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Households had less to spend in 2017 compared to 2016, the latest figures from the Office for National Statistics (ONS) reveal, as disposable cash income fell for the first time since 2011. Compared to 2016's increase of 0.2%, real household disposable income fell by 0.1% last year.
There was an even bigger increase on an individual basis, as cash real household disposable income (RHDI) per head fell for the second year in a row, by 0.7%. The fall was mainly due to the impact of inflation and a rise in taxes on income and wealth, which were insufficiently offset by a 2.8% growth in wages and salaries.
At the same time, the cash based savings ratio fell from 2.9% in 2016 to 0.9% in 2017, the lowest ratio seen since 2008. This is partially due to a decline in gross saving, which decreased from £29.6 billion to just £9.6 billion between 2016 and 2017. "Although on the face of it today's figures present a gloomy outlook, it doesn't tell the whole story," commented Kate Smith, Aegon's head of Pensions.
She continued: "Cash savings have suffered as a result of an historically low base rate, translating to a continuation of unattractive interest rates from high street accounts and ISAs. But brighter times are on the horizon. Interest rates are widely expected to rise in May, and savers may be encouraged by the introduction of better rates filtering onto the market.
"It's important that people have the flexibility of a cash buffer for any unexpected spending and in times of uncertainty we would encourage people to get into positive savings habits to build financial security for both the short and long-term."
While auto-enrolment might be taking care of your future in the longer-run, through frequent and steady pension contributions, it's always a good idea to keep saving. You may be feeling the squeeze this year as well as the last, but things can only get worse if something essential breaks down and you don't have the money stashed away to cover the cost.
Have a look at the easy access or regular savings charts to see if there's an attractive deal on offer that's suitable for you – don't let your hard-fought savings languish in a no-interest paying account or your sock drawer
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