SAVINGS FELL TO a record low in December as increased negative sentiment towards the economic environment discouraged saving. The results of the latest Nationwide UK (Ireland)/ ESRI Savings Index show a drop from 98 to 81 last month, the lowest ever level since the index’s inception in April 2010.
The decline in the index is predominantly driven by a 28 point decline in the Savings Environment sub-index which fell from 99 in November to 71 in December. The Savings Environment sub-index measures whether people think that the current period is a good time to save and if they believe government policy is encouraging saving.
Some 60 per cent of people say that government policy discourages saving, up 3 per cent on the previous month with just 7 per cent believing that government policy encourages saving. The index shows that 48 per cent of people are not saving at all with 65 per cent of people saying they are saving less than they should while only 13 per cent are saving more than they should. The one key positive from this month’s Savings Index data is a 2 percentage point increase in the number of people who are saving regularly to 30 per cent.
Commenting on the index, Brendan Synnott, Managing Director of Nationwide UK (Ireland) said, “Clearly the environment for savers has become more negative. During 2012 people have found it increasingly difficult to save while at the same time, deposit interest rates have fallen thereby reducing their return for saving.”
Despite these difficulties, almost 40 per cent of people continue to express a preference to save any spare cash available and this saving is driven by precautionary motives according to Synnott. 45 per cent are saving for unexpected expenses and an additional 7 per cent are saving to offset a fall in income.