Stark research reveals how little Scots are saving and the gap is widening

One third of Scottish households have no savings, with the gap between Scots and those elsewhere in the UK widening, new research today suggests.

The study shows that some 32 per cent of households north of the Border report having nothing in savings, while the figure for the rest of the UK stands at 23 per cent.

Two years ago, 29 per cent of households in Scotland had no savings, while the figure for the rest of the UK was 26 per cent, meaning the proportion without savings in Scotland has headed in the wrong direction.

The new research suggests that too few of us are saving for the future.

The Financial Fairness Tracker, commissioned by the Abrdn Financial Fairness Trust and analysed by a team at the University of Bristol, has been monitoring the personal finances of UK households since the start of the pandemic, across a sample of around 6,000 UK households, including 880 in Scotland.

About one in seven households in Scotland (14 per cent) are “very worried” about their overall financial situation in the next 12 months. One in five households (20 per cent) north of the Border meanwhile felt that they were “currently struggling to pay for food or other necessary expenses” to some extent. A similar number of households - 22 per cent - said they would need to borrow to meet their expenses if their household income fell by a third or more - compared to 18 per cent of households in the rest of the UK.

Financial difficulties also appear to be taking a toll on households’ health and wellbeing. Over a third (36 per cent) of Scottish households feel they have no control over their financial situation, while a similar proportion say that financial worries cause them to sleep poorly at night (35 per cent) or that their financial situation is causing their mental health to deteriorate (37 per cent).

Despite those concerns, financial confidence was found to be substantially higher now than in 2022. Three years ago, some two in five households (39 per cent) lacked confidence in their overall financial position for the coming three months; whereas this has now halved to one in five (20 per cent).

Mubin Haq, CEO of Abrdn Financial Fairness Trust.

Mubin Haq, chief executive of Abrdn Financial Fairness Trust, said: “It’s vital we all have a financial cushion to help us cope with financial shocks, such as replacing essential household goods or losing a job. Without any savings, everyday problems such as the fridge breaking down can push people into debt and force them to turn to high-cost lenders.

“What is particularly worrying is that Scotland is moving in the wrong direction with even fewer having a savings safety net, which is in stark contrast to the rest of the UK.”

Professor Sharon Collard, chair in personal finance at the University of Bristol, said: “As the Scottish and UK governments continue to grapple with the issue of low productivity, this new data is a stark reminder that, for many households in Scotland, money worries are strongly linked to poor health and wellbeing. These need to be tackled in tandem if we are to see productivity growth.”

Abrdn Financial Fairness Trust funds research, policy work and campaigning activities to tackle financial problems and improve living standards for people on low-to-middle incomes in the UK. It is a charitable trust registered in Scotland and its name recognises an historic donation from Scottish investment heavyweight Abrdn, which led to the foundation of the trust.

The research comes amid speculation the Chancellor is looking to shake up the cash savings market. Rachel Reeves is aiming to foster a “culture of retail investing” in the UK, and is said to be weighing up a reduction in the annual cash ISA allowance.

Following her recent meeting with City executives and fund managers, reports emerged suggesting that Reeves was considering a significant cut in the cash ISA limit, from the current £20,000, in a move that could channel savings away from cash and into investments.

It comes as another new study suggests people are missing out on a “huge opportunity” by not saving or investing via a Junior ISA (JISA). Some 48 per cent of people say if they got a lump sum at the age of 18, they’d have saved or invested it, while 49 per cent would have spent it.

Younger people, aged 18-34, are more likely to say they would have saved or invested (58 per cent), according to financial platform Hargreaves Lansdown. It found that among its own clients with matured JISAs, the vast majority still have money invested a year later, and 24 per cent have topped up.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “It’s not easy to put your faith in an 18-year-old - and put your money where your mouth is. Not all teenagers make the best possible decisions at all times, so parents may worry about trusting them with the proceeds of a Junior ISA.

“However, if you don’t back your offspring, you’re missing a huge opportunity, and if you plan for it carefully and trust your kids, you can help transform their financial life.”

She said a JISA was a “brilliant chance to teach them about investment” and understand that investments are a longer-term commitment.

“When your children reach the age of 18, their JISA will roll into an adult ISA, and they will have a stake in their own future,” Coles added. “The risk of keeping it a secret and then presenting them with a lump sum is that they have no opportunity to build good instincts towards this money.”

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