One in six savings pots run dry this year, says research | moneyfacts.co.uk

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Michael Brown

Content Writer
Published: 13/07/2022
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Overall, over half of UK adults have dipped into some form of savings in the last six months.

Approximately one in six UK adults has depleted their savings or investment accounts over the past six months to fight the cost of living crisis.

This is according to a study by Scottish Friendly and the Centre for Economics and Business Research (CEBR), who also found that more than half of UK adults have withdrawn some money from their savings or investments in the same period.

“People tend to save more when their income is relatively high and draw upon this money when it is weaker,” said Kevin Brown, Savings Specialist at Scottish Friendly.

He further explained that while this provides protection in periods of high inflation and low economic growth, many families were still unable to create a savings buffer during lockdown.  

This research has been largely corroborated by a separate study from Quilter, a wealth management company, which found that just over half of its respondents managed to add to their savings during lockdown.

In addition, 15% of people surveyed had already spent all their lockdown savings, with a further 39% of respondents making “a significant dent” in their funds.

While many people were able to save during the lockdowns and have had those funds to fall back on during the cost of living crisis, almost half were unable to save in the first place and could be left in a financially vulnerable position,” said Ian Browne, Financial Planning Expert at Quilter.

“Even those who were able to put some money aside have seen their savings rapidly swallowed up by rising costs - particularly on day-to-day bills such as food, car fuel and heating and electricity,” he said.

Stocks and shares ISAs garner attention

“Anyone that does have the ability to save gets little in return because interest rates trail so far behind inflation, which means the value of their money is being quickly eroded,” said Brown.

This has been the case for several months, as there is still not a single savings account on the market which beats the current rate of inflation. By contrast, two years ago in May there were 440 savings deals which beat the then inflation rate of 0.5%, according to Moneyfacts data.

It could be the reason behind the rise in popularity of stocks and shares ISAs, which have increased in total value of £10 billion since 2019 and 2020, according to HMRC.

The same data found that stocks and shares ISA holdings accounted for 58% of the market value of ISA funds in 2020 to 2021, an increase from 49% in the previous financial year.

Meanwhile, cash ISAs used to account for over half of the market value in 2019 and 2020, but this share has since fallen to 42% in the last recorded financial year.

Younger relatives need assistance

Quilter’s study also found that 16% of “Baby Boomers” – those aged between 57 and 75 years – have used their lockdown savings to help younger relatives through the cost of living crisis this year.

“While many baby boomers were able to save and were the least likely to have spent their lockdown savings, they have been heavily relied on by family and friends as a result,” said Browne.

Indeed, of the people surveyed in this age group, almost 60% are yet to spend their lockdown funds.

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