Show interest, Gordon

By TONY HAZELL FOR THE DAILY MAIL
Updated:

 

Gordon Brown should come to the rescue of savers in his Budget in four weeks' time. Falling interest rates mean that many people with money in traditional High Street savings accounts are struggling to keep pace with inflation.

Many of these people, especially older savers, simply don't want to risk their money on the stock market. But Mr Brown can help. If, as widely expected, the Chancellor plans to introduce the 10 pc starting rate of income tax in this Budget, he should extend the concession to savers.

Cutting savings tax to 10 pc for basic-rate tax payers would cost the Exchequer between £0.5-1 billion a year. Higher rate taxpayers would have to pay extra tax on their interest just as they do now. With mortgage rates low for the foreseeable future now would be the ideal time to abolish mortgage interest tax relief, bringing an extra £1.7 billion a year into the Treasury. This would be a simple way of redressing the balance between borrowers and savers. Targeting the 10 pc savings tax at basic-rate taxpayers would also ensure the benefits went to those who need the most help.

Anpother way the Chancellor should consider helping savers is with the Individual Savings Account (Isa).

Under current proposals everyone will be able to hold £3,000 cash in an Isa in the coming tax year and earn interest tax-free. But from April 2000, when the overall Isa savings limit drops from £7,000 to £5,000 a year savers will only be able to hold £1,000 a year in cash. Many risk-averse savers will never use the stocks and shares element of an Isa and are being punished by the arbitrary rules. Isas are too complicated and survey after survey shows few people really understand them. So, from April 2000, why not simplify them by scrapping mini Isas altogether and allowing people to have one Isa with a £5,000 limit into which they can put any mix of cash or shares.

And finally....when you visit an independent financial adviser (IFA) you expect to be given the pick of the products. In reality, you are often given the pick of a short-list of products the adviser regularly uses. If the top-performing unit trust is not on your IFA's short-list, you will not be sold it. Meanwhile investment companies that have gone off the boil retain their place and their products are still sold in large numbers.

The Office of Fair Trading is investigating to discover whether we are getting the quality of advice we pay for. The crux of the problem is the rules governing financial advice. Either an adviser must be fully tied or fully independent - multi-ties are not allowed. But, as financial advice becomes increasingly complex, thanks to new product launches and government tinkering, many small advisers cannot hope to keep up. It's time the rules were changed. IFAs who use panels could then be rebranded as multi-tied advisers.

If an IFA does not select from the full range of products available they should not be allowed to label themselves independent.

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