IFA Promotion survey finds shortfall is almost £40bn more than the figure normally quoted
The UK is facing a savings shortfall of £66bn, according to an IFA Promotion survey.
This figure is almost £40bn more than the £27bn savings gap often quoted in discussions on the need for adequate pension provision.
The gap affects the financial security of almost two-thirds of the population, some 29 million adults, if no action is taken to close it, said David Elms, chief executive of IFA Promotion.
He added: 'This serves to highlight the extent to which people are under-providing for themselves, not only in terms of retirement income but across all forms of long-term saving.'
For the survey, IFA Promotion, with the help of research analysts RAKM, devised a barometer of UK savings behaviour.
The official UK savings ratio is a measure of the difference between what households earn and what they spend, and therefore acts as a useful monitor of consumption and overall performance of the economy, Elms noted.
However, the savings ratio does not produce a clear picture of true savings patterns, since it takes no account of consumer debt or the relationship between saving and borrowing.
As a result, the researchers created a representative barometer of UK saving behaviour, based on the ratio of how much the nation is borrowing as a proportion of how much it is saving over time, what it terms the Savings Brake. Elms said: 'This research takes account of all types of long-term savings, analysing a broad range of official data on unfixed assets, alongside newly-commissioned consumer research, to reveal the true state of UK savings.
'It uncovers a stark and worrying picture. In short, the £27bn pensions gap becomes a £66bn long-term savings gulf, and six in 10 of us are caught up in it to some degree.'
According to the report, a third of people have no savings at all while more than 50% have less than £1,500 saved.
Only one in eight people have a savings pot of more than £20,000, the report stated.
Elms added: 'To compound the enormous savings shortfall, the report also reveals the extent to which what we save is being cancelled out by what we borrow. The straightforward, representative Savings Brake ratio shows that, for the second quarter of this year, total new borrowing, excluding mortgages, represented 64.5% of total new savings, up from 55% for the previous quarter.
'We are borrowing 65p for every pound we save, one of the highest ratios ever recorded.
While this consumer debt is providing much-needed fuel for the faltering economy, it is, in turn, applying a significant brake when it comes to closing the savings gap, and we could well see the gap widen further before it narrows.'
IFA Promotion's Get Saving! Report showed that more than 80% of people choose low-paying current accounts for their savings, while Isas, premium bonds and stocks and shares are also very popular, with nearly a fifth of savers choosing them.
For a copy of the How to Get Saving! factsheet, call the IFA Promotion hotline on 0800 085 3250 or visit www.unbiased.co.uk.
The increase in minimum AE contributions has had little impact on opt-out rates - with cessations after April increasing by less than two percentage points, data from The Pensions Regulator (TPR) shows.
Follows string of appointments
Follows acquisition of BlackRock's DC platform
‘In the know’
£116.8m of benefits received by customers