UK savings plummet as £23bn withdrawn from accounts

3rd December 2013

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UK savers have been withdrawing cash from their long-term savings at the fastest rate in decades according to numbers from the Bank of England.

It has been suggested that over the past year, every household in the UK has withdrawn the equivalent of £900 from their long-term savings, a total of some £23bn nationwide.

The majority of the money has ended up in current accounts to allow easy access. It marks the biggest fall in savings since the 1970s, an analysis of the figures by Sky News has shown.

Its research also found that in the year to October, the amount of money in time deposits and cash ISAs dropped by 4.7%, while the amount families have in their instant access current accounts or in their pockets rose by 11.2% – some £71bn.

According to official numbers the household saving rate was 5.9% in the last three months of 2012, dropped to 4.2% between January and he end of March this year.

As a broad rule of thumb, experts say every adult should be putting aside at least 10% of their monthly income towards long-term savings and for someone starting saving in their 30s for the first time, it should be nearer to 15%.

Tom McPhail, head of pensions research at Hargreaves Lansdown says: “The overall picture is one of continued decline in our long term savings. As individuals we should be investing money in pensions and ISAs, providing for the long term and not spending more than we earn. Given the continuing low interest rates on cash savings it is understandable that people are withdrawing their money.

“However all too often, rather than being channeled into long-term investments, the money is just being spent instead. We are likely to see an increasingly polarised society, with those who have saved money being able to look after themselves and those who have not being forced either to carry on working or to rely on very meagre state benefits.”

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