SAVINGS levels in Scotland have slumped to a three-year low as rock-bottom interest rates, stagnant wages and the rising cost of living wipe out disposable incomes.
Scots are setting aside £91 a month on average, equating to 6.81 per cent of monthly incomes, according to the latest quarterly savings survey from NS&I, published today. The figures are down markedly from £103 a month (7.68 per cent) in the previous quarter and represent the lowest point since autumn 2010.
Savers have been deterred from squirreling cash away by a combination of inflation and low interest rates.
While the Bank of England base rate has remained at 0.5 per cent for more than four years, banks and building societies have slashed their savings rates since the funding for lending scheme, launched last August, gave them access to cheaper funding. The rate on the average cash Isa has plunged from 2.44 to 1.6 per cent over the past 12 months, while the average easy access account pays just 0.67 per cent, Moneyfacts figures show.
Rising household bills have added to the pressure on savings levels.
“I think the reason for the fall in savings levels is simply that, for most individuals, their post tax incomes are not increasing (if at all) as fast as their non-discretionary spending,” said Paul Lothian, director at Verus Financial Planning in Dundee.
“With energy and food costs in particular rising at a much faster rate than wages, it’s inevitable that real incomes are being squeezed.”
John Prout, retail customer director at government-backed NS&I, said: “Savings levels have decreased from the high levels recorded in the last quarter, and it appears women are under the most pressure financially with their savings levels dropping to 6.84 per cent of their income each month, £72 in real terms. They haven’t been quite so low since autumn 2010.”
People in Scotland are still more likely to save than those south of the Border, the NS&I figures showed. Just 11 per cent have no savings and 16 per cent said they were not putting money aside each month, both below the UK figures.
Scots also feel more confident that they could cope in the event of financial emergency, with 55 per cent insisting they have enough set aside, compared with a UK average of 52 per cent.
But nearly one in four people in Scotland think they are less likely to save over the next three months, while just 16 per cent said they would put more money away over that period.
Those findings point to a continued slide in savings levels north of the Border over the coming months, an outlook supported by research from the Equity Release Council. It found that more than one in five people believe it will become even harder to save money over the next five years.
“We could be seeing people turning their back on savings and returning to debt,” said William Hunter, director of Edinburgh-based Hunter Wealth Management.
“This research may indicate that the canny Scots have realised that with house sales and prices on the move there has never been a better time to rack up debt.”
People able to put cash away would be better off taking a little more risk with their investments, he added.
“For most people buying a new energy efficient washing machine would yield a bigger return than saving at the current interest rates,” said Hunter.
“With good quality investment advice someone with a capital sum can still make above inflation returns, but for the majority of savers low rates of interest and inflation have turned saving into a mugs’ game.”