Your Money: Savings flatline as households tighten belts in face of cost-of-living crisis

Financial mutual Scottish Friendly has revealed the impact the rising cost of living is having on UK households’ ability to save and invest.

Its data shows the number of new stocks and shares Isas (individual savings accounts) opened during the three months to March was down 22% year-on-year.

Young people appear worst affected by belt-tightening, with new policy openings among 18-34-year-olds falling 32%, while 35-49-year-olds saw a 27% decline and 50-64-year-olds a 12% drop.

Savers were able to sock away significant sums during the pandemic but that trend now seems to have come to a painful end.”

Kevin Brown, Scottish Friendly.

New policy values for 50-64-year-olds fell more than in any other age group, down 12% year-on-year, suggesting they continued to save but reduced their contribution levels.

The total value of policies opened in the first three months of 2022 rose modestly, by 2% quarter-on-quarter.

But sales of new policies slumped by 12%, against the previous quarter, and were down by 22% from a year earlier, when household savings rates soared during lockdown.

New Junior Isa (Jisa) policy openings surged 44% quarter-on-quarter, but values dropped by 31% – indicating parents were putting leftover lockdown funds to work for their children, but saving and investing less overall.

Scottish Friendly savings specialist Kevin Brown said: “The sudden drop in new policies and the flatlining of contributions to stocks and shares Isas is indicative of one thing – tightening budgets.

“The cost-of-living crisis, while brewing last year, has really exploded in the past three months as increasing costs have been passed onto UK households.

“Younger people seem to be bearing the brunt of this, with a 15% decline in new policies.

“This is worrying because younger people are most likely to be facing economic uncertainty at the moment.

“That being said, the cost-of-living crisis is affecting everyone, as the 12% cut to policy values suggests among older savers.”

Mr Brown added: “Savers were able to sock away significant sums during the pandemic but that trend now seems to have come to a painful end.

“Through continued rises in Jisa contributions, however, we can see parents are still making efforts to save and invest for their kids.

“This is gratifying to see, but time will tell if that trend is sustainable as household budgets are squeezed further this year.”