The Chancellor is doing everything possible to get me to spend, but look around: can you blame me for saving for a rainy day?
I was first introduced to the supposed ancient Chinese curse “may you live in interesting times” at 12 years old, following the 9/11 attacks on New York, and the feeling that the world we had grown up in had permanently tilted on its axis. I later learned that the Chinese origins of the phrase are dubious – it was probably coined by British politicians facing fast-moving events of their own – but still, it has become apt for my millennial generation.
In 2008, I walked up Northumberland Street in the centre of Newcastle on my way to my university Freshers week, practically as savers queued outside Northern Rock to try and remove their money after the Bank of England pulled its support for the lender.
Like many people now in their mid-30s, I studied for my degree under the shadow of the global financial crisis, and graduated into a labour market trying to figure out how it would cope with the new norms. In the summer of 2010, as I walked across the stage to collect my degree, the coalition government began implementing its policy of austerity.
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I have always been cautious with money – thanks to my parents having to scrimp and save to provide a comfortable life for me as a child – and have never been a spender. Preferring to save for when I want a new iPad or a more plush holiday than a Jet2 getaway. Given my tendency not to splash out, beyond a weekly meal out, I try to put money away for a rainy day. As I grew into adulthood, this mindset was beneficial, as the chaotic events kept on coming.
By 2016, I was in my mid-20s when older parts of the population – many retirees who’d already made their money and were sitting pretty – helped take us out of the European Union with the Brexit vote. Still struggling with the consequences of austerity, prices went up and got higher right as I began to have more disposable income and became more secure in my job.
We officially left the EU in January 2020, my 30th year on the planet, as the Covid pandemic struck and sent the economy into a nosedive. Combined, it’s something we’re all still financially (and in other ways) recovering from half a decade later.
Now, as I reach my mid-30s and am trying to settle down and start a family, the Chancellor Rachel Reeves has put in place, seemingly, yet another financial roadblock for millennials to try and swerve; another mountain to climb. Is it little wonder my generation is exhausted from it all?
Combined, the changes implemented in the recent Budget mean that those earning £52,000 will reportedly be the biggest losers, rather than the uber rich. That’s down to a purported “triple-whammy” of tax changes: freezing income tax thresholds, holding firm the salary point at which you start to pay back student loans and reducing the level at which you can contribute to your pension through salary sacrifice schemes.
This will have an impact on my ability to reduce my net income, something I’ve taken advantage of as my career has developed yet tax thresholds have remained static. Being dragged anywhere isn’t a pleasant experience, and fiscal drag is no different.
In making these choices, I feel like Reeves is targeting people like me: middle-aged, mid-career millennials who have tried to be sensible with their cash and savings – a consequence of living through too many rainy days in our lifetime already.
By slashing the amount available to save into a cash ISA if you’re under 65 – from April 2027 – we’re being compelled either to take higher-risk bets by investing in the stock market, or see opportunities to try and save for retirement dwindle.
Of course, the Chancellor’s goal in doing so is to unlock cash that is increasingly being put into bank accounts and isn’t washing through the economy, with the goal of stimulating spending.
More than a third of households tell the Bank of England they’re saving more than usual because of a “greater worry about emergencies”. The Bank itself said “measures of uncertainty have, on average, been much higher over the past five years than in the previous decade.”
The proportion of disposable income Brits are putting into banks has risen from less than five per cent in the immediate aftermath of the pandemic to more than 10 per cent today. The average in the first 20 years of the millennium was just 7.3 per cent.
I’d like to think, then, that a general discomfort with avenues to saving being closed off is understandable. Scholars suggest Germany is so parsimonious with its cash at an individual and governmental level because of the trauma it experienced from hyperinflation in the 1920s. A generation of people my age are similarly scarred from successive setbacks.
“Granted, some of the recent changes announced to ISA rules are controversial,” says Rajan Lakhani, head of money at smart money app Plum. But, Lakhani adds, people should not feel “like they’re being forced to invest to pay less tax”. “Don’t let it deter you from investing”.
Lakhani explained that for people like me who are reluctant to try out the rollercoaster of the stock market, there are alternatives. “There are low-risk funds, tech-focused funds, global funds and more – the choice is yours, but it takes away the work of having to constantly eyeball individual stock movements, and allows you to be more passive with your investing,” he says.
So what should we do? Keep calm and carry on is the expert advice. “Our overarching advice would be not to panic or make rash decisions: there are still options available to make your money go further over the long term,” says Anna Murdock, head of wealth planning at JM Finn. “Don’t be put off by the ISA restrictions…[they] will continue to be a tax efficient savings vehicle and the restrictions should not reduce your willingness to contribute £20,000 each year.”
But given the constant succession of “interesting times”, is it little wonder that I don’t want to splurge on fripperies? When I don’t feel like I can trust those meant to be custodians of our economy to not mess things up? People of my age are being – and have been – screwed from all angles, and it’s hard to know what to do.
For now, I’ll be following the experts’ advice: take advantage of the timeframes until things are implemented – and do so quickly. “Review your workplace pension contributions now, especially if your employer offers salary sacrifice – and consider maximising this by as much as you can afford before the change is introduced,” says Murdock.