The first salary slips affected by the new NI rates should be slipping into employees' hands right a...
The first salary slips affected by the new NI rates should be slipping into employees' hands right about now and the effect is likely to be another blow to the government's attempts to close the savings gap, Insight Investment says.
It calculates that the gap will increase by up to £2.8bn this year because the reduction in disposable income will act as a dis-incentive to saving.
The figure is based on the £204 reduction in disposable income that the average earner will take-home over the course of the next year, and which half of those surveyed by Insight said would mean they saved less in order to maintain existing spending levels.
Adding £2.8bn to the savings gap identified by the Oliver Wyman report would take the total figure to more than £30bn annually, roughly equivalent to the fiscal deficit some economists say chancellor Gordon Brown is heading towards.
Worse still, some 7% of those surveyed said they would borrow money to make up the shortfall in disposable income.
The good news, from a savings perspective, is that a third of those surveyed said they were more likely to cut back on spending rather than increase debt or reduce long-term savings rates.
The Insight study does not say whether higher government investment in health services, presaged by the hike in NI payments, will result in more people being capable of working more, which might offset the effects of increased NI payments in terms of the total savings gap.
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