New figures from the Office of National Statistics (ONS) shows that across the UK we’re putting less away into our savings accounts.
According to their latest report, our personal deposits grew by 2.3% – the lowest in 8 years, and well below the rate of inflation.
Cash ISAs also shrank, with a 3.3% decline in July of this year relative to July 2016. Or, to put it another way, we stashed just £162 million into ISAs – the biggest drop in ten years.
Indeed, cash ISAs seem to have fallen out of favour generally, with a net outflow of £1 billion from the government-backed savings scheme. This follows June’s dismal loss of £1.17 billion from cash ISAs – a £2.2 billion loss in two months that’s sure to focus the minds of high street banks.
The issue of how much – or how little – we’re saving has been on the economic agenda for some time now. The Bank of England, particularly, is worried about the amount we’re putting away, coupled with how much we’re spending on credit. In short, they fear it’s a recipe for another credit crunch or financial meltdown.
The news follows from a previous report from the ONS that looked at the savings rate for UK households; the average amount we’re all taking out of our salaries to put away for a rainy say. Shockingly, the first quarter of 2017 saw the figure plummet to its lowest ever rate, with savings accounting for just 1.7% of our income.
The ONS was quick to point out the fact that the savings rate has actually been in decline since 2015, suggesting that those infamous low interest rates we all read so much about have made a serious dent on our willingness to save. However, experts believe other factors are also at play here. UK Finance, who represent almost 300 leading financial institutions, believe that changes to the tax system has played its part in making savings unappealing for UK consumers.
The current wage stagnation we’re experiencing across the UK is considered another player in the savings game. No pay rises, no additional money, no way to save. This is directly tied to rising inflation and an increase in the cost of living.
Indeed, we’re already seeing the effect of this as consumers focus on ‘essential’ purchases like food and fuel over luxury goods. The latest figures for the second quarter of 2017 point to just 0.1% growth in spending, compared to 0.4% over the first quarter of this year – which, worringly, is the lowest growth in consumer spending in three years.
All put together, we’re presented with a dark financial landscape that actively repels potential savers. While we know we need to be saving for the future, right now, we don’t feel we’re earning enough to afford to save, and the incentives don’t exist to make it seem like it’s worth our time.