Britain is a nation of savers having nearly doubled the amount we put aside since the millennium according to Alliance and Leicester Savings.
Savings over the last seven years are up £426 billion which is five times higher than the increase in borrowings for the same period (up £79 billion) - a trend that is likely to continue with over a third of Brits planning to increase their savings balances over the next five years.
Ewan Edwards, Head of Savings at Alliance and Leicester comments: “If current growth continues, then in the next five years personal cash savings could grow to around £1 trillion. We are also seeing big changes in the types of accounts favoured. Five years from now Britain’s savvy savers are likely to have over a third of their cash savings in tax efficient accounts such as ISAs – a massive increase from five years ago, when just a seventh (14%) were sheltered from the tax man in this way.”
In the Alliance and Leicester report, entitled: ‘The Changing Face of the Savings Market’, it was revealed that a mere 2 per cent of people think saving is unnecessary and that one should ‘live for the day’. In contrast, 39 per cent of people feel saving is necessary for their financial future with the under 35s believe this most strongly.
However, one in four people have no savings at all, with three quarters of them citing the main reason for not having any stashed away for a rainy day is not enough disposable income while one in eight feels they lack the discipline to save.
Professor Merlin Stone of Bristol Business School explains: “Today, we have a savings paradox. Households appear to be stretching themselves to meet increased taxation and a general rise in the cost of living. However, perhaps surprisingly, overall savings balances have continued to increase. It seems that the pressure has fallen on pension contributions. Evidence suggests that people in their prime years are saving more cash with a view to funding their retirement.”
The report also found that there have been significant changes in the ways in which people save – driven by factors such as the growth in internet usage and price comparison websites. In particular, instant access accounts have grown in popularity with more than half of the nation’s cash savings being placed in this type of account now with the average account balance up 60 per cent to more than £5,000.
Ewan Edwards concludes: “This Alliance and Leicester report shows that consumers’ savings needs are evolving. Over the last five years new savings products have become available to meet these needs, particularly variations within the instant access category, such as ‘disciplined’ savings accounts. When choosing the right account for their money, we know savers use a number of information sources, such best buy tables and the internet. We expect these will also have to evolve to reflect the changing savings market, empowering savers to make informed decisions of their own.”
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