UK Savings Ratio Hits Record Low
The UK savings ratio is at a record low as disposable income drops, with the Office of National Statistics reporting that the ratio stood at 1.7% from January to March, down from 3.3% in the previous quarter. This means that the proportion of income that goes into savings is lower than ever, with the Savings Gap potentially affecting the quality of life that people can expect in retirement.
The savings ratio measures outgoings and incomings that affect households, and it has been falling for more than a year. With disposable income falling for three quarters in a row, consumers are faced with more challenging times when managing their finances.
Tax has also played a factor, with the head of GDP at the ONS, Darren Morgan, saying, “The saving ratio has fallen again this quarter to a new record low, partly as a result of higher tax payments reducing disposable income.”
With inflation at a four year high of 2.9%, and with most Cash ISA accounts paying interest at less than 1%, saving is proving to be difficult alongside the rising cost of living. Indeed, Cash ISA users could be losing spending power by leaving money in an account at a 1% interest rate while inflation continues at 2.9%.
With an obvious Savings Gap developing in our society, there is a definite need to think about how we will all manage in the future. Our mission at True Potential is to help close the Savings Gap, with our own research showing that only a minority of savers will have enough funds for a comfortable retirement, by their own definition. With the UK savings ratio at a record low, it is as important as it ever has been to consider how you will close the savings gap. Learn more about the Savings Gap and our research here.