The level of saving in Britain in the first quarter of this year was the lowest since records began in this case 1963, according to figures published last week by the Office for National Statistics. <\/p>\n
Over those intervening 54 years the British, on average, have managed to save 9.2% of their income every year. <\/p>\n
However, last year taxes went up but people felt confident enough to keep on spending even with less money in their pocket. <\/p>\n
As a result, in the first quarter, the savings ratio dropped to just 6.1%. <\/p>\n
The spending spree continued throughout last summer and by the final quarter of last year, savings had virtually halved again to 3.3%. <\/p>\n
Then they halved again: in the first three months of this year it was an almost invisible 1.7%. <\/p>\n
It has been calculated separately that 16 million people in the UK have less than 100 to their name though that obviously includes a lot of children and more than 2.5 million of the adults in this group live permanently under water on their credit cards. <\/p>\n
The financial services industry tends to think it is the solution, but it is in fact part of the problem. <\/p>\n
Every week someone somewhere in the business warns of the dire consequences which will befall the population in its old age if it does not immediately enrol in a pension scheme, an ISA, or even open a deposit account. <\/p>\n
But they ignore the fact that there is a generation of savers out there who once believed them and whom they subsequently let down. <\/p>\n
The world is full of people who bought 25-year with-profits endowment policies in the late Eighties and early Nineties, saved religiously every month, and were then presented with a final cheque by the UK saving industry which was for less than they paid in over all those years. <\/p>\n
The insurance companies think they have put this problem behind them by forgetting about it selling off their with-profit books of business to a consolidator and washing their hands of the continuing responsibility. <\/p>\n
Those policyholders who have, in effect, been cut loose and abandoned by the organisation they trusted are hardly likely to advise their children the millennials to sign up to their successors. <\/p>\n
Similarly with pensions. One of the five largest pension schemes in the UK is the Pension Protection Fund, an organisation which was brought into existence a little over a decade ago to put some kind of rescue in place for pension schemes which had failed elsewhere. <\/p>\n
Today, it has assets of 28 billion, the aggregate of all those failed schemes plus some investment return and has paid out more than 3 billion. <\/p>\n
The fund is a big improvement on the void which existed before and it has more than a quarter of a million members who depend on it because they had previously been in schemes that failed. <\/p>\n
Unfortunately but necessarily, to keep costs manageable it pays out to most of them rather less than they had previously been promised in their original pension schemes. <\/p>\n
Though grateful to the fund that leaves another 250,000 people who might reasonably feel let down by the long-term savings industry. <\/p>\n
But the biggest problem of all is that the naked self-interest of the savings industry drives it to design products which suit itself not its customers often requiring quite large initial lump sums, a commitment to regular payments and restrictions and penalties for early cash withdrawal. <\/p>\n
It then tries to sell these to the public, and the offerings are studiously ignored. <\/p>\n
When the public dont buy them, rather than change the products (as should happen in a capitalist system), the savings industry demands instead that young people be educated as if this was North Korea to turn them away from being feckless. <\/p>\n
However, if alternatively, the savings industry were to look at the problems facing young people mountains of student debt, stagnant incomes and unaffordable housing and set about designing products which might actually help, it might get a better response. <\/p>\n
We shall soon see. <\/p>\n
This week Seedrs, the crowdfunding site, began raising money for Plum which has a product specifically designed to help non- savers to save. <\/p>\n
To people of my generation this sounds positively Orwellian, but it is also very clever. <\/p>\n
Artificial intelligence can predict financial behaviour by closely monitoring a persons existing pattern of spending and comparing it with what has gone before. <\/p>\n
Thus the founders of Plum have developed an algorithm which monitors a persons bank account. <\/p>\n
It then notes every couple of days when, on the basis of its predictions, there might be a small amount of cash which could be diverted to savings, without impinging on the persons lifestyle, and duly makes the transfer. <\/p>\n
It is the electronic equivalent of emptying ones pockets into a jar at the end of the day, but with the advantage that it will do it only when it believes you will not need to dip back into the jar. <\/p>\n
Interestingly, before launching, the companys joint founders road-tested the idea. <\/p>\n
One of them set aside all the money left in his bank current account at the end of the month; the other relied on the algorithm to analyse his transactions and calculate how much he could safely put aside during the month. The algorithm won hands down. <\/p>\n
The implications of this are profound because if artificial intelligence can predict financial behaviour then it paves the way for a complete solution to personal financial management. <\/p>\n
It would be a simple matter then to link those savings flows into an automated investment platform such as EQ Investors or Nutmeg and thereby get people not only saving but investing without having to think about it. <\/p>\n
And it would pose an existential long-term challenge to existing fund managers whose business models rely heavily on attracting clients who already have money. <\/p>\n
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Read the rest here:<\/p>\n
Anthony Hilton: How artificial intelligence can help us save - Evening Standard<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" The level of saving in Britain in the first quarter of this year was the lowest since records began in this case 1963, according to figures published last week by the Office for National Statistics. Over those intervening 54 years the British, on average, have managed to save 9.2% of their income every year. However, last year taxes went up but people felt confident enough to keep on spending even with less money in their pocket. Continue reading