A £74bn savings gap threatens household finances

Britain has a £74 billion savings shortfall, with more than half of working-age households not having enough allowances to cover the huge hit to their finances, according to a report.

A study by the Decision Foundation found that 51 percent did not have savings equivalent to three months’ income, in the event of major problems such as unemployment, illness or a breakdown in relationships.

They would need to raise an additional £74bn to meet this limit, the think tank has calculated.

About 30 per cent had less than £1,000 in savings set aside for a ‘rainy day’, 12 per cent revealed they had less than £100, and 5 per cent had no savings at all.

The report found that many people do not save enough to have an adequate income in retirement.

Deficit: A study conducted by the Decision Foundation found that 51 percent did not have savings equivalent to three months’ income

Deficit: A study conducted by the Decision Foundation found that 51 percent did not have savings equivalent to three months’ income

She called for an increase in auto-enrolment pension savings and allowing savers to borrow up to £15,000 or 20 per cent of their pension funds to help them cope if they face difficult circumstances. Currently, no one can be withdrawn until age 55.

Mobeen Haque, chief executive of the Aberdeen Fund for Financial Justice, which supported the study, said: “Britain is not a nation of savers.

“Many have little to fall back on, and lack the rainy-day buffers to prevent drama from turning into crisis.”

These results come even though Britain has seen an increase in savings during the pandemic.

“As previous research has shown, the majority of these improvements were experienced by higher-income households,” the report said.

“Low-income households were more likely to see minor or negative changes in their household finances.

As a result, despite the overall rise in savings during the pandemic, Britain still faces the critical problem of worryingly low precautionary savings balances.

(tags for translation) Daily Mail

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