Household savings rise sixfold over past 40 years

The overall value of household savings has risen sixfold in real terms in the past 40 years, a report has claimed.

There has been a dramatic shift in the way people save, moving to savings accounts like Isas. Picture: Getty

An analysis of household savings habits in the years since 1975 found a “dramatic shift” in the ways people save, moving from cash savings to private pensions and “tax free” savings accounts such as ISAs.

Even after taking into account the increasing number of households in the UK, the average amount of savings per household has grown four-fold from £36,989 in 1975 to £145,566.

In real terms, the amount saved by a typical family – including deposits savings, pensions and shares – has risen by 130 per cent, according to the report by Lloyds Bank.

However, there are considerable differences in the value of savings with some UK households holding little or no savings.

More than one in three UK households have no savings of either deposits or investments and a further 13 per cent hold savings and investments of less than £1,500 in value.

The total amount held in savings by British households has risen to an estimated £4.1 trillion, compared to £744 billion in 1975 in today’s prices.

Meanwhile, over the past 40 years, the value of cash deposits held per household has more than doubled from £21,070 to £48,906.

Philip Robinson, savings director at Lloyds Bank, said: “The UK savings market has seen a dramatic shift over the last 40 years, with increased retail competition, the rise of digital banking and a greater emphasis on private pensions and “tax free” savings.

“Despite witnessing three recessions during the period, in addition to rising levels of consumer spending and borrowing, real household savings have grown annually by an average of over four per cent and we would expect this to continue over the next few years.”

The bank analysed savings trends over the 40-year period, looking at how much households held in cash, compared to investments such as shares and pension plans.

Over the 25-year period to 1999, the value of shares held by households grew sharply, rising by over 482 per cent. Most of the increase occurred over the period between 1982 and 1993, coinciding with the privatisation of a number of public utilities – such as British Telecom, British Gas, water and the electricity industries – and the falling costs of buying shares. During this period, the proportion of households owning shares doubled to 20 per cent.

More people have put higher amounts of money into pension plans as worries grow about provision during retirement. The amount put into pensions has grown almost 16-fold from £123 billion in 1975 to £1,944 billion today – accounting for more than half of the overall increase in households savings over the period.

Over the past 40 years, the annual growth rate for pensions has been on average seven per cent – faster than for any other form of savings.