A study of people who were already saving before the pandemic found that 51% increased their savings balances during the coronavirus lockdown period, with the majority of those retaining these higher balances after the lockdown ended.
The period produced strong growth in cash ISAs, which were largely stagnant before the lockdown, says Andrew Wright, head of savings at Paragon Bank, which carried out the analysis.
“It’s positive that those already saving were able to increase their savings during the lockdown and that many still hold onto those balances today, helping to improve financial resilience, particularly as savings rates grew over the period, delivering better returns,” he added.
Savings continued
The figures show that over a fifth of savers increased their savings up to £4,999, with 12% increasing their savings between £5,000 and £9,999. Over 15% increased their deposits by between £10,000 and £29,999 and just over 5% managed to increase their savings by £30,000.
The remainder did not know the exact amount or preferred not to say.
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Two-thirds of savers still have the nest egg they put away during the pandemic, the study showed.
The figures back up Bank of England data that showed that our savings increased from £1.3trn in January 2020 to £1.8trn in March this year.
The largest increase has been in non-ISA easy-access accounts, growing by £138bn. We’ve also increased the amount of money we have in cash earning zero interest, which has risen by £117bn.
Cash ISA balances rose £108bn over the period, while fixed rate non-ISA accounts increased by £93bn.
Security increased?
Reasons for the increased saving during lockdown included reduced spending opportunities, which was the motivation for two-thirds of respondents, while a quarter said they saved more because they felt uncertain about the future. Over a fifth said they saved more because of increased awareness of financial security.
Despite the increase in savings, over half felt their financial security had not changed and 13% felt less financially secure after the pandemic. Less than a third of savers felt more secure about their finances compared with pre-pandemic times.
Wright said customers who had money in zero-interest current accounts should consider moving it somewhere where it can earn a higher rate.
“That money could, and should, be earning a better rate of interest,” he said.
