UK to start dipping into the bank

THE MONEY STATS – UK to start dipping into the bank

The Money Charity was set up to help people manage their finances and save money. In some ways we have been fighting an uphill battle in the last few years. From a long term average of around 8%, the savings ratio – the amount households take in minus the amount they consume in goods and services – has fallen to 5.1% in the last quarter of 2016, and looks set to stay well below average for years to come.

With record low deposit rates in savings accounts of 0.13% and just 0.38% for and ISA, this is no surprise.

More worrying still is the picture if you exclude the cash people are putting away in their pensions. According to the Office for Budget Responsibility, if you exclude pension saving, the UK is about to enter a long period where people are eating into their savings.

Except in very extreme situations, pensions are locked away until you reach 55, so if you’re not saving other than in a pension, it leaves you with nothing to fall back on in the here and now. In the last quarter of 2016, the savings ratio excluding pension equity was just 0.4%, and is projected to fall below zero this year, staying there through until 2021.

The undoubted good story of pension savings increasing from 4.7% now to a projected 7.2% in 2021 has the counterintuitive effect of worsening the short term problem. If rule changes mean the 7.279 million people now in auto-enrolment pensions grows and they begin to save at higher rates, it’s great for their retirement, but takes away from their rainy day funds.

March MoneyStats Graph Source: OBR, ONS, projected figures in black

Michelle Highman, Chief Executive of The Money Charity says:

“It worries us at The Money Charity that people are saving less than they did historically. And while it’s great to see people putting away more for their retirement, it should not come at the expense other of saving.”

“We always encourage you to put money aside for a rainy day or to achieve your financial goals. You might be getting low interest now, but that will change, and you will still be able to have the security of whatever you save.”

Other key points from the March Money Statistics include:

  • Outstanding consumer credit lending was £194 billion at the end of January 2017.
  • Inclusive of all benefits, private renters spent an average of 41% of their income on rental payments. Owner-occupiers spent on average 18%. Weekly rents in the social housing sector were £106 for housing association renters and £95 for local authority renters.
  • 34% of households owned their home outright, while 29% were mortgagors. 20% rent privately, and 17% pay a social rent.
  • In February 2017 the average price of unleaded petrol rose by 0.6 ppl (pence per litre) to 120.1ppl. This meant it cost £60.05 to fill a 50 litre unleaded tank.

Get the full picture, and many more fascinating facts about money in the UK in our monthly Money Statistics.