A fifth of people are not saving regularly and one-in-ten just save at home
• The single biggest barrier to regular saving is people feel squeezed and are living day to day
• A third of existing savers prefer simple, tax efficient products such as ISAs and a quarter would invest in one if they had an additional £50 per month ‘spare’
New research commissioned by a grouping of leaders from across the UK financial services industry reveals that almost one fifth (19%) do not save, whilst around one-in-ten (11%) just set money aside at home – under the mattress or in a money box. The industry group, acting as TISA’s Savings and Investments Policy project, (‘TSIP’, ‘the Project’), also highlights how women are even less likely than men to save.
Earlier this year the TSIP project group published a review entitled, ‘Our Financial Future’, setting out how the UK is not only failing to save enough for day-to-day needs, but that it will reach a tipping point in 2035 when those entering retirement will be increasingly less-well-off than earlier generations. The Project, which is being managed by TISA (the financial services industry membership association), is stimulating discussion and debate about the role saving plays in securing people’s financial future. TSIP is developing strategic proposals for new savings and investments policies to help rebuild consumer confidence and trust in long term savings.
The latest research highlights that for many people the focus remains making ends meet in the face of rising living costs, with four fifths (81%) of people saying that their single biggest barrier to not saving regularly is that they have no disposable income. For women this percentage is even higher at 83%. As a result, the most common financial priority over the next 12 months is to ‘Live day to day’ (47%) ahead of ‘Saving for a holiday’ (46%) and ‘Setting money aside for a rainy day’ (43%).
With an additional £50 per month ‘spare’ to invest, almost a quarter of people (24%) would invest in a ISA (cash / stocks or shares), 21% would deposit this extra money in a bank account, 16% would pay down their mortgage or other debts and 15% would save towards a holiday.
However, TSIP believes there is a once in a generation opportunity to change people’s attitudes to saving and to develop long-term policies to avert this looming social and economic crisis. Whilst welcoming pension changes, the group is concerned that policy changes are not addressing the fundamental issue – people are not saving enough money and they do not start early enough to fund their future and that this will result in substantially reduced living standards.
The TSIP project believes by working together with other financial services companies, policy-makers and consumer groups, solutions can be created that meet the needs and aspirations future savers and investors. For instance, the research reveals that a quarter (24%) of people would start saving if offered an explicit, one-off lump sum of money. On average, the amount which would spur people to start saving would be £87, with women needing a slightly lower financial incentive (£82) than men (£95).
Tony Stenning, Chairman of TISA’s Savings and Investments Policy project and Head of UK Retail at BlackRock says:
“It’s important for us to remember that whilst many people know that they should be saving and investing, it is simply not an option for some as their priority is to live day-to-day. However, it is essential that we work together to develop ways to rebuild confidence and trust in saving and investing. Essentially, we need to create a culture where it is as easy to save as it is to get into debt.
“Over the past 25 years both the State and employers have significantly reduced the levels of income that people can expect in retirement. This means people need to save more just to maintain the same standard of living as their parents, meanwhile given increasing longevity their retirement pot will also have to work much harder to support their longer lives. The generations impacted most are those aged 35 or younger as they face rising housing costs, less generous pensions and are saving less. If nothing changes we could be destined to benefit from longer, healthier lives, yet suffer financial hardship in old age.”
Of those who do save, almost a third (32%) of people are saving or investing £50 or less each month, and 37% of women are saving this amount. The majority (54%) are depositing this money in a bank or building society, 34% are investing via ISAs, 12% into a pension and 3% through a company Save As You Earn Scheme. One in ten people (11%) still set money aside at home (under the bed, piggy bank) rather than in a financial product.
For those who do not currently save, the single biggest factor in making them start to save or invest would be better rates of returns on savings (30%), followed by a lump sum incentive from the Government (24%) and then free financial advice (12%).
Carol Knight, Operations Director, TISA says:
“When we established TSIP we wanted to demonstrate that the UK financial services can speak with a single voice and work with policy-makers and consumer groups to help shape clear and coherent long-term policies that change attitudes to savings. This is the most effective way to re-build trust in retail financial services.
“When we published our first report in March 2014 we highlighted how a potential retirement tipping point would be reached in 2035 unless action was taken now. These findings highlight the scale of the challenge facing both the industry and policy-makers to provide many people with the means to save, but it is possible. Early next year the TSIP will publish its recommendations for discussion with political parties, consumer groups and regulators.”
Please visit the Savings and Investments Policy project website, www.tisa.uk.com/savings-investments.html for further details about the project.
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For further information, please contact:
TISA’s Savings and Investments Policy project
Tony Stenning – Tel: +44 20 7743 2922, Mobile: +44 7841 220 365
Newgate Communications
Deborah Saw / Alistair Kellie – Tel: +4420 7680 6558, Mobile: +447801 234 598 Email: Deborah.saw@newgatecomms.com / Alistair.kellie@newgatecomms.com
Notes for Editors
1. The TSIP project group commissioned Consumer Intelligence to conduct a survey with 2,161 people online between 4th – 5th December 2014.
2. The Savings and Investments Policy project is working with a wide range of financial service companies, trade bodies and consumer groups to develop these pan-industry proposals. It is directed by an Executive Committee formed of 22 leading financial services companies including Aviva, AXA Wealth, BNY Mellon, Barclays, BlackRock, Charles Stanley, Citi, Fidelity, J.P. Morgan Asset Management, Henderson, Intrinsic, L&G, Lloyds Banking Group, Nationwide, NatWest, Northern Trust, Old Mutual, the international law firm, Pinsent Masons, Simply Biz, Threadneedle Investments, TISA and Zurich.
3. TISA is a not-for-profit membership association operating within the financial services industry. We represent the interests of over 145 member firms involved in the supply and distribution of savings and investment products and services.TISA has a highly successful track record in working cooperatively with government, regulators, HMT, DWP and HMRC to improve the performance of the industry and the outcomes for consumers. Policy and regulation continues to be the major focus for our members with regard to corporate responsibility.
TISA and its members’ remit is evolving into a clearer focus on pro-active consultation in the regulatory world in order to influence policy and associated regulation before its creation, rather than reacting to issued policy directives. This will help to ensure a more considered policy creation from the authorities. www.tisa.uk.com