Why is it easier to promote debt rather than savings? Am I the only person to notice that while there are adverts everywhere exhorting us to borrow – often at punitive rates of interest – there are far fewer encouraging us to save?
One answer has to be that current regulations perversely make it easier to promote debt than to encourage long-term saving through, for example, a tax-friendly Isa or a flexible self-invested personal pension.
If you are a payday lender offering short-term loans at rates of several thousand per cent APR, as long as you make that clear you can more or less advertise where and how you please – you can even ridicule the elderly as Wonga does with its sad puppet characters Betty, Earl and Joyce. Student campuses, Tube trains, bars – you name it, you can be sure a payday lender will be pushing its expensive wares.
More... How to get out of debt: Your ten-step plan to getting your finances back under control The best balance transfer credit cards to help clear your debts Should you ditch the banks and their low savings rates? Why people are flocking to lend-to-save and how it works Easy money: Wonga's puppet characters Betty, Earl and JoyceBy contrast, investment companies, many of which have helped generations of prudent investors save for retirement, have a Herculean task to satisfy regulations before they can release an advert.
If you doubt me, take a look at the vast tome of regulations by which investment companies and other firms are bound – the excitingly titled Conduct of Business Sourcebook. The section that relates to advertising investments can be found at ‘COBS 4.6.2R’ – an index reference that might give you a clue as to how numerous, dry and complex these rules, laid down by the Financial Conduct Authority, truly are.
No one denies that some investment firms have in the past been guilty of misleading consumers or encouraging them to invest in costlier or riskier schemes than was reasonable or right. Who will forget the relentless pushing of technology investment funds in the crazy, testosterone-fuelled stock market of the late 1990s?
But now the regulator’s rules have gone way too far. It would take a lawyer, or compliance expert, to ensure that investment adverts met the FCA’s tricky and detailed demands – and indeed investment companies do spend a great deal of money on just such advice.
This all needs to change. Common sense dictates that it should be easier for companies to promote investment, and far more difficult to promote debt.
If this were the case, perhaps we wouldn’t be witnessing such a dramatic slump in Isa fund sales (50 per cent down) despite a buoyant stock market.
Equally, we wouldn’t be witnessing such a horrible – and truly frightening – jump in the number of people struggling with payday loan debts. Debt advice charity StepChange said that last year it helped 36,413 borrowers with payday loan debts – 20,000 more than in 2011.
The scourge of payday lenders should be stamped on hard. It’s something the Office of Fair Trading has been promising to do for a long time, but it is only now slowly getting its act together.
One savings success story from which the Government should draw some comfort is the new law requiring workers to be automatically enrolled into workplace pension schemes.
This is proving more effective than many thought (including the Government).
According to pensions consultant Towers Watson, more than 90 per cent of employees are agreeing to save into a company pension rather than opt out, as is their right.
Major pensions provider Legal & General says opt-out rates are under ten per cent.
Given L&G’s earlier research had indicated the figure could be as high as 35 per cent (the Government was expecting about 25 per cent), these are all encouraging numbers.
Of course this appetite for pensions will be tested as smaller companies are required to auto-enrol workers into company pensions – only the country’s largest employers are obliged to do so at the moment.
But this Government push to get people saving for retirement, aided with a little tax relief, is producing the desired effect. Hats off to Pensions Minister Steve Webb.
The Post Office is doing itself no favours by continuing its business relationship with the tarnished Bank of Ireland, the provider of its branded mortgages and supplier of its soon-to-be launched current account.
Last week, 13,500 Bank of Ireland home loan borrowers saw the rate on their base rate tracker mortgage jump, some by more than 100 per cent from 2.25 per cent to 4.99 per cent.
This was not because the base rate (0.5 per cent) had risen, but because the bailed-out bank needs to build up more capital reserves.
It was a despicable act – made possible by it triggering some clause buried away in the mortgage contracts of these borrowers. If I was a Post Office boss, I would be looking for a more reputable business partner.