ROCK-BOTTOM interest rates are now challenging the convention that someone with £1m in savings could live off the interest, RateSetter claims.
The peer-to-peer platform’s latest savings tracker found on average UK adults think they would need an income of £26,140 per year to live comfortably, but £1m in an average savings account would pay just 0.14 per cent interest, equating to £12,500 each year.
£1m invested in a one-year bank bond with an average rate of 0.79 per cent would earn just £7,900, while the same amount could earn £45,000 in a RateSetter account earning 4.5 per cent interest.
Investors opting to put their £1m into FTSE 100-listed stocks would have earned £80,000 in interest over the 12 months to the end of August, the research found.
Read more: Household savings rate hits record low
“We’ve all heard the suggestion that a millionaire could live comfortably off bank interest alone,” Peter Behrens, co-founder at RateSetter, said.
“However, this is clearly no longer possible, with current saving account interest rates languishing below one per cent.
“But all is not lost. Whether you’re fortunate enough to be a millionaire, or you just want to put your hard-earned money to work, by accepting some risk you can access significantly higher returns, which add up quickly over time.”
The research also found more than a third of UK adults have not saved or invested a penny in the past three months.
The poll of more than 2,000 adults found that 36 per cent have not put any money away, the same percentage as the previous quarter’s research.
However, where people are saving, the amount they are putting away has increased since the last survey, from £211 per month to £232.
The research found men typically saved more than women per month at £296 compared with £170 while 25-34 year olds put away the most, averaging £278 a month.
52 per cent of respondents admitted they weren’t saving enough, but just 20 per cent expect to be able to save more over the next 12 months, while 43 per cent said low returns meant that it was not worth saving in cash.
“This research highlights a serious concern: a worrying number of people are failing to make any provision for the future,” Behrens added.
“This not only means that they risk being caught out by an unexpected bill, but also miss out on long term returns.”