29th May 2014
Britain’s wealthiest 40% typically have more than £18,000 to squirrel away into a savings account while in stark contrast the nation’s lowest income households are not saving at all.
According to the Post Office’s Future of Savings study, the situation is set to get far worse where over the next five years, the amount Britons have available to save is set to plummet.
The research, compiled by the Centre for Economics and Business Research (Cebr) predicts that by the end of 2014 the UK’s lower income households will not only have with zero in savings but they will be typically of debts of £1,910.
The study, looks at the changing trends in UK savings over the last 50 years, and forecasts how the UK’s savings habits are set to change.
It found that while there is a growing sense of optimism that the economy has turned a corner, the amount of money available for UK households to save is on the decline.
Once housing and living costs – right down to holidays and pints bought in the pub – have been taken into account, the amount left at the end of each year to put into savings is set to fall for the foreseeable future.
The rising cost of living coupled with increasing consumer confidence is thought to be the driver behind this forecast
This figure has fallen from £4,414 in 2010, to £3,780 in 2013 and is expected to fall further in 2014 to £3,630, and then again to £3,518 in 2015.
By 2018, this pot will have been reduced to as little as £2,944. By the end of this year, the amount of money available for households to put into savings will be the same level as it was in the 1960s. Cebr predicts that around 70% of this figure will actually be put into savings – with the rest accounted for by holding cash, storing money around the house or lending it to friends.
Commenting on the findings, Henk Van Hulle, head of savings and investments at the Post Office says: “Even though the cost of living remains one of the biggest factors preventing people from saving more, it’s crucial that people understand the importance of saving. Whether it’s paying for a broken boiler to be fixed, or paying for a family holiday or retirement.
“If the UK’s savings habits don’t improve, we’ll be left in a situation where far too many of us have inadequate savings pots, putting more financial stress on people in later life.