UK households have fallen behind other European households when it comes to the amount they could be saving each year – slipping behind both Spain and Italy and only just ahead of Portugal, according to the Post Office’s Future of Savings Study. The UK currently sits eleventh in a league table of average potential household savings across advanced economies.*
The study, conducted alongside Cebr, examined the savings habits of 18 countries with a comparable cost of living** and found that since 2010, the average amount each UK household could potentially save each year has fallen by more than 10 per cent to £3,781. This is almost £5,000 less than Australia, which has the most money available to save, and £3,286 less than the highest placed European country, Switzerland. Should this trend continue, Post Office Savings predicts that by 2018 this amount will have fallen to as little as £3,000 and will place the UK below the majority of advanced European economies in the savings league table.
Worryingly, this makes UK households far more vulnerable to economic shocks, such as a repeat downturn, redundancy or wage cuts.
What do other developed households save?
While the economies of Spain and Italy are still struggling in comparison to the UK, the average potential household savings for each country exceeds that of UK households, £4,644 and £5,409 respectively in 2013. Of all countries analysed, Estonian households had the smallest amount of money available to save each year, with only £1,039. Interestingly, across the pond, the US fares worse than the UK, with a pot of only £3,442.
When it comes to trends, nearly all households – regardless of country – experienced a peak in potential savings in 2012, with many still keeping a close eye on their finances. However, this all changed in 2013, with the majority of households’ potential savings pots falling again – the exception to the rule being Australia. Australian households managed to buck the trend and found themselves in the enviable position of being able to save more, with money available to save, or potential savings, growing from £8,517 in 2012 to £8,746 in 2013.
Henk van Hulle, Head of Savings comments: “While it’s great UK households feel more confident about their finances, it’s worrying that we’re seeing savings rates fall so soon after a recession. While spending is undoubtedly good for the UK economy, it’s not good for savers to neglect their pots and leave themselves vulnerable to a change in circumstance or wider economic shock.
“It’s all too easy to forget about the importance of savings, or fall into the trap of thinking it’s not worth it, because you don’t have much to save. However, saving a little and often, and within your means, can make a big difference, especially with the cost of living continuing to rise. And for us to create a long-term, sustained economic recovery, a strong savings culture is key.”
Notes to editors:
*Potential saving is the amount of money left over after disposable income minus total expenditure. Research carried out by Cebr on behalf of Post Office in April 2014.
**To attain an average household potential saving per annum for different countries around the world Cebr utilised data from Eurostat, OECD and World Bank. Firstly to attain disposable income Cebr converted disposable income for all countries from Purchasing Power Parity (PPP) terms into sterling value using a standard PPP to dollar and then dollar to sterling exchange rate -provided by the World Bank statistics. From here Cebr utilised readily available saving ratio data on each country provided by OECD and Eurostat to calculate the potential saving per person in each country. Finally Cebr multiplied this by the average person per household in each country to attain a household (mean) potential saving per annum figure.
[Purchasing power parity means that a bundle of goods should cost the same amount of money in the UK as it does in France once you have taken into account the exchange rate]
To allow for a fairer international comparison of household potential saving, Cebr has included countries where the cost of living is broadly similar. This means that we can compare the household potential saving per annum in the United Kingdom with countries such as France and Norway, who both have similar costs of living but markedly higher potential to save.
The Post Office has won the following awards for its popular savings range:
- Best Direct Savings Account Provider – Your Money Direct Awards 2013
- Most Consistent Fixed Rate Bond Provider - Moneynet Personal Finance awards 2013
- Best Fixed Rate Provider – Moneyfacts Awards 2012
- Trusted Provider – Moneywise 2012
- Best ISA provider for consistency of rates – Moneywise 2012
- Best Fixed Rate Bond Provider – Moneynet Awards 2012
- Best Savings Provider – MoneySupermarket Supers Awards 2011
- Best High Street Savings Provider - Consumer Moneyfacts Awards 2011
- Best Savings Account for consistency of rates - Moneywise Awards 2011
- Best Savings Provider - What Investment Readership Awards 2011
- Best Fixed Rate Bond Provider - Moneynet Awards 2011
- Best Fixed Rate Savings Provider - Moneyfacts Awards 2010
About the Post Office
The Post Office (Post Office Limited) has an unrivalled national network of over 11,500 branches across the UK, more than all the high street banks combined, and sits at the heart of communities in Northern Ireland, Scotland, Wales and England. The Post Office has made a commitment to maintaining its network of branches at its current size and reach. It provides around 170 different products and services spanning financial services including savings, insurance, loans, mortgages and credit cards; Government services; telephony; foreign currency; travel insurance and mail services.
The Post Office serves over 17 million customers a week and a third of small businesses. Some 99.7% of the total population live within three miles of a post office and over 97% live with one mile of a post office. For many rural communities, the post office is the only retail outlet. Post Offices branches remain highly valued and trusted, and are the focal point of many communities. For more information, visit http://www.postoffice.co.uk/.
Bank of Ireland UK has been the exclusive partner to the Post Office for the provision of financial services and products since 2003. The partners’ venture has become one of the UK’s fastest growing financial service providers with almost three million customers and a savings book of £18 billion and the leading supplier of foreign exchange in the marketplace.
Bank of Ireland has supported customers in the UK for many decades. Bank of Ireland UK plc, is a wholly owned subsidiary of Bank of Ireland Group, separately incorporated and is authorised and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Activities related to the Post Office partnership are conducted within this entity and as such, all retail deposits up to £85,000 with the Post Office are protected under the UK’s Financial Services Compensation Scheme and ring-fenced in the UK. At 31 December 2012 Bank of Ireland (UK) plc had a loan to deposit ratio of 77% with customer deposits of £23.3 billion utilised to fund customer lending of £18 billion (primarily comprising £12.6 billion of UK residential mortgages). In November 2010, in the UK Government's report 'Securing the Post Office network in the digital age', Bank of Ireland UK received the explicit support of the Coalition Government for its continued partnership with the Post Office.
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