Thatcher, who died aged 87 on April 8, was determined that people should be financially independent rather than reliant on the state, and so encouraged home ownership and a new savings culture by enabling millions of people became shareholders for the first time.
However, critics claim that some of her policies, such as allowing people to take out bigger mortgages than they ever had before, and making other sources of credit much easier to come by, have resulted in many of the problems people still struggle with.
Here, we look at Thatcher’s financial legacy, and the impact it has on us today…
1. Home ownership
Thatcher’s ‘Right to Buy’ scheme gave council tenants the opportunity to own their home for the first time - although opponents argue that it has resulted in a massive shortage of social housing today.
Around two million people are thought to have bought their council homes since the Housing Act of 1980 became law and enabled people to purchase their properties at significant discounts, based on how long they had lived there.
The current government has recently taken steps to encourage more tenants to exercise their Right to Buy their council house by increasing the maximum discount that buyers can get off the market value of their home to £75,000 outside London, and £100,000 in London.
It has also introduced the ‘Help to Buy’ scheme to provide financial help to homebuyers who wouldn’t otherwise be able to afford to buy a home. This is essentially made up of two schemes – “equity loan” where the government will loan individual up to 20% of the value of a new build home and “mortgage guarantee” where lenders will be incentivised to make more mortgages available for people with small deposits.
Read more about the 'Help to Buy' scheme in Mark Hooson's article.
Many people may think that tax-free individual savings accounts (ISAs) are a relatively recent form of savings scheme, having been introduced in 1999, but their predecessors personal equity plans (PEPs), were first introduced by Thatcher’s government in 1987.
The original aim of PEPs was to encourage individual share ownership, although you can split your allowance and hold half in cash and half in stocks and shares. This tax year, you can invest up to £5,760 tax-free in a cash ISA, and the same amount in a stocks and shares ISA, or you can invest the full £11,520 allowance in stocks and shares.
According to independent financial advisers Hargreaves Lansdown, a couple that has taken full advantage of ISAs and PEPs, and invested the maximum contribution each year, would have sheltered over £400,000 from the tax man so far – and that’s before any returns are factored in.
The mortgage market in the 1970s was restrictive and confined to a small number of lenders.
Under Thatcher, UK capital markets were opened up and exchange controls were lifted. This meant that building societies and banks could lend more, so people could borrow several times’ their salaries. Increased competition led to a wider range of products too, including fixed and capped rate deals, whereas previously most people were only offered the option of a standard variable rate mortgage.
Mortgages not only became easier to get, but the credit card market boomed, and there was a huge increase in the number of retailers offering credit.
4. Share ownership
Before Margaret Thatcher came to power, relatively few people in Britain owned shares directly. However, by the end of the 1980s, there were well over 10million private shareholders in the UK.
This was due to wave of privatisations, which saw publicly-owned assets, such as British Gas, British Airways, British Aerospace and British Telecom sold off. British Telecom, for example, was privatised in 1984, enabling 2.1million investors to buy shares which doubled in value on the first day.
Brian Dennehy, of financial website FundExpert, said: “In 1986 it was the turn of British Gas to be privatised. Four million people applied for shares, 1.5million received an allocation and many sold within the first few days for another handsome profit.”
In the 1970s less than 10% of people in Britain owned shares directly. By the end of the 1980s a quarter did.
Gavin Oldham, chief executive of The Share Centre, said: “Margaret Thatcher’s legacy to the City – and to the current generation of shareholders – shouldn’t be underplayed. Her decision to privatise through issuing shares to the general public helped kick-start the process of democratising shareholding, opening the door to a new way of personal share ownership in the UK.”
Personal pensions were launched by Thatcher’s government in July 1988, while compulsory occupational scheme membership was scrapped the same year. Unfortunately, this led to the widespread mis-selling of personal pension schemes by the life assurance industry which resulted in huge mis-trust of the pensions industry.
Tom McPhail, of independent financial advisor, Hargreaves Lansdown, said: “Her political ideology emphasising individual rights and responsibilities rather than collectivism can still be seen today. Pension provision may be focused through the workplace, but with the end of final salary pensions and the move to money purchase arrangements, the question of what people get to live on in retirement is increasingly dependent on the decisions which they take for themselves.”
Last year the current government introduced the auto-enrolment pension system, which aims to give up to 10million people access to a workplace pension for the first time. If you are at least 22 years-old and earn more than £9,440, your employer will have to automatically enrol you in a pension scheme over the next five years, although you can decide to opt out if you want to.
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