From debt to savings.

After a decade of debt accumulation amongst consumers, what we are seeing, post-crash, are the beginnings of a welcome and necessary rebuilding of savings.

At present, the new money being saved largely reflects short-term, precautionary savings. As the economy slowly stabilises, though, a proportion of precautionary saving should transform into long-term investments designed to meet the costs of specific future events or to give a planned income in retirement.

For this to happen, confidence in financial services and financial products needs to return. One important aspect of this will be stability of regulatory and tax treatment. Savers need to know that they can plan, and that taxation of savings products will not be subject to unexpected changes. The further erosion of this principle in December’s pre-budget report (PBR) was therefore disappointing. Importantly, savings product manufacturers need to be confident that they will not also be the victims of retrospective policy changes.

Savers and investors also need to know that, while the regulatory system protects consumers’ interests, it is the customers themselves who ultimately bear the costs of compliance. This must remain at a reasonable level, ensuring protection of the consumer, but not reducing the value of the investment from day one as a result of excessive and unnecessary bureaucratic processes.