The Government needs to support savers who are helplessly watching their funds deteriorate every year in real terms, says David Cutter, the chairman of the Building Societies Association.
Speaking on Friday, Mr Cutter said that Government schemes designed to improve the flow of credit had delivered a “profound” impact, resulting in both winners and losers.
Schemes such as Funding for Lending have been instrumental in boosting the housing market and consumer confidence. Equally, they have been detrimental to savers, who have seen the returns on their savings plummet far below the rate of inflation.
The Government needs to countermand this by implementing a number of measures to support savers, Mr Cutter told delegates at a BSA lunch.
Among a number of proposals submitted to the Treasury ahead of December’s Autumn Statement is an increase to the annual cash ISA allowance (currently £5,760) to match that of investment ISAs (currently £11,520).
A related proposal is allowing savers the ability to transfer funds from stock ISAs to cash ISAs. Currently, savers can transfer cash ISA funds to stock ISAs but not the other way around. This restriction has attracted criticism because it only benefits those willing to make risk-based investments.
Building a long-term savings culture
The BSA wants the Government to nurture a long-term savings culture by agreeing to match the amount that savers deposit into an ISA during its first year.
It also hopes to persuade the Government to enable the transfer of child trust funds into junior ISAs.
Millions of young children born between 2002 and 2011 are currently stuck with low-performing child trust fund accounts after they were granted a £250 head-start by the Government.
Consequently, they do not qualify for the more expansive and competitive range of junior ISAs.
The Treasury has already hinted that an announcement regarding these restrictions will be made before the end of the year.
Savers are "the bedrock"
Research carried out by the Treasury's savings arm, NS&I, has discovered that Britons have increased their monthly savings to £96, which further emphasises the importance of a flourishing savings environment.
Mr Cutter, also group chief executive of the Skipton Building Society, one of the few institutions to offer an above-inflation account, said: "Savers remain the bedrock on which our lending industry is based, and it is therefore vital to encourage and foster a long-term savings culture."
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