High banking fees discourage savings

High banking fees discourage savings

Fees charged on savings accounts discourage people from saving, who then use credit more than is needed, the National Credit Regulator said today.

Gabriel Davel, the chief executive officer, testifying at the public hearings of the Competition Commission's Banking Enquiry in Pretoria, said that with the exception of one financial institution the returns on all entry level savings accounts were negative. "If people see negative growth on their savings they stop saving. It is the logical thing to do," Davel told the enquiry which is into its third day of hearings.

He said a study indicated that the negative returns were as much as 19%, if return debit fees were brought into consideration it was as high as 43%. "The effect is that people don't save so when there is a crisis they have to borrow money, which brings on debt," Davel explained.

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Raise ISA limit, says savings industry

Raise ISA limit, says savings industry

LONDON (Reuters) - Industry experts have welcomed government plans to extend tax-free savings indefinitely but called for a rise in investment limits on ISAs.

The 7,000-pound annual limit has been unchanged for seven years.

Ed Balls, Economic Secretary to the Treasury, said on Wednesday the government would simplify the ISA regime and guarantee its future beyond 2010.

The tax-free accounts were introduced in 1999 for an initial 10-year period. Of the 7,000 pounds per year that individuals can pay into an ISA, 3,000 pounds can be held in cash.

Peter Vipond, director of financial regulation and taxation at the Association of British Insurers, said the news acted as a "signal to consumers that the government will provide an environment that encourages a savings culture".

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