INCREASING THRIFT

Evening Post, Volume CIII, Issue 53, 4 March 1922, Page 9

INCREASING THRIFT

SALE OF SAVING CERTIFICATES

LORD ISLINGTON'S REPOET.

(WOM OUR OWN COHSUPONBEfir.)

LONDON, 12th January.

Lord Islington, chairman of the National Savings Committee, had very gratifying figures to bring forward at a meeting yesterday in Rochester. War savings certificates became popular as soon as they were introduced in 1916— they appealed to people who had not largo sums of ready money to invest. The price of 15s 6d each was within the means of most people, and. additional certificates could be bought as opportunity offered. With interest added five years after purchase each certificate would be worth £1;. no dividends were meantime to be received.

A point that appealed to the majority of buyers was • that' investment in this form of savings was wholly exempt from income tax. No purchasers could invest more than £387, which sum at the end of the five-year period first named would then be £500. :,-...'

Some time ago the investing public i were asked not to withdraw their money thus invested, but to allow it to remain for another five years, by which time each original 15s 6d would become 265. Each year^from the first year the certificate has been worth a little more, so that investors who have wanted the cash have received 15s 9d for each one realised at the end of a year from the date of purchase; at the end of three years it has been worth 17s 9d. Lord Islington stated that the, number of savings certificates sold from 1916 to 31st December, 1921, totalled 493,----997,705, representing a cash investment of £382,848,221.. During 1921, 53,556,----315 certificates were sold, the cash value being approximately £,41,506,144: The average weekly sales throughout last year had been 1,029,929 certificates. The lowest weekly total recorded was during the coal stoppage. The figure was 760,832, and that| it should be so high during such a period pointed to the growth of a steady savings habit. The amount repaid through the encashment of certificates was less in 1921 than in 1920, and this fact also pointed to the growth 1 of a steady habit. The number of savings associations formed last year was 1725, as compared with 981 in the ivear preceding. The' present vitality of the savings effort in this country was shown by the following comparison: For the last three months of 1920 the number of certificates sold was 11,867,260. For the last three months of 1921 the number was 14,758,368. In the former period the number of associations formed was 275; in the latter, period the number was 700. . r

Since October, 1921, when the extension of loan on certificates sales to wider local purposes was made, local authorities had shown increasing interest in this source of local finance, and 27 applications (a larger number than in any previous month) -were received for loans involving a sum of £354,298. This increase was significant, showing that authorities had been quick to realise the value of the extension, and suggesting that this factor in local finance was likely to develop considerably in the future.

A MAGNET FOR SMALL INVESTORS.

At the turn of this year the announcement was made by the Treasury that the price, of the 1 national savings certificates was to be increased from 15s 6d to 16s as from Ist April; the value of to accumulate to 20s in five years, and to 26s in ten, as now. Naturally the announcement came as somewhat of a surprise,. but it has been recognised for some time past that the return to investors on these certificates is out of all proportion to the yield given by other British stocks. • Even allowing for the increased price, these certificates will still be one of the safest and most profitable investments.

Apart from the fact that they constir, tute the only real tax-free security— the income arising from other so-called " tax-free" investments having to be included in one's income-tax return — they are entirely immune from capital depreciation. 'At the hew price of 16s the certificates, if left uncashed for five years, will give the holder 4s in interest, which is equivalent to 4£ per cent/ compound interest for five years, against 5J per cent, on the present basis. For the second five years'(during which the value of the certificates increases from £1;-to £1 6s) the interest will still be 5i per cent, compound as at present. , , . Despite the additional sixpence in purchase price, the certificates will remain one of the best possible British Government investments for those who are liable to the lull income-tax rate of 6s in the pound on their ordinary investment income. Nobody can hold more than 500 .certificates (costing £387 10s now, or £400 if bought on or after Ist April), but there is nothing to prevent all tKe members of one family, from having 500 each. Certificates taken in payment of war gratuity are not reckoned in the 500.

After Ist April, 1922,. there will be two kinds of certificates in existence: (1) 16s certificates then on, sale, and (2) 15s 6d certificates, no longer on sale, but bought before Ist April. A person's maximum holding will still be 500 certificates, whether they are--15s 6d certificates or 16s certificates, or a combination of both.. " There is a privilege which enables a holder of certificates to keep them as interest-bearing securities until his last bought certificate is ten years' old," explains an official of the committee. " This means, of course, an extension whereby the earlier bought ■certificates may be made to run on well beyond ten years. 1 For the purpose of this extension, the 15s 6d certificates and the 16s certificates are treated separately. A holder, may still exercise the privil-, ege of this extension for His 15s 6d certificates, considered apart from his 16s certificates. He may also apply it to whatever number of 16s certificates he may buy in the future. But he cannot lump both kinds together and apply the privilege to the lot." A BENEFIT TO INDUSTRY, As Sir William Schooling, K.8.E., points out, to a large extent certificate^ money is provided by a section of the community which would not ordinar^y lend its money, to local authorities. It is a fresh source of loans, and if the needs of the local authorities can be met in this way they will not, compete with industry to the same extent as formerly. Hence, when trade revives and capital is needed for industrial undertakings, there will be a larger supply of money, and probably at a lower rate of interest, than would be the case if the local authorities were unable to borrow certificate money. It is erroneously supposed that it is "bad for trade" for people to save money, and saving is sometimes thought to diminish employment. It is manifest, however, that if people receive interest on their money, the interest must be earned, and for the interest to be earned the .capital must be invested in productive enterprise of one kind or another, which involves employment, and is likely to increase the i wealth of the community to a much.

greater extent than if the money were ' more or less frittered away by individuals in temporary gratification. Moreover, it is manifest that if an individual accumulates his money' for a time, his ultimate spending power is greatly increased. If, for example, he can obtain £5 Is 6d per cent, per annum ('upon" his money, and will save £10 a year for fourteen years, he will have enough money to bring in an income of £10 a year in perpetuity.... , CERTIFICATE CONDITIONS, It is provided that if an individual has a number of certificates of different dates,'he may retain them all until the latest dated certificate is ten years old, and then cash them all at,the same time; on these certificates . he receives one penny per month per certificate at the new price of 16s, but holders of certificates which cost 15s 6d will not be allowed to retain them to a later date .than ten years after the purchase of the last 15s 6d certificate. For this purpose the certificates at 15s 6d to 16s are treated as belonging to different series. The public having received three months' notice that the price of certificates is to be increased, it may be taken for granted that all sensible people who have not the maximum holding will buy as many certificates as they can before the.price is raised. After the change has been made the popularity of the certificate is likely to continue undiminished, because it will still be the most convenient and attractive security in existence.