The financial crisis has dented Britain’s savings culture, says NOW: Pensions, as new research from the workplace pensions’ provider finds more than one in four (28%) people in Britain stopped saving in light of the recession and have not saved since.
The research gives a worrying snapshot of the current state of savings in Britain, as three quarters (74%) claim that Britain has no savings culture. Figures show that one in three (32%) people have less than £500 in savings – and as many as one in five (15%) has no savings at all.
The economic climate has posed a major barrier to saving as one in four (25%) blame frozen wages and rising bills for their lack of savings, while one in ten (10%) believe there is no point in saving when interest rates are so low. However, meeting everyday costs such as running the home is the biggest savings barrier for 72% of cash-strapped consumers. While seven in ten (70%) people in Britain are worried about their current lack of savings, apathy is still preventing one in ten (11%) from putting aside money for a rainy day.
Savings habits of a generation
Recessionary strain has had the greatest impact on the savings habits of the baby-boomer generation (51-71 year olds), as one third (32%) say they have put an end to regular contributions since the crisis began. Worryingly, one in ten (11%) adults aged over 51 say they have no savings at all. In contrast, the financial crisis has had a more positive impact on Generation Y (18-31 year olds) with four in ten (38%) claiming they are saving more since the crisis began.
Re-creating Britain’s savings culture
In order to tackle this problem, over half (58%) of those surveyed believe better financial education in schools is needed to encourage people to want to save, while one in five (22%) believe workplace education is the key. Looking at other measures, one third (34%) want the Bank of England to raise interest rates, 18% are calling for a cut in VAT while 17% say the Coalition should raise the Cash ISA limit. Over half (53%) of consumers believe the new changes to workplace pensions, auto-enrolment, will play a big part in helping to ensure younger generations have a more financially secure retirement.
Morten Nilsson, CEO of NOW: Pensions said: “With low interest rates and the rising cost of living, saving has inevitably taken a back seat for many. But the recession isn’t solely to blame for the lack of a savings culture in Britain. As credit has become more accessible and acceptable, the motivation to save has diminished. To transform this, more needs to be done to help people recognise the value of saving, for both their short and long-term financial security.
“The changes to workplace pensions will go some way to helping instil a positive culture of saving in Britain but employers need to ensure they drive home the benefits of staying opted in to the scheme. While we are still some way off having a pension system that is entirely fit for purpose, the current changes to the pension landscape do offer opportunities for savers to start building up a pension pot and this opportunity shouldn’t be missed. "
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