One in five consumers have raided their savings to help meet rising living costs, according to a Royal London survey.
The survey showed that people have cashed in savings worth an average of £2,623. But while people were dipping into rainy day accounts the survey showed only 7 per cent were considering accessing pension funds to meet day-to-day living costs.
This latest cost of living research from Royal London showed that consumer in the UK have seen the cost of housing. food and energy bills rise by an average of £494 a month, when compared to August 2022.
Royal London says that the number of people accessing their savings equates to £32bn black hole in people’s savings.
The survey did find that overall savings levels were up — but this was largely driven by mortgage-free homeowners, who have double average amount in savings of those who are paying a mortgage or rent.
In total those who are mortgage free have an average £33,857 in savings, those with the national average of £17,575. Those paying rent typically ave the lowest savings balances at £3,642; this compares to an average of £11,601 for those with mortgages.
The survey found that one in five people (21 per cent) have less than £100 in savings, a figure that has been consistent since March this year.
The research also found that three quarters of UK consumers (76 per cent) were concerned about rising interest rates, following 14 consecutive rises in Bank of England Base Rate since December 2021.
More than eight in 10 renters (82 per cent) said they are worried about rising rental payments, with the same proportion of homeowners with a mortgage (80 per cent) stating they were worried about mortgage costs. This compares to four in 10 renters and a third of mortgage payers being worried a year earlier.
Almost half of people (46 per cent) who have or plan to take money from their savings have focused on their ‘rainy day funds’. In contrast far fewer said they would borrow money to meet rising living costs. In total 6 per cent said would spend more on credit cards, 5 per cent said they would turn to friends and family to borrow money; 5 per cent would use a bank overdraft and only 1 per cent would turn to payday lending.
People were also keen to leave their pension savings intact with only one in 14 people (7 per cent) stating that they’d consider using money from their long-term investments, such as their pension, in the future if they needed additional funds to cover increased living costs.
Royal London consumer finance specialist Sarah Pennells says: “We’ve been tracking the impact of the rising cost of living on UK consumers since February 2022 and, while some people, especially those who are mortgage free, have been able to build up their savings, others have depleted theirs.
“That leaves some people with low financial resilience at a time when household bills have risen by almost £500 a month compared to August last year.
“While some people have been raiding their cash savings and one in 14 have been taking money out of their pension or other long-term savings, very few people have been stopping or reducing their pension contributions, with only 2 per cent saying they’d done that in the last six months.”
