Britons raid savings at fastest rate in 9 years
DISPOSABLE income is falling at the fastest rate for nearly a decade as the cost-of-living crisis bites, says Scottish Widows.
The life insurer said Britons are trying to cope by raiding their savings, which have slumped to their lowest levels since 2013.
Scottish Widows said its quarterly household finance index – measuring how well families regard the state of their finances– had fallen from 40.1 to 38.5 over the first three months of the year. A score over 50 indicates that people see improvements, while below points to deterioration.
Emma Watkins, the life insurer’s managing director of retirement, said 60 per cent of households had failed to boost their savings during lockdown.
And she said financial resilience will weaken as 70 per cent said they will dip into savings to meet rising bills.
“It’s tough right now for households trying to manage the surge in day-today living costs,” she said.
“Despite rising incomes and workplace activity, we have seen a rapid decline in the amount of cash UK households have available to spend and, as a result, they are likely to be prioritising their daily budget over their long-term savings plans.”
The squeeze on households could get even worse, according to economists from Bank of America. Inflation, as measured by the consumer price index, is expected to peak this month at 8.3 per cent, before drifting down.
The current high follows Russia’s invasion of Ukraine, which has pushed up wholesale energy costs. And the investment bank estimates that when energy regulator Ofgem adjusts its price cap again in October, CPI could spike back to eight per cent again.
Elsewhere, the Institute for Fiscal Studies says that Britain’s biggest earners are paying more tax. It said that the share of after-tax income received by the top one per cent has fallen over the decade up to the end of the 2018-19 financial year, from 14 to 11 per cent.