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The obvious conclusion

Why are people not saving more? Just look at the statistics on personal debt

Exasperated by the demands and endless criticism directed towards him, Basil in Fawlty Towers once asked his long-suffering wife: “Can’t we get you on Mastermind, Sybil? Next contestant – Sybil Fawlty from Torquay. Special subject – the bleedin’ obvious.”

So much in 2005 has been confirmation of the bleedin’ obvious.

The Government knows we have a pension crisis. If you have been in this business for more than 20 years, you will recall that it was often quoted that by 2020 there would be two working people to one retired person.

The point I am making is that the pension crisis has been known about since the 1980s yet both major parties have failed to address it when in Government.

Financial advisers said stakeholder would fail because companies would refuse to write business at a loss. The Treasury taking 40bn out of pension funds tells us all we need to know about its commitment to addressing the pension crisis.

Turner wants a substantial rethink. Some ministers seemed to have been engaged in the pantomime routine of: “Oh no, we won’t”, “Oh yes, we will” before the report was even launched.

What is causing people not to save? Some will tell you that it is all to do with a lack of confidence in the financial services industry. They say our products are too complicated and returns have declined.

The bleedin’ obvious stares us in the face again when we consider that there is another reason for people not saving – the increasing level of debt. Credit Action ( informs us that the UK’s personal debt is increasing by 1m every four minutes. We broke through the 1trn barrier 18 months ago. This implies that saving is difficult for many people. We are told that the average household debt is 7,723 excluding mortgages and 45,758 including mortgages.

Since the turn of the century, personal debt is up by 86 per cent. If we consider that average earnings are up by 28.5 per cent over the same period, we can see where the savings problem lies. Then reflect that the average interest rate on credit cards is 15.75 per cent – more than three times the bank base rate and 10 times higher than stakeholder charges. Is this scandalous or what?

According to Apacs, there are 74.3 million credit/charge cards out there compared with a population of 59 million.

What about encouraging the young to save? According to the National Union of Students, average student expenditure is 10,493 in London and 8,810 outside London. Barclays Bank informs us that the average debt for those finishing university this year will be 13,501.

Brewin Dolphin says the average wedding costs 16,000.

The average first-time house purchase is 153,285. The Council of Mortgage Lenders says first mortgages average 88 per cent loan to value on an income multiple of 3.21. Revealingly, 25 per cent borrow the deposit from family or friends.

Debt is the biggest competitor with savings. It is hard to encourage people to engage in financial planning. Some 57 per cent of the adult population have not made a will and you would think that would be a first step in organising your affairs.

Yes, Basil, the bleedin’ obvious is a subject for study. It is a shame that those with greater brains than the Fawltys have not considered the facts at their fingertips before trying to dump responsibility for their own shortcomings on the financial services industry.

Against this background, resolving the pension crisis looks some way off and, in one form or another, will most certainly result in an increase in taxation.

I have been around long enough to feel that once politicians are involved, they will try to bypass those of us who can offer advice and underestimate the ability we have to persuade. Together, sharing the responsibility, we just might make progress.


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By Steve Webb, director of policy In my recent discussions with advisers, a hot topic has been the growing number of people interested in transferring their defined benefit pension rights into a defined contribution pension scheme. With many pension schemes offering eye-watering transfer values, this is likely to be an area of increasing interest. Yet […]


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