ex Japan (including Australia & New Zealand) region. The Sub-Fund may also invest in collective investment schemes. See latest fund factsheet for details.
Newton Higher Incomeyes5.4%More Info >
Income Paid Quarterly. The objective of the Fund is to achieve increasing distributions on a calendar year basis with long term capital growth. The Fund may also invest in collective investment schemes. See latest fund factsheet for details.
Invesco Perpetual Distributionyes4.7%More Info >
Income Paid Monthly. Invesco Perpetual Distribution offers a balance between both income and capital growth through investment in UK based equities and fixed interest securities. See latest fund factsheet for details.
Invesco Perpetual Monthly Income Plusyes4.46%More Info >
Income Paid Monthly. Popular income fund that aims to achieve a high level of income whilst seeking to maximise total return through investing in high yielding corporate and Government bonds, together with UK equities. See latest fund factsheet for details.
Woodford Equity Income Fundyes3.50%More Info >
Our selected partner for investing in Neil Woodford's Equity Income fund is Barclays Stockbrokers, via their INVESTMENT ISA for new ISAs and ISA transfers, or their MARKETMASTER® ACCOUNT for non-ISA investments. Income Paid Quarterly.The fund’s investment objective is to provide investors with long-term appreciation through investing in stocks primarily listed on the UK stock exchanges. Up to 20% may be invested in international companies. The income objective is 10% higher than the FTSE All Share Index yield with an anticipated annual yield of 4.0%.
Newton Global Higher Income yes4.7%More Info >
Income Paid Quarterly. The objective of the Sub-Fund is to achieve increasing annual distributions together with long-term capital growth from investing predominantly in global securities. The Sub-Fund may also invest in collective investment schemes. See latest fund factsheet for details.
Jupiter Merlin Income Portfolioyes3.10%More Info >
Income Paid Quarterly. To achieve a high and rising income with some potential for capital growth by investing predominantly in unit trusts, OEICs, Exchange Traded Funds and other collective investment schemes across several management groups. The underlying funds invest in equities, fixed interest stocks, commodities and property, principally in the UK. See latest fund factsheet for details.
M&G Global Dividendyes3.27%More Info >
Income Paid Quarterly. The Fund aims to deliver a dividend yield above the market average, by investing mainly in a range of global equities. The Fund aims to grow distributions over the long-term whilst also maximising total return (the combination of income and growth of capital). See latest fund factsheet for details.
Kames Strategic Bond yes2.95%More Info >
The primary investment objective is to maximise total return (income plus capital ) by investing in global debt instruments,denominated in any currency, ranging from AAA Government Bonds through to high yield and emerging market corporate bonds. At least 50% of the fund will be invested in sterling and other currency denominated bonds hedged back to sterling. See latest fund factsheet for details.
M&G Optimal Incomeyes2.44%More Info >
Income Paid Twice Yearly.The fund aims to provide a total return to investors based on exposure to optimal income streams in investment markets. The fund invests across a broad range of fixed income assets according to where the fund manager identifies value. See latest fund factsheet for details.
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