Age of enlightenment is overdue

IF YOU can keep your head when all about you are losing theirs ... maybe you don't understand the situation. More evidence, if evidence were needed, that the average wage and salary earner simply does not understand the speed with which his financial prospects are changing or the scale of change comes from NOP, in a survey conducted for Scottish Widows.

It shows that the proportion of those polled who think saving for retirement a good idea has gone up from 44 per cent to 48 per cent in the past 12 months. But the proportion who are actually doing it for themselves has fallen in the past year from 36 per cent to just 30 per cent.

Asked what they consider the main reason for saving, exactly 50 per cent of the GBP (Great British Public) believe that saving "for a rainy day" or "for the future" is the objective. Another 30 per cent still think saving for their annual holidays is the main priority. But at least the overwhelming majority of those who think they should save for a rainy day actually do so.

But the poll suggests that 37 per cent of those polled still do not save anything at all. It is tempting to think that the majority of those who do not save are actually younger people, the under-thirties, whose main priority is to enjoy themselves while just possibly making some efforts to get their feet on the bottom rung of a ladder somewhere later on. But unfortunately the poll is limited to the thirty-pluses.

At least it could still be assumed that sooner or later, but hopefully not too late, they will stop and think of the future and start saving.

But detailed figures suggest that in fact more younger people are taking prudent action more often than their elders. Just under a quarter of all consumers save more than pounds 100 a month, but in the 30-35 age group the proportion rises to 31 per cent, which itself is sharply higher than the 24 per cent recorded in a similar survey just a year ago.

If one tries to reconcile the evidence of the poll to the real world however, the most obvious reason why so many people do not save is that in the most vulnerable age-group, from 35-55, an uncomfortably large number cannot afford the luxury of savings after they have met all the more pressing demands on their earnings, which include insurance and school fees for the white-collar workers.

Demands also include mortgage payments for the masses, two-thirds of whom are putting away an average pounds 300 a month to secure the roof over their heads. A decade ago the majority would have classed that as saving, if not as outright investment. Now it is more likely to be regarded as an expense of living.

But 59 per cent of those who do save put away less than 10 per cent of their net monthly income after tax and other deductions. Since 10 per cent of net income is said to be the minimum necessary to achieve a comfortable retirement fund in the 21st century, it indicates that there is still a long way to go before government warnings and financial services industry pleadings, not to mention the urgings of the financial press, can get people up to speed.

And even then there will still be a substantial proportion of the population that may never be able to earn enough over the continuous periods necessary to provide sufficient for a comfortable retirement.

And there is another large part of the community, including the near- retired and the already-retired, who have not made enough provision in the past because they could not anticipate the speed of change in social policy, and for whom it is now too late to make adequate provision.