• March 29, 2024
 Household saving rate drops to all time low

Household saving rate drops to all time low

Recent data has revealed that the household saving rate has fallen to record low.

According to the Office for National Statistics, the UK’s household saving ratio in the first quarter of 2017 dropped to 1.7%, the lowest rate ever recorded.

Compared to the final quarter of 2016, this is a drop of 1.6%, down from 3.3%. Although it is difficult to establish a definite cause of the decline, it has been attributed in part to the rise in income tax.

However, the ONS drew attention to the downward trend in household saving, stating that it had started to decline in the third quarter of 2015. They stated that this may be due to a range of economic factors, such as higher inflation, strong consumer spending and minimal wage growth.

Also sharing his thoughts on the figures was Tom McPhail. The Head of Policy at Hargreaves Lansdown stated: “This data is likely to set alarm bells ringing; whether this is in fact evidence of a confident economy or peak complacency remains to be seen. The fall in the household savings ratio is undoubtedly in large part due to the squeeze on disposable income caused by a combination of flat average earnings and rising prices.

“Savings rates tend to fall when the economy prospers, and to rise in times of recession and uncertainty, as households cut back on consumption to build a rainy-day reserve. Monetary policy and the low returns available on cash may well be a factor here too.

“However, we also know that only 3 in 10 of the working age population have savings of 3 months’ income or more and 12 million are not saving enough for retirement. We need to develop a stronger culture of saving and investing; this is something to which the government needs to devote more attention.”

Georgia Owen

Georgia is the Senior Content Executive and will be your primary contact when submitting your latest news. While studying for an LLB at the University of Liverpool, Georgia gained experience working within retail, as well as social media management. She later went on to work for a local newspaper, before starting at Today’s Wills and Probate.