You are here: Home - Saving & Banking - News -

Flaws in the savings market, as people fail to save for a rainy day

0
Written by:
13/03/2018
The UK regulator said flaws it identified in the savings market in 2015 still haven’t been solved.

At the same time, a report by GoCompare Money revealed that around a quarter of people have no savings at all, showing more needs to be done to encourage saving.

In 2015, the regulator found that 80% of easy access accounts had not been switched in the previous three years, potentially leaving people earning low rates on their savings.

Efforts to solve the problem, including publishing the rates on existing accounts – which showed the average rate on a closed branch-based account was 0.1% – and seven-day switching for ISAs. The Financial Conduct Authority (FCA) said the problems hadn’t been solved by these so-called ‘Sunlight Remedies’.

The GoCompare Money survey found that while 50% of UK adults save on a regular basis into a bank or building society account; a quarter don’t have any savings at all to cover unexpected bills or emergency costs.

The average sum earmarked for ‘rainy day’ emergencies was £1,300 but, 42% of UK adults have £500 or less set aside. Trust remains a significant issue; over a fifth (21%) of those surveyed said after the credit crunch they no-longer trusted the sector; 37% think that banks have done nothing to improve their reputation since the financial crisis; and 13% of people have looked at alternatives to traditional bank and building society savings accounts.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “While it’s good news that (the FCA) is trying to improve things, the fact that it is planning more consultations and proposals means there won’t be a solution overnight.

“This is going to be a tough nut to crack, so it’s important to take action with your own savings as soon as possible. You can put your emergency cash savings safety net into an easy access savings account paying up to 1.35%. After that it’s important to work out the most sensible period of time to lock your savings away. You can, for example, get up to 2.1% if you fix for two years, and 2.56% if you fix for five. Because while savings rates are hardly a reason to be cheerful at the moment, it doesn’t mean you need to stick with a savings account that’s profoundly depressing.”

Georgie Frost, consumer advocate at GoCompare, said; “A rainy day savings fund is not just a nice thing to have, it is essential…The perceived wisdom is to have at least three months’ worth of outgoings saved as an emergency fund. Official figures set the average monthly salary around £2,300 – which suggests that many people’s ‘rainy day’ savings typically fall short of the ideal target.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

YourMoney.com Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

  • According to @YourMoneyUK the #Govt is considering a Care ISA’ which would be exempt from #inheritancetax. Could th… https://t.co/hPVZZfdyDr
  • RT @unitetheunion: “We need tough action against unscrupulous debt collection agencies who prey on people’s misery to ramp up the debt thro…
  • RT @unitetheunion: “We need tough action against unscrupulous debt collection agencies who prey on people’s misery to ramp up the debt thro…
Read previous post:
2273863-blue-paintbrush-on-two-tone-blue-background
Homeowners: should you move or improve?

More people than ever are choosing to improve their existing property instead of moving to a new home, but what...

Close