According to one financial expert, more people need to be encouraged to use savings accounts through incentivising savings activity.
Online resource Money Maxim’s managing director Mark Bower stated that savings culture needs to be cultivated to a greater extent in the UK. It was especially important for those on lower salaries to save early and save often through such products as ISAs, Mr Bower added.
The managing director also said that certain low-income savers may be in need of more assistance from public sector sources in order to gain access to the best interest rates currently available in the wake of the worldwide economic recession. The Coalition government may be considering the abolition of ISAs in order to launch the Lifetime Bonus Savings Account in its place in an effort to increase the amount of lower wage earners who can save.
The recommendation for the new LBSA programme came from the Institute for Public Policy Research, which published a paper recently on the topic. Mr Bower stated that if the IPPR measure were to be put into effect, it could enable lower income families to not only put their money to good use in the long term but also save for specific occasions such as Christmas or to go on holiday.
Moreover the managing director commented that there was a palpable need to help lower wage earners to build a respectable savings pot of approximately three months’ worth of income. In order to combat the temptation to dip into their savings, Mr Bower recommended the use of a so-called ‘carrot’ of a 10 per cent bonus.
Despite these plans Mr Bower stated that the likelihood of the current administration adopting these plans was low due to a desire to not further aggravate savers who have been suffering through a long period of depressed interest rates on savings products.