Call urging consumers to save

Last Modified: 24 Jul 2008
Source: ITN

The Government has been urged to run a financial health campaign encouraging consumers to save rather than rely on debt.

The Association of British Insurers said with the economy in "choppy waters", the Government needs to introduce a range of incentives to get people to improve their financial security.

These included increasing the tax-free ISA savings allowance, promoting long-term investments rather than cash deposit accounts and improving financial literacy through money guidance and generic advice.

The group said the average household had run up unsecured debts of £21,000, with people owing around £102,000 through their mortgage on top of this.

It warned that the pressures of these high debt levels, combined with rising living costs, meant consumers were likely to start using their savings to pay for day-to-day living.

It said this would not only have a "severe impact" on long-term savings habits, but would also increase the temptation for people to cut back on important insurance products.

The ABI said the Government should encourage people to save by increasing the annual amount they could put into an ISAs to £9,600 a year from its current limit of £7,200.

But it added that the amount consumers were allowed to save in cash should be capped at £3,600, with the rest put into longer-term investments such as equities.

The group has also urged the Government to take steps to ensure that people were not penalised for saving for the long-term by reducing the impact of savings on the benefits they could receive.

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