Savings fail to match champagne economy

7th August 2014

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The economic upturn does not seem to have trickled far down the income chain. Figures from Lloyds Bank suggest that the improvement has not led to increased savings. And that could mean trouble for the economy if and when interest rates rise – seen as an increasing likelihood.

But there is evidence that for once the banks have behaved better than some mutual building societies by not hitting customers with charges that mount up over the years for using their consumer rights to choose insurance.

Lloyds says a third of the population still have less than their monthly household income saved while a quarter tell the bank they will either save less or stop saving altogether over the next 12 months.

The Lloyds Bank Savings Index shows that despite the widely publicised upturn in the economy, many still aren’t able or choose not to save each month. Almost two in five people (38%) can’t save due to a lack of spare money. Others would rather spend their cash than leave it in an account paying a pittance in interest.

Older people are generally better savers. Only a fifth of the over 65s have less than a month’s income while the figure for 35-44 year olds is 40 per cent. And, unsurprisingly, those in London have more money put by and save more regularly than in other regions – the North East is the least savings conscious.

Andy Bickers, Savings Director, Lloyds Bank says: “Despite widespread news about the economy improving, four in 10 still aren’t saving each month. This shows there is still some way to go for confidence in the economy to filter down to the man on the street.”

Paying for a holiday is consistently the most common reason for withdrawing from savings, with three out of ten doing so.

But those buying homes with some building societies would have more to save if they were not hit each year with the choice of either sticking with the lender’s often high priced property insurance or finding their own cover and having to pay an annual charge.

This process – charging anything from £25 to £45 – was supposedly outlawed years ago. But some building societies have found a way around this, according to comparison site comparethemarket.

The “meerkats” say this charge, levied each year is a disincentive to save money by going elsewhere because it is seen as a bureaucratic nuisance when homebuyers have other calls on their time. This inertia applies when rival policies are much cheaper despite the fee.

The societies claim this pays for their buying insurance that would pay out if customer selected policy was inadequate. However, big building societies such as Nationwide and the banks find no need to impose this extra layer.

TABLE OF MORTGAGE PROVIDERS CHARGING A FEE IF CONSUMERS TAKE HOME INSURANCE VIA AN ALTERNATIVE SOURCE (Compare the Market)

 

Provider Fee (£)
Ipswich Building Society

£45.00

Dudley Building Society

£30.00

Leeds Building Society

£30.00

Market Harborough Building Society

£30.00

Platform

£30.00

Newcastle Building Society

£27.00

Chorley Building Society

£25.00

Cumberland Building Society

£25.00

Darlington

£25.00

Earl Shilton

£25.00

Furness Building Society

£25.00

Leek United Building Society

£25.00

Mansfield Building Society

£25.00

Marsden Building Society

£25.00

Paragon Bank

£25.00

Progressive

£25.00

Skipton Building Society

£25.00

The Nottingham Building Society

£25.00

Average 

£27.33

 

 

 

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