- Research shows that average monthly savings deposits have decreased by 14% over the last 12 months.
- Six in ten haven’t moved their funds in the last five years, but there is a growing appetite to save and many are prepared to sacrifice luxuries
- The government should also improve incentives for saving regularly and act upon high street banks offering low rates, claim savers
Following the General Election, RCI Bank asked savers what they would like the new government to prioritise. Almost a fifth (17%) called for them to take stronger action against the high street banks offering poor savings rates, and 16% want more benefits for those who save regularly.
The cost of living has risen over the last year – consumer inflation hit 2.6% in June – meaning the amount savers are managing to put away has fallen. In June 2016, they saved £277 every month, whereas this year the average fell 14% to £239.
Londoners experienced the highest year-on-year drop in the amount they save; in June 2016 the average deposit was £664 a month, but in June 2017 this fell 31% to £461 – a difference of £2032. In contrast, those in the East of England save more every month – a 21% increase year-on-year.
Nurturing nest eggs
Engagement in the savings market is low; a third (32%) have never switched savings account and three in ten (29%) have let their savings pot sit idle for over five years without switching providers. Only 12% have moved their cash in the last year. However, while consumers aren’t saving as much as they were last year, they would like to be able to save more. The research shows that if they could, almost half (45%) would be willing to give up luxuries to help fund big purchases, including new clothes (63%); meals out (61%); mini-breaks (31%); taxies (25%); and even their morning coffee (20%), potentially saving an extra £100 a month on average.
Londoners are much more likely to give up their morning coffee (30%) than those willing to sacrifice their luxuries in other regions, while those in the Midlands are most inclined to sacrifice mini-breaks (39%). Savers in Northern England will opt out of going on nights out and eating out in order to build their savings pot (60% respectively).
The current political climate and how it influences savings behaviour
The rising cost of living, macro-economic environment and political uncertainty play important roles in the nation’s ability to save. RCI Bank asked consumers how they thought the General Election result would affect their ability to save, with a quarter (26%) expecting it to have a negative impact. Only a tenth (11%) think it will have a positive impact and a third (31%) claim their confidence in the savings market over the next 12 months will decrease as a result.
Jean-Louis Labauge, CEO, RCI Bank, said: “Although engagement in the savings market is low, there is a real appetite to save; as a nation, we understand the importance of putting money away and saving for a rainy day. The fact that people are willing to give up luxuries says it all. The financial crash of 2007/08 has had a lasting impact on this. Our research shows that just over a tenth (12%) now spend less every month, and 10% feel that they need to save more every month. However, the current savings landscape does not feed this appetite – and the customers are calling for more action to be taken to encourage saving.
“In order to achieve good financial health, savers need to be more at the heart of monetary policy. An end to quantitative easing, as has been exercised in the US, is just one of the many ways that the Bank of England could set out to increase interest rates again and improve the market.”