Office for National Statistics data might show that nine million people in the UK have been forced to borrow additional sums as a result of financial difficulties caused by the pandemic. However, a new report by financial consultancy LCP has also revealed that the health emergency has created 6.4 million ‘accidental savers’, who have managed to reduce their outgoings significantly whilst retaining their job. Many of these have benefitted to the tune of several thousand pounds.
The 6.4 million figure was obtained from the LCP survey where 24% of respondents said that they had been able to save more as a result of the pandemic. Based on there being 27 million adults in the UK, 24% of this number is 6.4 million.
38% of respondents said that they were saving at the same level as they did prior to Covid, while 15% said they were unable to save anything prior to March 2020 and that this remained the case. 23% said they were saving less as a result of coronavirus.
Meanwhile, the individuals in the 24% group have seen their income remain stable in most cases. Some, however, work in one of the few areas which have actually expanded over the last year and may even be receiving a higher income than previously.
Around 70% of respondents reported reduced spending on meals out and holidays, while 50% said they were spending less on transport and clothing. The authors also say that if working from home becomes established, the savings benefits could be extended beyond the point when coronavirus restrictions are lifted in the UK.
Slightly more men than women have become accidental savers. Unlike some of the financial consequences of the pandemic, this is also one area where it appears younger people may have benefitted the most. More than 30% of employees aged 16-24 report being able to save more, while the figure is also above 25% for the 25-34 age group. This is possibly because these groups were spending the most on travel and socialising in normal times, or because more of this age group moved back in with their parents as the pandemic took hold. However, at least 20% of employees report being able to save additional amounts across all of the age groups.
The report suggests that those who have benefitted from the pandemic might now choose to pay off debts, or build up a rainy-day emergency fund, or save more into their pension. It calls on employers to do more to promote the benefits of general saving and of saving for retirement.
61% of the accidental savers said that the monies they had saved were now in a savings account, while 28% said that they were in their current account. Both of these options would mean that the funds were attracting little interest. 29% said they were pursuing medium to long term savings or investment, but just 5% said they had saved into a pension as a result, with the same proportion having paid off debt. (Respondents were allowed to select more than one response to this question, as they could have placed their funds in more than one vehicle).
LCP surveyed 10,000 employees during the autumn of 2020.
Heidi Allan, co-author of the LCP report, said:
“Employers will have a key part to play in ensuring that workers take advantage of this opportunity and do not simply allow these increased balances to sit in current accounts and gradually drift away.”
Former pensions minister Steve Webb, a partner at LCP and co-author of the report, said:
“There are few silver linings from the current crisis, but the emergence of a large group of accidental savers could be one of them.
“A concerted effort is needed to use this unexpected opportunity to create more of a savings culture, especially among those who may permanently benefit from reduced outgoings as a result of a switch to greater home working.”
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