Putting something aside for that rainy day is on the rise

BRITONS are piling more money into rainy day funds in a bid to shore up their finances even as new evidence emerges of 
government policies wiping out savings incomes.

Savings levels have risen over the past three months, according to a report out today from National Savings & Investments (NS&I), the third successive quarterly increase. The average adult is managing to save 7.3 per cent of their income each month, up from 7.08 per cent in the first three months of the year.

The figures offer further proof that households are battening down the hatches as the economy continues to flatline. The proportion of savers who believe they have enough money set aside to cope in the event of losing their main income has climbed to 52 per cent, despite low interest rates.

The biggest increase in savings has been among people aged between 35 and 44, who are stashing away 7.22 per cent of their income every month, up from 5.62 per cent in the summer. That equates to monthly savings of £103, based on average incomes, compared with £81 six months ago.

The improvement may be short-lived, however. Three in ten people think they will struggle to save money over the coming months and expect to be putting less away than they are now.

The survey also found that one in four people is not saving at all in the average month, up from 19 per cent in Autumn 2011.

John Prout, retail customer director at NS&I, said: “It is encouraging to see that savings levels have increased for the second quarter in succession, however we know that these are at low levels and the need for people to review every aspect of their spending to see if they can build up more of a financial cushion is still ever pressing.”

NS&I’s report comes hot on the heels of research showing that over 55s in Scotland are being forced to raid their savings pots as the cost of living continues to rise.

Income levels among over 55s north of the Border are rising, according to Aviva, with the average monthly net income climbing from £1,645 a year ago to £1,906 now. Yet the average Scot in the age group is saving just £59.67 a month, the figures show. The typical savings pot has shrunk over the past year from £17,499 to £13,748, below the UK average.

Over 55s in Scotland are spending more than those elsewhere in the UK on debt repayments, which account for 16 per cent of the average expenditure.

Unsecured debts among Scottish over 55s are the highest in the UK, with an average of £14,084 owed on credit cards, pay-day loans and other non-mortgage debts.

The research is published as MPs prepare to launch an inquiry into the impact of the Bank of England’s quantitative easing (QE) policy. The Treasury select committee is to look into the effect of QE on savings accounts and pensioner incomes as evidence shows that, by driving down gilt yields, the money printing policy has sent annuity rates to new lows.

Savings efforts have also been hampered by the government’s funding for lending scheme. The £80 billion programme, which gives lenders access to cheaper funding, has sparked a mortgage rate war over the past three months. But by reducing their dependence on customer deposits it’s also enabled banks to narrow their margins on savings business.