Savers are being shafted – and with the Chancellor’s wish to turn us into a nation of investors (irrespective of risk and appropriateness), I fear the shafting is far from over.
Especially given the eagerness of some financial groups to pour petrol on the savings pyre with self-interested calls for the savings cult to be abandoned in order to save the UK stock market. Twaddle of the highest order.
Savers are suffering enough already. Latest figures from HMRC indicate they will pay £6 billion in tax on the interest they earn on accounts with banks and building societies in the current tax year – that’s nearly four and a half times what they paid in the tax year ending April 5, 2022.
This massive tax grab is a result of higher interest rates for most of the time since 2021. It also stems from a freezing of the annual personal savings allowance at £1,000 for basic rate taxpayers (£500 for higher rate taxpayers) since 2016.
Yet Rachel from Accounts isn’t finished yet. As regular readers of Wealth will know, she is lining up another attack on savers – this time, on those who use Isas to protect cash from the taxman.
Although the Chancellor has yet to confirm details, the consensus view is that while the annual allowance will remain at £20,000, cash Isas will be capped at £4,000. All part of Reeves’s plan to get the nation investing and fuelling economic growth.
Taking aim: Chancellor Rachel Reeves wants to turn us into a nation of investors
I am a big believer in the financial empowerment that long-term investing can bring. Yet, equally, I can acknowledge that there are millions of people – young and old – who don’t want to take risks with the money they put aside for the future.
On Friday I spoke to readers Carol Peacock and her husband Grant, who are concerned about a cash Isa crackdown. Retired and living in Cheshire, they have no wish to risk their financial security by investing. ‘Why on earth would we take a gamble with our wealth at our time in life,’ asks Carol. ‘We want security as we enjoy our twilight years.’
Carol and Grant use Isas to protect savings from tax, and say that if the cash allowance is reduced to £4,000 they will look to shove more money into Premium Bonds and maybe buy bullion coins (capital gains tax free) from The Royal Mint.
‘Experts say a lower cash allowance would nudge more people into investing,’ says Carol. ‘But nothing will nudge us.’
As for IG’s call, as part of its ‘save our stock market’ campaign, to end all new cash Isa openings on the pretext that such accounts hinder rather than help people build wealth, Carol is left speechless. I’m not, so I will speak for Carol and millions like her.
IG makes money from people taking short-term bets on the direction of markets. Such spread betting is a form of leveraged gambling where investors can end up losing a lot more than they originally bet. So for IG to present itself as a backer of long-term investing is as ridiculous as its desire to see cash Isas bashed on the head.
Chancellor, ignore IG’s twaddle. And hands off the Peacocks’ cash Isas. Indeed, hands off ALL our cash Isas.
Brace for yet MORE bank branch closures very soon
A further round of bank branch closures is imminent, according to my sources close to the industry.
If correct, the closures will leave yet more communities without a bank, inconveniencing those customers (both personal and business) who prefer face-to-face to online banking.
Although the axing of branches is unstoppable, it is time for the regulator to look at the quality of the alternative high street services which the banks are usually obliged to fund when towns are left bankless.
These services come in the form of banking hubs. These are high street branches, usually managed by the Post Office, and are funded by the banks through an organisation called Cash Access UK.
Currently they provide basic banking services to both personal and business customers, with representatives from the main high street banks on hand one day a week for anyone seeking a one-on-one meeting.
The Government wants at least 350 hubs up and running by 2029, and it is likely to be granted its wish as the big banks’ branch closure programmes ramp up.
This autumn, hub numbers should top 200. Yet in their current form they are too low grade. As Derek French, the former head of the Campaign For Community Banking Services, keeps reminding me, hubs should be more about personal service than mere access to cash.
For hubs to really work, the bank representatives should be empowered to provide a broader range of services. For example, helping customers deal with the complexities of sorting out probate following the loss of a parent. Or being allowed to process the application for a new bank account. I also don’t understand why hubs aren’t routinely open on Saturdays to help those who are too tied up with work during the week to get to one.
While the banks are reluctant to give hubs a refresh, it should be the minimum ‘price’ they pay for turning many high streets into banking deserts.
I am told the Financial Conduct Authority is currently looking at requiring the banks to widen their hub services. I trust it follows through with decisive regulatory action. Hubs must be allowed to flourish – and not held back by cost-conscious bankers.
If you have an opinion on hubs – favourable or otherwise – do let me know.
Remembering passionate pension campaigner Jacquie
Many people now retired owe their financial security in part to the campaigning zeal of the Pensions Action Group (PAG) during the early 2000s.
Without this group’s dogged determination to ensure workers should not lose their accrued (defined benefit) pension when their employer folded, we would not have in place today the Pension Protection Fund (PPF). A £32 billion scheme that pays (or will pay) the pensions of 292,000 workers whose employer went bust.
A key supporter of PAG was Jacquie Humphrey, from Hemel Hempstead in Hertfordshire, who regularly demonstrated alongside husband Peter for pensions justice. Peter’s future works pension was decimated when his employer, Dexion, folded – and like hundreds of others he (and Jacquie) refused to take it lying down.
Jacquie was passionate, articulate, plain speaking and was great fun to be with, whether on PAG marches or at all-night vigils outside 10 Downing Street.
Sadly, she died a few days ago – 11 weeks after the death of her beloved Peter.
What a duo.
Those with former work pensions now looked after by the PPF have a lot to thank them for.
