Savings at lowest level since records began in 1963

HOUSEHOLDS are saving the smallest portion of their disposable income since records began more than 50 years ago.

At the same time, the money they have available after tax and deductions has fallen for three consecutive quarters – the first time that this has happened for 40 years.

Rising inflation and sluggish wage growth have forced households to dip into their savings or put less aside, figures show. And many are said to have been put off saving because of record low interest rates. house- holds saved £5.6billion in the first quarter of the year, down from £11billion the previous quarter and £17.7billion in the three months before that.

The Office for national Statistics reported that the savings ratio – which measures how much of their disposable income households put into savings accounts or pensions – fell below 2 per cent for the first time. It was down to 1.7 per cent in the first quarter of this year from 3.3 per cent in the final three months of last year. This was the lowest level since records began in 1963.

The ratio was at a high of 15.5 per cent in 1993, when John Major was prime minister and interest rates hit almost 6 per cent, compared with 0.25 per cent today.

last night former pensions minister Baroness Altmann said: ‘Keeping interest rates so ludicrously low has made a generation of people think they must be a mug to save.

‘This policy is encouraging people to live beyond their means, borrow more and not bother saving.’

The OnS stressed the timing of tax payments was a major factor in the cut in savings levels since September last year.

Companies rushed to pay their dividends before an increase in tax on dividends last April. This led to a spike in tax receipts before the January 31 self-assessment deadline, when tax for the 2015/16 financial year became due. It meant households overall had less money left over to put into savings accounts or pensions.