Let’s have a Help to Save and Invest programme that sticks

The information provided in this article was accurate at the time of publishing and should be read in the context of the date it was published. Views in this article are those of the author alone and do not necessarily represent the view of Scottish Friendly.

According to David Cameron, the government plans to announce a Help to Save programme in the March Budget. The programme is designed for the low paid to help them build a “rainy day” fund.

While we have scant information on what this will comprise, few can deny such a programme will be anything but worthy. However, the record of governments on programmes aimed at helping and lower income groups to save is patchy at best. Time and again one highly lauded scheme is introduced by one government only to be abolished or watered down to drowning point by the next.

The most recent example of this was the Child Trust Fund, a savings scheme that really did constitute income redistribution on a modest scale and could have made a genuine difference to children from lower income families.

ISAs have been a big hit with the British public since their introduction in 1999 and are now an almost permanent fixture on the financial landscape. People need to have faith in the longevity of any Help to Save investment and to help secure this, the Government needs to talk to other parties to ensure this Scheme is not going to hit the rocks in future years.

In recent times, the focus has all been on getting us to spend to help rejuvenate the economy. That’s all very well but with the state pulling back from so many other areas of welfare provision we have to do more to get people saving again. The savings ratio is currently at a low level and if people don’t have enough to fall back on, the government will have ended up shooting itself – or future governments to be more precise –in the foot.

Lower income groups will only be encouraged to save for their future if there is a sufficiently attractive government incentive to do so.

A matched pound for pound contribution up to £500 a year for households on low pay is what’s needed to get the nation saving again. What’s more, saving for the long term shouldn’t be focused on cash investments. A Help to Save scheme should encourage people to consider stocks and shares investments.   Investing in stocks and shares offers growth potential and needn’t be scary. There are plenty of funds that don’t involve 100% shares investment. With profits and managed funds balance stocks and shares holding with more secure property, fixed interest and deposit funds to appeal to the mores risk averse investor.

Scottish Friendly, whose roots as a friendly society were established on helping the less well-off in society to make financial provision for their future, hopes that David Cameron’s well-intentioned desire to help the lower paid to save will amount to more than a token gesture. Helping this hard working but money-poor group prepare for their financial future is not purely altruistic; the financial confidence it will instil will mean less reliance on the state in future.

The value of investments in stocks and shares can go down as well as up and the investor may not get back the amount originally invested. Your original investment in a deposit account is guaranteed.

No advice has been provided by Scottish Friendly. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk. Advisers may charge for providing such advice and should confirm any cost beforehand.