Insurer casts doubts on truth of claims we have stopped saving
SUSPICIONS THAT Britain has stopped saving to go on a debtfuelled consumer spending spree have been called into question by a new study from insurer Royal London.
In June, the Office for National Statistics published its estimates for Britain’s current ‘savings ratio’ – essentially a measure of the percentage of household income which is not going into current spending.
The figures for the first quarter of 2017 showed a sixth consecutive quarterly fall, with a record low savings ratio of 1.7 per cent, compared with 3.3 per cent in Q4 2016 and 5.3 per cent in Q3 2016.
The figures were widely interpreted as a sign that the UK had abandoned any pretence at prudence, but now a new Royal London policy paper, Has Britain really stopped saving?, casts doubt on this interpretation of the data and warns policy-makers against jumping to the wrong conclusions.
It points out that the savings ratio calculation includes not just households’ day-to-day savings, but also the increase (or decrease) in the value of their pension funds – a factor which appears to be driving much of the recent fall.
Royal London director of policy Steve Webb said: “Recent figures for the headline savings ratio have been eye-catching and seemed to tell a story of a dramatic slump in household savings.
“But leaving aside short-term factors like people paying lumpsum tax bills before the January 2017 deadline, most of the recent change in the savings ratio has been about what is happening in the world of pensions and tells us little or nothing about consumer spending habits. Policy-makers need to be incredibly careful about reading too much into a single headline statistic.”