Rescue the savers badly hit by the recession

Apr 22 2009 Ian Taylor, MP for Esher and Walton

Savers and pensioners are suffering badly in this recession. Over the past year, someone with £10,000 of savings in an easy access high street account has seen their income halve from £50 a month to less than £25.

So, having been careful and put money aside for a rainy day, living standards are falling as the recession hits home. Of course, cuts in the interest rates by the Bank of England are absolutely necessary to try to restimulate an economy that has been wrecked by mismanagement.

But the unavoidable collateral damage on savers is devastating.

In circumstances like these, the Government should be there to help. We need a plan to deal with the debt crisis now and for an economy rebuilt on saving and investment.

sions have been undermined. We should increase age-related personal allowances for those aged 65.

Third, we need action on annuities. At the age of 75, pension holders are forced to buy annuities that will fund their old age.

However, during a financial crisis with low interest rates, this means that many are being consigned to a lower income for the rest of their life.

We need to show common sense and compassion on this issue by perhaps replacing the current annuities rule altogether.

This would allow more flexibility and suspend the requirement to annuitise accrued pensions at the age of 75. This small change could make a real difference.

By the time you have read this article, you will know if the Budget has helped people in the categories I have mentioned.

First, action is needed to help savers.

At the moment, income from savings in bank accounts suffers from double taxation - the money is taxed when you earn it and then any interest is taxed again.

For basic rate taxpayers, this unfair double taxation of savings should be abolished. The biggest benefit would go to people who are dependent on income from savings and do not have other income.

This would not only help today, but would encourage more saving in the years ahead.

Second, action is needed for pensioners. Over the past decade, private sector pen-