- Amount UK households have available to save (‘potential savings’) has increased by £124 in the last year – to £4,784*
- …but 13 million adults (26 per cent)** saved nothing over the last 12 months
- Eight million adults (17 per cent) have never saved at all
- Forecasts indicate the average amount available to save is expected to rise by 17 per cent by 2020 to £5,591 but many UK households are unlikely to feel the benefit
The amount UK households have available to save has increased over the last year, according to Post Office Money’s Future of Savings study – yet 13 million adults (26 per cent) saved nothing at all.
The study compiled by the Centre for Economics and Business Research (Cebr) for Post Office Money looks at the changing trends in UK savings, and forecasts how consumers’ savings habits are set to change in the coming years.
Improvements in the economy have led to the amount of money available for UK households to save (their ‘potential saving’) increasing by an average of £124 per household over the last year. Once housing and living costs – right down to holidays and pints bought in the pub - have been taken into account, the amount left available to save is now on average £4,784 per household.
A worrying number of people are not taking advantage of this improvement in their potential savings. More than one in four UK adults (26 per cent) took a savings ‘gap year’ and didn’t put away anything in the last year, while over eight million (17 per cent) have never saved at all – leading to fears of a UK savings ‘black spot’ with millions of UK adults unprepared for the inevitable rainy day.
Commenting on the findings, Nick Kennett, Director of Financial Services at Post Office Money said: “Following several years of austerity households have loosened their purse strings and started spending again, with the low rate of inflation and fall in unemployment contributing to their increasing financial confidence. However, while they enjoy the brighter outlook many consumers have reduced the amount they are saving – or in some cases stopped saving altogether. Although the cost of living crisis appears to be easing for many, it is important for them to think about the future and ensure they take a long-term approach to their savings. By cultivating a habit when times are good they will be in a far better position should things – inevitably – become more challenging again.
“A particular cause for concern is the eight million UK adults who have never saved at all, and are unlikely to have a safety net should they need one. While it’s not always easy to save, putting a little to one side on a regular basis can make all the difference in the long run; there are no ‘quick-wins’ when it comes to achieving long-term financial goals, such as saving for retirement, and so it is important to plan ahead.”
A host of factors including a recovery in inflation and a future increase in interest rates from the Bank of England would mean the level of potential savings for UK households could decline in 2016, falling to an average of £4,778. These factors will place a strain on household finances as key costs for families, such as mortgage interest payments rise from their current lows.
By 2020, the average amount available to save will have increased by 17 per cent overall, leaving UK savers with approximately £5,591 at their disposal. However, due to factors such as inflation, this will only be equivalent to £4,712 in today’s prices - meaning that families could effectively end up marginally worse off.
Nick Kennett adds: “While overall potential savings may improve in the next five years, many households will not feel the benefit of this – and therefore need to consider and make provisions for the immediate unforeseen circumstances that may arise, such as a broken boiler or car, for instance.”
With the economic recovery and increased consumer confidence, levels of day-to-day spending have risen in recent years, causing the levels of potential saving to fall back across much of the UK. However, the average London household has seen their potential savings fall to £6,599 this year, down from the £10,306 in 2010, savers in the capital still have significantly more available to them than the next highest region, the South East, which had an average of £5,899 available to save this year. Northern Ireland remained the region with the lowest available savings with only £1,087 at their disposal.
*Research carried out by Cebr on behalf of Post Office Money in July 2015 as part of its second annual ‘Future of Savings’ study
**Research conducted by Opinium on behalf of Post Office Money between 8th and 11th September 2015. 2,002 online interviews took place. 26 per cent of UK adult population (50,909,000 UK adults) = 13,236,340. 17 per cent of UK adult population= 8,654,530
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