We’re frequently told that the UK has a savings crisis – and a report from a House of Lords committee has revealed just how bad it really is.
The Lords Exclusion Committee last week announced that 40% of the UK population holds just £100 in savings. That’s a worryingly far cry from advice offered by experts, who suggest annual savings should be around 2-3 months’ salary.
It’s all part of a wide-ranging study, in which the committee reported on the many ways that banks are still failing customers, or excluding them entirely from the financial industry. This saw the Lords discuss the ‘accelerating trend’ of online banking, leaving those with no internet access completely without means to check their accounts as banks continue to close branches or slash services. It will come as little surprise that, between 1989 and 2016, 53% banks have shut up shop, at the same time banks push hard for digital banking.
The report also lashed out at financial institutions who do not make enough provisions for poorer citizens, calling it a ‘scandal’ that 1.7 million people do not have access to a bank account. According to the committee, a shocking 600,000 of those are elderly people, who find themselves excluded, financially in this way.
Calling it a ‘poverty premium’, the Lords were quick to acknowledge that due to a lack of financial options available to them, it’s the poorer sections of society who, ironically, end up paying more to take out loans. As such, they suggested wider restrictions on high-interest credit, in the wake of a successful crackdown on payday loans companies.
Baroness Tyler of Enfield, who chairs the Financial Exclusion Committee, was unequivocal in expressing that more needs to be done to help those financially excluded. She said:
‘The UK financial services sector is a world leader which makes it doubly unacceptable that it is failing those who need it most. Too many people still have no bank account or cannot get access to basic or fairly-priced financial services. The poverty premium – where the poor pay more for a range of services from heating their home to accessing credit – contributes to a vicious circle driving people ever deeper into debt and distress.’
However, it’s not only poorer people who are getting a raw deal with banks. Baroness Tyler also highlighted the plight of the disabled, saying:
‘We have heard of banks contacting deaf people by phone and sending written Pin numbers to blind people instead of using braille. Banks must review their own practices toward disabled customers to ensure they are making the reasonable adjustments already required of them by law. It is totally unacceptable that this situation persists, over 20 years after the introduction of the Disability Discrimination Act.’
The committee suggests that further financial education is the answer to limiting financial exclusion, and that education starts at primary school. For instance, the committee points out, there are more Post Offices than banks in the country, while offering many of the same services for everyday banking customers – the trouble is, few seem aware of the fact. Ultimately, the Lords believe that it’s the job of the UK Government and the Financial Conduct Authority to ‘end the scandal of the poorest being excluded from even basic financial services and forced to rely on expensive and substandard products’.
But as shopping bills rise, along with house price increases and dwindling interest rates, and at a time when 51% of 18-24-year-olds say they’re worried about money, it remains to be seen how much education will get people feeling able to afford saving again.
