Three years of record low interest rates have hit savers
Careful savers have managed to increase their balances to the highest levels in nearly two years, despite the tough economy, a study said.
Tight control over household budgets by squeezed consumers resulted in their bank balances swelling by £284 on average during the first quarter of 2012, a record increase for ING Direct's consumer savings monitor report, which has been running since 2009.
This equated to an 18% rise in people's savings in the first three months of 2012 compared with the previous quarter, taking average balances to £1,858, the report said. This is the highest typical savings balance since the second quarter of 2010, when people had around £2,050 put away in accessible savings, the study said.
Savers have struggled amid three years of record low interest rates to find accounts which will give them a real return on their cash, while high household bills have given them little money left over.
But careful spending by consumers, with a determination to pay down their debts, has been one of the key reasons driving the savings recovery, the report said.
Levels of unsecured debt, which includes credit cards, loans and overdrafts, have also remained stable at an average of £2,242, a modest £18 rise over the last three months.
The survey also suggested that large numbers of payment protection insurance (PPI) payouts by firms who mis-sold policies to customers have helped people to build up their savings pots as well as pay off some of what they owe.
ING said that 4.3% of people it surveyed said they had either received or expected to receive a PPI compensation payout this year, which could equate to more than two million UK adults. Around a third of them said they would put the payouts into savings while 42% said they would use them to pay off debts. Nearly £2 billion of compensation payments were made last year to settle claims from the mis-selling of PPI, the Financial Services Authority has said.
ING Direct chief executive Richard Doe said: "Our research told us that ordinary Britons saw restoring savings as their top financial priority for 2012, but in the current climate we thought it would be tough for them to deliver on this. Six months of relatively restrained spending may not have helped the economy in terms of GDP growth, but it has allowed Britons to deliver on their determination to restore their savings."
The latest figures also mark the first time there have been two quarterly rises in savings in a row since 2009, according to the study. Around 1,000 savers take part in the regular study.