An independent financial adviser has claimed the fall of national savings ratio in the UK can principally be attributed to the dramatic fall in numbers of pensions and savings policy salesforce.
Mark Wilkins, an independent mortgage and insurance broker with Equity Financial Planning, says industry figures reveal the pension industry had in excess of 200,000 salespeople in 1990, but this number has subsequently fallen by 75% to 50,000, at the same time as consumers savings have fallen.
“The collapse of the national savings ratio in the UK to a current 40-year low has exactly mirrored the dramatic fall, over the last fifteen years, of the numbers of salesmen out there selling pensions and savings policies," says Wilkins.
Wilkins also argues the national salesforce at the frontline of the pension industry has been regulated to a standstill.
Rachel Vahey, pensions development manager at Scottish Equitable says while it is true pensions are sold and not bought, it could be argued the reduction in number of "men from the Pru" is a symptom rather than cause.
Vahey also points to various other reasons behind the fall in savings ratio as she says additional factors which have also influenced the decline, including a change in culture, should also be taken into account, along with the reputation of the financial services, and the lessening of confidence.
Moreover, the performance of the equity market and reduced involvement of employers to provide good pension provision, are further contributing factors to throw into the mix.
John Lawson, senior technical manager at Standard Life offers a similar stance to Vahey, as he says:
“The number of salespeople out there may well have something to do with the fall in the savings ratio but I think that the answer is more due to people spending more on housing.”
He argues previous analysis on the subject reveals the savings ratio also fell in the late 80s when house prices last boomed.
Going forward, Lawson suggests there will be an improvement in the savings ratio as house price inflation moderates.
He also points out the human tendency to spend rather than save: “Everyone prefers to enjoy themselves today rather than tomorrow and if they are looking for an excuse to do that (i.e. not save for the future) then they can always say that they don't trust the savings system.”
He says it is importance for the industry to rebuild trust in the market, following past mistakes, citing pensions mis-selling and the scandal surrounding Equitable Life.
Lawson adds it is important for advisers to help in this process and agrees the industry could benefit from greater numbers.
While not directly agreeing with Wilkins' comments, Alasdair Buchanan, group head of communications at Scottish Life suggests there could be some correlation between fewer consumers receiving financial advice and saving.
“A particular concern is that the main losers - in the sense of those who no longer have access to financial advice and help - are the less well-off. This is because a very large slice of the reduction in salespeople has come from the ‘home service’ part of the industry,” says Buchanan.
He says this effectively represents a ‘financial exclusion’ for millions of individuals.
Buchanan adds the trend towards greater consumption, fuelled by easy access to credit and a stable economic outlook, suggesting saving is not as much of a necessity while the impact of the increasing effect of the means-tested benefits system, which leads many people to doubt if it's financially worthwhile saving, all contribute to the current UK savings crisis.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Gareth Vorster on 020 7968 4554 or email [email protected].IFAonline
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