Jeff Salway: Innocent savers left to pay high price for failure to tackle crisis

Savers and pensioners are the “forgotten victims”, he said. “They are innocent bystanders and it’s simply not good enough for the government to walk on by,” he added.

With no interest rate rise on the horizon and inflation stubbornly sticking around the 4 to 5 per cent mark, the time has come for the government to help savers.

In the past two weeks alone we have seen living costs rise again and the withdrawal of inflation-linked bonds by the Post Office and NS&I, both because of unprecedented levels of demand. Risk-averse savers can now choose between watching their money erode in value or taking a chance with more volatile assets. And while equities are an effective hedge against inflation, they’re simply unsuitable for many savers, particularly the many pensioners with nothing to fall back on.

Over-50s group Saga has called for a rise in the individual savings account (Isa) limit for older savers, hit so hard by the loss of income from their savings. A more effective move would be to allow savers too risk averse to put their money in other asset classes to use their entire Isa allowance for cash. Temporarily suspending income tax on taxable savings accounts would deliver an additional boost.

Savers have lost out on £43 billion since the Bank of England cut interest rates to 0.5 per cent in March 2009. Over the same period, mortgage borrowers have benefited to the tune of more than £50bn, according to the Bank’s own figures.

As calls grow for more fiscal stimulus – a move likely to drive inflation up further – policymakers have a duty to address the plight of savers, but don’t hold your breath.

And the source of the above quote? None other than Chancellor George Osborne, speaking during the banking crisis.

His sentiments were right on that occasion, when he pledged to protect savers from the impact of low interest rates if elected to government. Sadly, however, walking on by is clearly good enough for Osborne now.

The latest drop in the number of borrowers falling behind on their mortgage repayments, and a similar decline in repossessions, is sadly misleading.

The Financial Services Authority (FSA) revealed that while the number of homes in arrears has fallen, the proportion behind on their repayments by more than 10 per cent has increased in the past year. That’s because the statistics are being distorted by lender forbearance, with borrowers who would usually face repossession allowed to stay in their homes.

The FSA believes that almost two-thirds of homeowners in difficulty are being shown forbearance, and those borrowers are not showing up in the official arrears figures.

There are now concerns that lenders have taken it too far. From being too eager to repossess, there’s a feeling that for many banks forbearance is now the automatic response to borrowers in financial difficulty.

That lenders are doing more to help struggling borrowers is welcome, yet they are storing up trouble for both themselves and for those customers. Forbearance merely postpones the inevitable for many people a long way behind on their repayments and potentially makes matters worse in the long run, prolonging the spiral into inescapable debt.

And it could come back to bite the banks too, with the International Monetary Fund warning that the approach is obscuring lenders’ real exposure to risk.

A balance has to be found between helping those in trouble and making matters worse for them, because the situation is a ticking time-bomb.

I was called at the weekend by someone representing a group called National Money Savers – and there’s a good chance they’ve called you too. They claimed to be conducting a survey and offered the chance of winning vouchers for taking part. But it’s merely a scam aimed at obtaining as much of your personal details as possible, presumably to sell to organisations that can exploit the data.

Take part in the survey and the chances are that you’ll later be bombarded by sales calls from other companies, without a money saving voucher in sight. They’ll even get through to you if you’ve got the telephone preference service (TPS), which blocks sales calls but not surveys.

If you get cold-called by any survey, refuse to pass on details of your identity, ask how they got your number and for it to be removed from the list.

Times of financial hardship provide fertile ground for scams. There’s one rule that’s worth keeping in mind though: if it sounds too good to be true, it probably is.