Shock rise in savings levels
The amount Brits are stashing away in easy access savings accounts rose by an unexpected 18% in the first quarter of 2012.
The average savings balance is now £1,858, up by £284, according to the ING Direct Consumer Savings Monitor. The rise also marks the first consecutive quarterly rise in savings since 2009, indicating a reversal in the three-year trend of falling savings levels.
One of the main reasons for the rise has been the start of payment protection insurance compensation payouts. An estimated two million people are expected to receive payouts of around £2,600 this year. ING Direct estimates that one third of these funds will end up in savings accounts.
However, for most savers it has been careful spending that has meant they can increase their savings levels - it’s no coincidence that high street spending was subdued in the first quarter.
"Our research told us that ordinary Britons saw restoring savings as their top financial priority for 2012, but in the current climate we thought it would be tough for them to deliver on this," says Richard Doe, ING Direct chief executive.
"Six months of relatively restrained spending may not have helped the economy in terms of GDP growth, but it has allowed Britons to deliver on their determination to restore their savings."
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.
The total money value of all the finished goods and services produced in an economy in one year. It includes all consumer and government consumption, government spending and borrowing, investments and exports (minus imports) and is taken as a guide to a nation’s economic health and financial well being. However, some economists feel GDP is inaccurate because it fails to measure the changes in a nation's standard of living, unpaid labour, savings and inflationary price changes (such as housing booms and stockmarket increases).