Expert View: When it comes to savings, we're all amateurs

I dined with a group of fund managers this week and, as it does so often, conversation turned to savings and retirement plans. It emerged that whatever capital each of them had was tied up entirely in their homes. If this is the state of UK investment professionals' personal finances, what hope for Mr Average?

I dined with a group of fund managers this week and, as it does so often, conversation turned to savings and retirement plans. It emerged that whatever capital each of them had was tied up entirely in their homes. If this is the state of UK investment professionals' personal finances, what hope for Mr Average?

The level of financial awareness in this country is woefully low. By simply being a reader of a Sunday business section you are easily in the top 10 per cent of financial sophistication. Why are we not taught at school the pitfalls of credit card borrowing, the dangers of floating rate mortgages, and how to invest for the long term?

This educational failing was given some attention in the report by Sir Richard Sykes, published on Wednesday, ambitiously called Restoring Trust: Investment in the 21st Century, and dealing with the recent collapse in UK savings and investment. But, sadly, this long-awaited report quickly degenerated into a rant against the financial industry.

This is not to deny there has been an appalling series of scandals - endowment mis-selling, Equitable Life, split-capital trusts etc. But these are hardly confined to the UK. The Americanisation of business values has seen an unwelcome decline across all industries. Indeed, Sir Richard's own company, GlaxoSmithKline, is itself the subject of an ethical enquiry into the suppression of research reports. The loss of investor confidence is surely much more complex - due not least to the bear market they have just lived through.

Sir Richard's background in the drugs industry, originally on the scientific side, hardly qualifies him to expound on the crisis in savings. No wonder the report wanders off into loosely associated areas such as corporate mergers and executive pay - areas Sir Richard is familiar with, having led Glaxo through a series of mergers. As for pay, he recently received a "bonus" of nearly £1m for not cashing even more valuable share options.

But then, Sir Richard wasn't chosen for this job. Although the Secretary of State for Trade and Industry, Patricia Hewitt, gave him some backing, this is not an official report. Why can't this Government make up its own mind on how to take the savings industry forward? Its contribution to the crisis is noteworthy. The removal of pensions tax credit, and the tacit acceptance of the end of defined benefit plans, have destroyed a huge part of the UK's retirement provision. The Chancellor has reduced the tax benefits of ISAs and even threatened to phase them out altogether. I suspect Gordon Brown doesn't really care about middle-class savers. He should reconsider.

Because if the British people are not saving money, they're spending it. This week's consumer spending statistics were alarming. The loss of faith in investments has coincided with a return to bricks and mortar, threatening a price bubble. Mr Brown's spurned middle-class saver is making this crisis worse by dumping billions into rental housing.

Mr Brown has tinkered and taxed, yet stood by as a crisis in savings and investment has grown. He has ensured UK savings are the most regulated on earth, but to what avail? Mis-selling will always occur while customers lack even the most basic financial education. Savers' next lesson could be a painful one - that houses are not as safe as investments.

christopher.walker@tiscali.co.uk