The summer is a good time to think about rainy-day money: Kevin Gray @BathBuildingSoc CEO
2019 marks the 150th anniversary of the Building Societies Association (BSA). This is the trade body for all of the building societies operating in the United Kingdom and also a number of the largest credit unions too.
Being an important milestone for the whole mutual sector, the BSA held its May annual conference in the sunny splendour of the nation’s capital city, at the Queen Elizabeth II Conference Centre at Westminster. I was lucky enough to attend this historic event and to hear powerful speeches from senior figures from HM Treasury, the Prudential Regulation Authority and the Nationwide Building Society, to name but a few. The hot air being generated inside the conference hall was only surpassed by the weather outside. Goodness…London did get very warm and stuffy in that early summer sunshine
The conference always covers a range of current issues that are relevant to the Society’s business i.e. looking after customers’ deposits and arranging mortgages to allow individuals to buy their own homes. This year I was struck by a presentation that quoted statistics on the worryingly low level of the nation’s savings ratio, and inparticular, the large percentage of British adults who have no savings whatsoever. Apparently, over one in five of us has less than £100 put aside. After years where the Bank of England has kept interest rates very low in order to encourage people to spend rather than save, it’s perhaps not surprising that we find ourselves in this position. Monetary policy has indeed worked.
Who are these under-saved individuals? Before answering this, let us first allow ourselves a moment just to consider what the statistic tells us. It means that one fifth of us has no ability to cope with an unexpected bill without resorting to the expense of the ‘never-never’. It means that one fifth of us would not be able to pay our rents or our mortgages even for one month if we lost our jobs. It means that one fifth of us has no resilience whatsoever to any financial hit. It means that one fifth of us is probably underperforming at work due to being stressed about our personal finances. With such a high proportion of the adult population living on their wits, it follows that some of these individuals must be working within our own business and within yours. These individuals are amongst us…indeed they are us!
Getting the nation saving again is going to be a tall task. I have so far tried and failed to encourage my own daughters to save. They always respond with ‘Dad….I can’t afford to save’. I generally sympathise with the argument that it is difficult to save but I don’t go along with this affordability argument. Lack of affordability was used as an objection to the recent roll out of pensions auto enrolment and the sceptics have all been proved wrong on that one. In recent years, the take up of individuals saving towards a pension has been, frankly, quite massive. This has been especially so amongst the relatively low paid. The reason auto enrolment has been a success is that pension contributions have been prioritised by employees via deductions taken directly from their salaries. What employees haven’t had in their hands…they haven’t missed…and their pension pots are growing as a result.
Bath Building Society will shortly be looking again at launching a regular savings account aimed at encouraging under-saved individuals to build a small ‘nest-egg’ in order to cushion them against unexpected financial events. This might prioritise the saving of small amounts on a regular basis. Using the message from pensions auto enrolment, we might also consider offering our own staff a mechanism whereby small monthly savings could be deducted directly from their salaries via our payroll. We might indeed also be able to roll this out to other local businesses who can see the benefit of their employees building financial resilience through a regular savings scheme. If you wish to discuss regular savings or whether Bath Building Society could do anything to encourage your employees to save regularly, then please give our Savings Team a call on 01225 423271.
The summer is now here…but we have a duty to try and encourage more of us to put aside some money for future rainy-days!