Fewer people saving despite rise in disposable income
Fewer people are putting money into savings despite increases to the amount of disposable income in household budgets.
According to research by Scottish Friendly, just over half (51%) of people surveyed at the beginning of April 2015 said they planned to save or already saved regularly. This represents a drop from 59% at this time last year.
The figures come despite greater freedoms to saving announced by the coalition government in its past two budgets in 2014 and 2015. In the former, chancellor George Osborne said savers could allocate their entire Isa allowance to cash, while in the latter he said interest earned on the first £1,000 of savings in non-Isa accounts would be tax-free.
Surprisingly, this drop in savings comes despite a rise in disposable income. In the same survey, Scottish Friendly found people had an average of 9.9% of their salary left over after covering bills and other essential spending - about £236 per person per month. This represents a year-on-year increase of 1.7%.
Note that the results are based on respondents' claims rather than any hard data quantifying how much is being saved each month.
Scottish Friendly savings expert Calum Bennie says: "It remains to be seen if this quarter's slow growth in disposable income marks a trend for the rest of the year. However, this together with uncertainty over the general election result and possibly spending on one-off items like holidays has had an adverse effect on the level of savings and investments in the UK."
Rises in disposable income have varied considerably by region, with the North East reporting an increase of 1.6% to £205 per month at the start of the second quarter of 2015 compared with the start of the first quarter.
Yorkshire and Humberside as well as Northern Ireland, on the other hand, reported a 1.2% fall to £239 and £165 per month in disposable income respectively quarter-on-quarter.
Bennie adds: "Despite the overall rise in national disposable income, not all areas of the country are thriving. If this continues, we could start to see a wider divergence in the UK between the haves and the have nots."
This article was written for our sister website Money Observer
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.