It was a relief to many, both savers and savings providers alike, that the Monetary Policy Committee decided last week to hold the Bank Base Rate at 0.25%. Although the Bank has now said it won’t reduce rates again this year, if the outlook worsens this rate could fall again. The BSA commissioned Ipsos MORI to survey a group of online 2,256 adults¹ aged 16-75 across the UK to investigate their savings intentions over the next 12 months.
The results show that despite an interest rate environment which has favoured borrowers since May 2009, many consumers are building up their cash savings:
- 30% say that they plan to save a little or a lot more over the next year.
- 9% say that they plan to save a little or a lot less over the same period.
- 46% say that their savings behaviour won’t change – the 32% of this group who do save will continue to do so and the 14% who say they don’t save – won’t start.
Commenting, Robin Fieth, BSA, Chief Executive said:
“One of the policy objectives of looser monetary policy has been to encourage consumer spending. But, faced with uncertainty and high profile stories of slowing growth and weakening employment prospects, our survey suggests that consumers are feeling the need to increase their rainy day savings. Societies are on the side of savers, sensitive to what they are trying to achieve.
“When you save for a rainy day rather than for income, interest rates become less important. More important is the feeling that you have something put aside in a safe place should you need it. This survey clearly shows that for many, concern about what has or may happen to their income; rising bills; or the drive to save a deposit to buy a home of their own, supersedes spending.”
- Saving for a rainy day is the most common reason given for saving more, irrespective of age, with 38% of the 664 people who plan to save more saying this was a reason.
- Younger people between 16 and 34 are also saving specifically towards a deposit for a house or flat, with 29% of the 354 16-34s who plan to save more selecting this reason. Among the 740 people surveyed in this age group 50% plan to save a little or a lot more between now and this time next year.
- Of the 196 adults who say that they intend to save less over the coming 12 months, many said it was because they were just less able to save: the results indicate that changes in personal circumstances (32%), less income (26%), an expectation of a drop in income (13%), and the need to spend more on other things (22%) are important factors.
- Low interest rates came a close second for these consumers with 30% saying that current rates mean it isn’t worth saving more in cash. Fewer than 10% said that they were saving less because they could get a better return on their money elsewhere.
- Even if savers have not been particularly sensitive to low rates so far, it looks as though they would react to a further reduction in the Bank Rate, particularly if it were to go close to zero. Almost a third (30%) of savers said they would save less than they do now if the Bank Rate reduced to zero, it is unclear through that they would spend the money that they would normally have saved. In the hopefully unlikely event that rates went negative, 44% of consumers said that they would save a little or a lot less than they do now.
- Savers also reacted emotionally to the potential of a further cut in the Bank Base Rate with 29% concerned, 23% annoyed, 14% angry and 8% scared about the prospect. This compares to the 15% who are uninterested and the 9% who are relaxed.
- Ends -
Press Office Contacts:
- Amy McCluskey: Tel: 0207 520 5927
- Hilary McVitty: Tel: 0207 520 5926
Notes to Editors:
- The BSA’s Chief Economist, Andrew Gall is available for comment, please contact the BSA Press Office.
- All figures unless otherwise stated are from Ipsos MORI.
- ¹Ipsos MORI conducted an online survey of 2,256 UK adults aged 16-75 between 14 and 19 October 2016. Fieldwork quotas were set according to age, gender and region. The sample was weighted to be nationally representative of UK adults 16-75 according to age, gender, government office region, working status and socio-economic grade