Many people have no savings to fall back on
A bank expert has highlighted a scheme that could assist people in building up their savings. One in 10 individuals has no cash reserves whatsoever, according to figures from last year from the Financial Conduct Authority. This represents a concerning figure, given that the escalating cost of living means increasing numbers are battling to meet their routine expenses from their regular earnings.
Banking specialists spoke to the Treasury Committee [January 28] regarding measures being implemented to boost financial inclusion and help more people accumulate savings. Matt Bland, chief executive of the Association of British Credit Unions, discussed the expanding adoption of payroll savings. This is an arrangement whereby part of your wages is transferred directly into a savings account.
Mr Bland said: “There is a commitment to a coalition to support the expansion of payroll savings and savings in workplaces, something that many credit unions do with great success.”
He explained that the scheme is presently offered as a voluntary choice for workers to enrol in. However, the expert suggested the system might work better with some changes to this. He said: “There’s a growing body of evidence that shows if we create an opt-out mechanism, a bit like we did with pensions, and allow for the auto enrolment of employees in payroll savings, then we can have just as transformational an effect on the savings crisis we have in this country – with a quarter of working age households having less than £100 set aside – in cash saving as we have in pensions saving.
“We recognise that asking all employers to do that in the way that we have with pensions would be a big thing, but certainly a clarification of the legislative provisions for employers that wish to, would be a very positive contribution.” Major changes to savings are being introduced from next year.
From April 2027, the ISA allowance will be effectively cut. Currently, you can save up to £20,000 annually into these tax-free accounts, with this allowance divided as you wish between cash ISAs and stocks and shares ISAs.
However, this allowance is being reduced, meaning you’ll only be able to deposit up to £12,000 annually as you choose, while the remaining £8,000 must be allocated to stocks and shares accounts. Additionally, from April 2027, the rate paid on taxable savings growth will rise by two percentage points across all bands.
This will push the rate for basic rate taxpayers up from 20 percent to 22 percent, while higher rate taxpayers would see an increase from 40 percent to 42 percent. Meanwhile, those on the additional rate would face a rise from 45 percent to 47 percent.
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