Should you get the savings habit?
Problems to do with company pensions hit the headlines every day, to say nothing of people needing to work longer to qualify, but new research shows that 10.3 million Brits have no savings, although it seems that we can no longer rely on our company pension schemes.
Yet another company pension scheme problem has been raised recently in that sums being drawn down under Pensions Freedoms legislation are resulting in an outflow of capital from many funds making it unlikely that many will be able to meet their obligations. Then we have final salary schemes closing to new entrants and pensions now being calculated on “career average” salary rather than final salary. Discussions are also taking place about other ways of changing the criteria on which benefits due are calculated, reducing the levels of benefits due pension beneficiaries still further, in order to ensure the scheme survives at all and that all employees at least receive something from their schemes.
The government Workplace Pension Scheme was designed to answer the concern that people were not going to have an adequate income in retirement and to restore a national habit of saving for the future, lost to a decade of low interest rates close to zero. While low interest rates kept up the value of assets - owned largely by the old - it has made it almost impossible for the young to acquire property assets or to accumulate substantial savings of their own.
Therefore new analysis from Santander Bank revealing that 10.3 million Brits (20 per cent) have no savings, leaving them exposed to unexpected expenditure is worrying.
The study, which investigates the savings habits of the nation, reveals that 52 per cent of people wish they could save more, on average an additional £388 each month. The most popular way to put money aside is in a savings account (53 per cent) followed by a Cash ISA (27 per cent). However, many Brits overlook investing as a way to manage their money with only one in 10 (12 per cent) saying they invest and utilise Stocks and Shares ISAs.
In fact, half of Brits (53 per cent) wish they had received more money advice at a younger age, rising to two thirds (66 per cent) for those aged 18 to 34, and decreasing to 42 per cent for those aged 55 and over. A quarter of UK adults (26 per cent) wish they had been taught more about investments and 21 per cent about budgeting, while almost one in five (19 per cent) wish they had received more advice about the different savings options available to them.
Helen Bierton, Head of Savings at Santander, said: “Our research shows that although many of us are saving, there is still a significant number who have no savings to fall back on or are not aware of all the options available. Developing a savings habit – no matter how small – provides a safety net and is a way of providing for your future, and those of your loved ones.”
The findings also highlight that more than three quarters of UK adults (78 per cent) believe that being “good with money” is a learned behaviour that anyone can pick up with practice. In comparison, only 13 per cent believe that being either good or bad with money comes naturally and is a behaviour that cannot be learned or influenced in any way.
When asked who had been the biggest influencer on their money and savings behaviour, over two fifths (43 per cent) revealed their parents had been their example to follow, compared to one in 10 (11 per cent) who mentioned their partner as their biggest influence.
Almost two thirds of Brits say that their friends or family would describe them as being “good with money”. Of these, almost three quarters pay all their bills on time, half seek out promotional offers rather than paying full price, 44 per cent keep an eye on their bills to see if they could be getting a better deal and 38 per cent pay off their full credit card balance at the end of each month. However, not everyone is so money savvy, of those who claim they are “bad with money”, 59 per cent say they run out of spending money before payday and 30 per cent have a lump sum of debt sitting in their account that doesn’t get paid off.
Most people say they are saving to increase their buffer pot (44 per cent) followed by a holiday (34 per cent) and to pay unexpected bills (26 per cent). A fifth (22 per cent) aim to top up their retirement pots and a further 14 per cent are saving for a home.
Dr Sam Wass, Channel 4 psychologist and research scientist at the University of East London, commented: “There are lots of factors that affect who saves their money and who doesn’t – such as our willpower, and how much we value our long-term happiness over a more immediate, short-term reward. The research shows that most people agree being good with money is a learned skill and there are various techniques we can use to help us to improve our willpower and our organisational skills. It’s never too late to start!”
Good advice indeed!