William Kay: Don't worry, blowing your savings could prove to be a real lifesaver

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The Independent Online

The news that a middle-aged couple responded to life-threatening illnesses by splashing their life savings on travelling round the world has raised potentially devastating questions.

The news that a middle-aged couple responded to life-threatening illnesses by splashing their life savings on travelling round the world has raised potentially devastating questions.

Good luck to them, you might say, they deserve a bit of fun in their dying days; but there is a sting in the tail. Their enjoyment has so perked up the couple, Patrick and Megan Hastelow from Gloucestershire, that they are both off the sick list. This has profound implications for our attitude towards pensions and other long-term savings.

Mrs Hastelow was diagnosed with breast cancer, and soon afterwards her husband contracted serious heart problems. They spent most of their £40,000 life savings in an 18-month spree on a QE2 cruise, an African safari and trips to Uruguay, Senegal and the Falkland Islands.

While Mrs Hastelow's cancer is in remission, Mr Hastelow had a little help from surgery - a successful heart bypass operation. But he is now a regular gym visitor and his wife says: "We are as fit now as we've ever been."

I am not suggesting that none of us save, or that we should blow our savings on going round the world and rely on living off the state.

But the Hastelows' experience does put in perspective some of the hysteria about the £27bn gap between what we save and what the experts say we should save. That relies on assumptions about lifestyles that do not necessarily apply to everyone: we all need money to live on, but we don't all have to spend it at the same rate or in the same pattern. As the Hastelows have shown, a spending injection can literally confer a new lease of life on people who might otherwise have simply faded away.

Such profligacy frightens our masters in Whitehall, whose worst nightmare is a generation of ageing baby boomers with their hands out for state benefits because they have no savings left. Those benefits will have to come from taxes provided by a proportionately smaller and smaller workforce, a prospect which no politician or civil servant likes to contemplate.

But a new survey by B&CE Benefit Schemes has found that nearly one in five people feel they do not need to save for retirement, as the state will provide an income for them at pensionable age. And that view was held by more than one in three workers aged over 45, a figure increased by the fact that more people realise they are not going to reach the finishing line with anything much to retire on.

At that rate it looks as if the QE2 will be fully booked for years to come. Is that a bad thing? Yes, if the then workforce rebels against an intolerable tax burden. No, if it means we have a happy-go-lucky and relatively healthy elderly population who take life as it comes and spend money when they can.

I suspect we are moving into a more relaxed era, when people will change careers more frequently, do more home working and spend spells freelancing. As such folk grow older, they will find it easier to slip into a routine of doing a few days' work here and there, until much later in life. The task of governments will be to reflect this in their pension and tax policies.

* It seemed such a good idea at the time. Just as the final episode of the American sitcom Friends was aired in Britain, Barclays bank let it slip that Jennifer Aniston had been snapped up to front the latest Barclaycard campaign.

The ads hit British TV screens next week, and doubtless everyone at Barclays from its colourful chief executive, Matt Barrett, downwards hope that Ms Aniston will do as much to recruit cardholders as such home-bred luminaries as Alan Whicker and Rowan Atkinson have in the past.

But every successful sitcom breeds its anoraks, and sure enough some have gleefully pointed out that Ms Aniston's character, Rachel, was once seen cutting up her credit cards.

Reason: she was buying things she couldn't afford. Friends fans, and others, take note.

Be afraid - the Bank is now out to get you

It did not take long on Thursday for banks and building societies to point out that Mervyn King and his merry men and women on the Bank of England Monetary Policy Committee have got tough. For the first time in more than four years they have raised the base rate in two successive months.

While two quarter-point rises stop short of the shock effect a single half-point rise would have had, they do indicate that the Bank is becoming concerned at our collective propensity to borrow. Indeed the Bank's announcement on Thursday said: "Household spending has grown strongly and the housing market remains buoyant."

Clearly borrowers did not take the hint a month ago, when the Bank said: "Retail spending continues to be robust, underpinned by income growth and unexpectedly strong house price inflation." If things do not cool down in the next few weeks, perhaps we can expect Mr King, the Bank's governor, to tell the British public bluntly: "Are you all deaf or what? Stop borrowing or we'll turn really nasty."

As I pointed out last week, part of the problem is that the Bank's rate rises have been widely negated by competition among lenders to drive down interest rates. This cannot go on much longer. But the Bank has decided to up the tempo, and there will be fewer and fewer places to hide. This makes it all the more urgent to cut spending commitments and fix your personal borrowing rate while the going is good.

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