Sultan of Savings who wants to bring thrift back to Britain
National Savings & Investments boss hits out at easy credit culture that traps us in debt
Adecade of super-low interest rates since the financial crisis has been devastating for savings and savers. Motor sports enthusiast Ian ackerley, as Britain’s saver-in-chief, wants to change all that.
‘If there is one thing I could do, it would be to change the culture to create a country where people understand the need to put money aside for the future, rather than just spend it all the time,’ says 55-yearold ackerley, a former Barclays banker who now heads National Savings & Investments (NS&I).
The would-be Sultan of Savings is enormously frustrated by the ‘shop until you drop’ philosophy that drives Britain’s economy.
Launching a fusillade against the UK’s spend-now-and-hang-the-consequences society, he says: ‘Generation on generation, it’s become easier to borrow and easier and easier to spend.’
The big banks and credit card companies must take a huge amount of the blame for destroying the savings culture. Zero rate credit cards, come-on consumer credit offers, the return of 90pc and more mortgages and pathetic interest rates on savings and deposit accounts have contributed to the UK becoming one of the most heavily indebted countries in the world.
‘I want to make it easier and easier to save,’ ackerley says. Historically, national savings were seen as a safe but deadly dull place for citizens to lock up their money.
as a head who has worked in the private sector in the UK and overseas, ackerley believes that he has an enormous opportunity.
He IS driving a digital agenda so savers can check accounts on mobile apps and keep track of their premium bond winnings. He doesn’t just see national savings as a means of plugging a hole in the public finances, as critical as that might be, but as a policy instrument to deliver objectives such as aiding pensioners.
The NS&I chief places the april 2017-18 issue of an investment guaranteed growth bond in this category. ‘This was something of a policy project agreed with government. It was about trying to help increase interest rates in the market,’ he says.
The bond offered a return of 2.2pc, much higher than most, admittedly pathetic, private sector offerings. ‘The net result was we raised rates in the market and we were particularly pleased about this.’
One complaint is that when the UK is in an interest rate hiking cycle (as in the last year) banks and building societies lose no time in passing on the cost to mortgage customers. But more often than not, small savers, seven times more numerous than borrowers, rarely see the same benefit.
When Bank of england governor Mark carney began the process of trying to normalise interest rates in 2017, lifting bank rate from 0.25pc to 0.5pc, NS&I followed suit. In contrast to the banks, it passed on the whole quarter of a point to savers.
Following the second increase this year ackerley admits they were more selective. It cut the rate on its direct Isa by 0.25pc in the weeks after base rate went up. It has also recently changed the index-linked bonds so they follow cPI inflation rather than RPI. This sounds technical, but it means half a million savers will see their rate reduced by a third.
Nevertheless, anyone with the basic investment account has received a 0.4 percentage point increase of the 0.5pc added by the Bank. In last month’s Budget, chancellor Philip Hammond cut national savings more slack by increasing the amount it can raise in the current financial year from the £6bn announced in the spring budget to £9bn – though that is lower than in previous years. By far the most successful product offered by NS&I is the premium bond, which appeals to British people’s love of a gamble.
It allows the public to have a flutter without losing their stake. enthusiasm remains as great as ever with £78bn sitting with ernie, the computer which spews out the winners. The bonds attracted £6bn of new savings last year, following £7.7bn in the previous year. ‘It’s still very relevant to a lot of people in the UK who find it a great way to save based around a draw rather than a straight interest rate, at the equivalent of 1.4pc return and tax-free, it is quite competitive,’ says ackerley
So what are the odds of a premium bond win? Turning from saver-in-chief to bookie-in-chief ackerley barely pauses for breath, saying the odds at present ‘are 25.5 thousand to one. But if you hold the full £50,000 that would potentially mean winning about two prizes a month.’
There is the remote potential that one could be the £1m prize.
But does ackerley hope to win the premium bonds himself?
alas, his big regret is that by taking the job, he had to cash in his own haul, to eliminate potential conflict of interest – otherwise he’d definitely have a flutter!