Brits are on course to put away as much as £1 trillion in savings by 2012, with balances having doubled since the turn of the century. It would appear that the message from government and financial advisors may have got through with many more people putting some money away for their future.

Balances since the year 2000 are up by £426 billion – five times the increase in unsecured borrowing (£79 billion), according to research carried out by YouGov on behalf of Alliance & Leicester. What’s more, almost two fifths (39 per cent) are planning to increase their savings balance over the next five years.

Commenting on the study, professor Merlin Stone of Bristol Business School said: “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.”

However, while 39 per cent of people feel saving is necessary for their financial future, almost a quarter (24 per cent) have no savings at all, with 75 per cent of those with no savings saying the main reason for not having any cash savings is lack of spare income.  Meanwhile, one in eight (12 per cent) feel they lack the discipline to save and a hedonistic two per cent say saving is unnecessary and that one should “live for the day”.

Of the savings accounts on offer, Instant Access Accounts have grown in popularity recently – a phenomenon attributed to the increase in popularity of internet banking and e-savings accounts. A total of 40 per cent of cash savings are now managed in online savings accounts – four times the amount five years ago. 

According to Apacs, the five-year growth statistics for online banking show that the number of adults in the UK using online banking has increased by 174 per cent from 6.2 million in 2001 to 17.0 million last year. This includes a 350 per cent increase in usage among the over 55s.

Brian Capon, a spokesperson for the British Bankers’ Association, said recently: “People like the flexibility and immediacy of the internet. It is instant and I think that’s part of the appeal of internet banking, not just for banking but as a society these days.”

As a result balances in instant access accounts are up 60 per cent to over £5,000. Disciplined and Regular Savings Accounts have also increased in popularity – a trend that looks set to continue. However, this seems to be at the expense of Notice Accounts, with virtually no new accounts being opened and balances falling dramatically.

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Many UK consumers would face considerable financial difficulty if they were forced to turn to their savings for economic sustenance, it has been suggested.
UK credit report advisory service Callcredit has released statistics suggesting that more than 40 per cent of working Britons would not be able to meet living costs for more than a month if their main source of income was cut off. Furthermore, the number of UK workers who have been able to put money away into savings schemes has reduced significantly in the past six months, with the firm reporting 25 per cent of people have either reduced savings levels or stopped setting cash aside altogether.
A further ten per cent of people were found to have been so constricted by inflated living costs that they had stopped saving and had been forced to dip into their savings to cover the costs of basic household expenditure. Young consumers were said to be particularly vulnerable to a loss of earnings, with 53 per cent of people within this age group estimated to have savings equalling less than an average monthly expenditure.
The firm also reported that as many as five per cent of UK consumers were spending half of their monthly earnings on meeting repayment obligations on items of unsecured lending such as credit cards or personal loans. For those who are struggling with these and other living expenses, a debt consolidation loan may provide a financial lifeline. By organising a repayment scheme with a loan provider, people may find that their monthly outgoings are more manageable and the likelihood of missing payments is lessened.
Callcredit highlights that while the number of people spending 50 per cent of their paycheque on meeting personal loan repayment obligations is low, this figure has more than doubled since September of last year.
Commenting on the figures, Owen Roberts, head of Callcredit Check, said: “These findings are a stark illustration of how the credit crunch is already affecting consumers, it’s clear that the rising cost of everyday living is having an immediate impact on our ability to save. Many of the UK’s workforce are at what could be described as a financial tipping point where just one unexpected unfortunate incident could have dire financial consequences. We all need to take an active role in dealing with our debts. The first step is to get a copy of your credit report for a clear view of everything you owe and then review your bank statement to see how much you’re paying out each month.”
The group also included a case study in their findings, highlighting the financial difficulties experienced by Shamima Begum, a marketing executive from east London who fits within the company’s ‘one month to meltdown’ category. With rising food and fuel costs compounding the strain of credit cards and university loan repayments, Ms Begum predicted that she is unlikely to be able to put any money away into a savings scheme until at least a year’s time.
According to the financial activity survey carried out last month by GfK NOP, a growing number of Britons are becoming financially active, with 25.3 million people expecting to make some form of monetary move such as applying for a personal loan or contributing to a savings vehicle.