Households will set aside 11 per cent of their disposable income this year, according to new analysis by mutual Scottish Friendly and the Centre for Economics and Business Research (CEBR) think-tank.
While that is lower than the record 16 per cent that Brits saved last year, it is well above the long-term average of 8.5 per cent (2000 to 2019) and would result in UK adults setting aside £3,023 each (£164bn in total) by the end of 2021.
As part of the research, CEBR studied 50 years’ worth of household savings data and Scottish Friendly interviewed 4,000 adults.
The study suggests that people will continue to save at levels well above the historical average, although there will remain a “high degree of variation” in households’ capacity to save.
Scottish Friendly and CEBR’s analysis of previous crises reveals that households saved significantly higher proportions of their income in the year after each of the past four major economic downturns than they did during the year proceeding each of these downturns.
Households saved on average 8 per cent of their income in the run-up to the 2008-09 financial crisis, but this jumped to 12 per cent in the year after the recession.
Similarly, households tucked away 11 per cent of their income, on average, before the 1990-91 recession but 14 per cent in the year following it.
Kevin Brown, savings specialist at Scottish Friendly said: “This study shows that the economic shock caused by the pandemic has impacted many households’ saving and investing habits in a way like never before.
“Recessions in the UK have typically led to a sustained increase in retail saving but there has never been a spike as severe as there was in 2020.
“Maintaining this level of saving is unsustainable without continued restrictions on spending, but we still expect that collectively households will put away a bigger share of their income this year than they did pre-2020.
“Although many families have faced financial difficulties during the past 12 months, we believe the pandemic has ushered in a new culture of higher saving in the UK, particularly among younger generations. A much higher proportion of savers aged under 35 intend to save more of the money in the aftermath of the pandemic than they did before.
“The question they will have to ask themselves is what is the best destination for the extra cash they intend to save?”
Some 47 per cent of those aged 18-24 plan to save a higher proportion of their income after the pandemic than before, rising to 55 per cent of those aged 25-34.
Meanwhile, less than a quarter (24 per cent) of respondents aged 55-64 plan to save more than they did before, with 39 per cent saying that the pandemic will have no influence on their savings habits.
Scottish Friendly has roots stretching back to 1862. Established as the City of Glasgow Friendly Society, its name changed in October 1992 when it took over Scottish Friendly Assurance.