Savings crisis ‘looming on the horizon’
A FAILURE to put enough money away and a lack of financial education mean a savings crisis is looming on the horizon, a new report has warned.
A survey of over 2,000 UK employees found a third were saving less than £50 a month and a fifth were not saving anything at all.
The report from merchant banking group Close Brothers and the Pension and Lifetime Savings Association (PLSA), released on Wednesday, suggests there is a lack of understanding and confidence in personal finance.
Only two fifths said they were confident in their ability to choose the right financial product to help them achieve their savings ambitions.
For example, half of those aged 18 to 34 cited saving for retirement or buying a house as their main savings priorities, but 42 per cent were not saving via the lifetime ISA because they “did not know enough about the product”.
Read more: Household savings rate hits record low
A separate survey of 1,000 UK employers found 65 per cent claimed the responsibility for improving employees’ financial wellbeing lay jointly with them and their employees, yet only 48 per cent were offering some form of financial education.
A fifth said they plan to introduce financial education in the next 12 months.
Jeanette Makings, head of financial education at Close Brothers, said while providers can explain their own products, there are very few who help individuals understand the savings landscape in its entirety.
She argued employers have a key role to play in solving the savings challenge, but far too few are adequately addressing the issue.
“Employers are hugely trusted and perfectly placed to close this knowledge gap. By working closely with them to develop impactful education, we can help employees secure a solid financial future for both themselves and their families,” she said.
Nigel Peaple, deputy director of DC, lifetime savings and research at the PLSA, added: “Today’s report highlights not only the low levels of saving amongst the workforce but also their interest and desire to do more.”
The research follows a report by Aviva which claimed millions of families are not prepared for a sudden loss of income, and will end up draining their savings or accumulating debt to plug the gap.
Inflation, which has hit a five-year high of three per cent, and subdued wage growth are hampering people’s ability to save.
Household spending power has also taken a hit, falling for the fourth consecutive quarter in the three months to September – the longest period of decline for almost six years.