The £74 billion savings shortfall threatens family finances

Britain has a savings deficit of £74 billion, with more than half of working-age families not having enough in savings to cover a major hit to their finances, a report says.

A survey by the Resolution Foundation found that 51 percent did not have savings worth three months’ income in case of major problems such as unemployment, illness or the breakdown of relationships.

They would need to save an additional £74 billion between them to meet that threshold, the think tank calculated.

Around 30 per cent had less than £1,000 saved for a ‘rainy day’, 12 per cent said they had less than £100 and 5 per cent had no savings at all.

The report shows that many people do not save enough for an adequate income after retirement.

Shortage: A survey by the Resolution Foundation found that 51 percent had no savings worth three months’ worth of income

It called for an increase in pension savings auto-enrolment and allowing savers to borrow up to £15,000 or 20 per cent from their pension pots to help them cope if they find themselves in difficult circumstances. Currently, no one can be admitted until the age of 55.

Mubin Haq, chief executive of the Abrdn Financial Fairness Trust, which supported the research, said: ‘Britain is not a country of savers.

‘Too many people have little to fall back on and lack the buffers for rainy days that prevent a tragedy from turning into a crisis.’

The findings come despite Britain experiencing a huge surge in savings during the pandemic.

“As previous research shows, the majority of these improvements were experienced by higher-income households,” the report said.

‘Lower income households were more likely to experience minimal or negative changes in their family finances.

‘As a result, despite an overall increase in savings during the pandemic, Britain continues to face a critical issue of alarmingly low precautionary savings.’