Savers are being thrown to the wolves

Published by Jeff Prestridge on 14 May 2013.
Last updated on 14 May 2013


No one - be it banks, building societies, the Bank of England or even the government – seems to care about savers, even though they outnumber borrowers by six to one.

Four years of the base rate at 0.5% has meant savers have seen the real value of their deposits steadily eroded by nagging inflation. And with the £80 billion Funding for Lending Scheme (FLS) now in full swing, savings rates are only going one way – and that's down.

Both banks and building societies no longer have a need to lure savers with attractive rates when they can borrow money from the FLS on cheaper terms. Hence, why we are now seeing derisory rates of 0.1% being paid on many accounts.

As Ros Altmann, a leading pensions expert, recently argued: "Four years of low rates have effectively transferred national income and wealth from older savers to younger borrowers and banks, without parliamentary debate."

In the light of such a dire savings backdrop, some experts thought Chancellor George Osborne might throw a little love in the direction of savers in his March Budget. But love, sadly, was in short supply.

"The Chancellor has thrown savers to the wolves," bellowed Simon Rose of pressure group Save Our Savers in the aftermath of the Budget. "This is a disgraceful betrayal of Britain's savers."

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Travesty for savers

Anna Bowes, director of, was equally vociferous. "It's a travesty for savers," she said. "Those who have done the right thing and prepared for their future by saving have been hammered, and now there is little incentive for future generations to save."

The anger of Rose and Bowes is understandable. Budget olive branches were in short supply. There was no relaunch of the popular National Savings & Investments inflation-linked savings certificates. There was no relaxation in the ISA rules that currently prevent savers from using no more than half of their annual allowance to put on deposit.

And although there was no further attack on the tax benefits of putting money aside in a pension, pre-announced changes to the annual allowance and the lifetime allowance will still go ahead in April 2014.

This means the annual allowance upon which tax relief can be obtained on contributions will reduce from £50,000 to £40,000. It also means the maximum amount of pension saving you can build over your lifetime that benefits from tax relief reduces from £1.5 million to £1.25 million.

Crumbs of comfort

Were there any crumbs of comfort for savers? Well, there were a few although they were hard to detect. The Chancellor did not renege on his promise to increase the annual ISA allowance in line with inflation.This means a maximum £11,520 can be invested in the current tax year 2013/14.

It was also good to see the annual tax-free savings limit for junior ISAs (JISAs), taken out for under-18s, rise from £3,600 to £3,720, with the Chancellor also ordering a review into the future of child trust funds (CTFs), the precursor of JISAs.

Although it's too early to predict, it's likely that CTFs will soon come under the JISA regime, hopefully resulting in a better deal for those who took out CTFs on behalf of children born between 1 September 2002 and 2 January 2011.

Throw in the abolition of stamp duty on purchases of shares traded on growth markets, such as the Alternative Investment Market, and that's about it in the form of comfort crumbs.

Post-Budget, savers have as much reason to be miserable as they had pre-Budget. Happy days are here again? Fat chance.

Jeff Prestridge is personal finance editor of Financial Mail on Sunday. Email him at

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