In recent months the Bank of England has admitted it is concerned about the nation’s credit use, with credit card spending growing at its fastest rate in more than a decade. This resulted in the Bank ordering banks to be prudent in their lending and prove that they are not taking risks with their balance sheets.

Alongside this focus on booming credit use, figures from the Office for National Statistics (ONS) have suggested that across Britain, people are losing the savings habit.

In June the ONS published its estimates for the ‘savings ratio’ for the first quarter of the year – essentially the percentage of household income which is not going into current spending. For the sixth straight quarter, the figure had fallen, this time to a record low of just 1.7%, compared to 3.3% in the last quarter of 2016.

However, Royal London believes that it would be wrong to read this statistic as a sign that people have stopped saving, and warned policy makers against jumping to the wrong conclusions based on this data.

The firm argued that the Q1 figure was distorted by people making larger-than-usual lump sum payments of income tax before the self-assessment deadline, which actually suggests people have been carefully setting money aside rather than splashing out recklessly.

In addition, it suggests that falls in the savings ratio from 2014 onwards are almost completely explained by changes in the figures for pension savings, from a drop in the amount companies are putting into defined benefit pension schemes to a fall on the returns on the investments in pension funds.

Steve Webb, director of policy at Royal London and former pension minister in the coalition government, said that while the headline savings ratio figures have been eye-catching, they do not actually tell the story of a dramatic slump in household savings.

He said: “Most of the recent change in the savings ratio has been about what is happening in the world of pensions and tells us little or nothing about consumer spending habits.

“Policy makers need to be incredibly careful about reading too much into a single headline statistic such as the savings ratio when it may be painting a very misleading picture of what is really going on in UK households.”

Getting more from your savings

It is understandable that saving is not the most exciting way to use your money at the moment. With inflation currently sitting at 2.6%, savers need to be smart to get a decent return. Indeed, in order to match inflation savers may need to lock their cash up for an incredible seven years.

Making the most of your ISA allowance is a good way to enjoy a more impressive return, not least because you do not pay any tax on the interest you earn. Read YourMoney.com’s guide to the different types of ISA currently available to establish which is right for you.