‘Saving raiders’ encouraged by low interest rates
More than two-fifths (43 per cent) of savers have raided their savings or investments to cover unplanned expenses, such as household repairs, in the past year. The average amount withdrawn is equal to £1,373 per saver – a collective withdrawal of just under £24 billion.
However, 18 per cent admit they would not have made these unplanned withdrawals – which collectively amount to more than £4.3 billion – if they had received higher rates of return. A further one third of savers (32 per cent) admit they would have withdrawn less for the same reason.
Needing to cover everyday living costs, such as food shopping, is the main reason why people raided their savings or investments (27 per cent). Funds to cover the cost of holidays (21 per cent), unexpected bills such as emergency home repairs (21 per cent), cars (18 per cent) and home improvements (18 per cent), complete the top five reasons.
Andy Brown, investments expert at Prudential, said: “Household budgets are under a lot of pressure so some unplanned withdrawals from savings or investments are inevitable, but raiding these hard-earned savings to fund one-off or impulse luxury purchases, such as holidays, should ideally be avoided. Establishing a regular savings habit that’s sustainable and having a clear understanding of your long-term savings goals is the best way to maximise returns and help reduce the need to make unplanned withdrawals.
“For those who are able to set money aside over a longer period of time, there are a number of investment options that offer smoothed returns and the potential for attractive growth.”
Access to funds also appears to be driving the number of unplanned withdrawals, with one in five (22 per cent) admitting that instant or penalty-free access to their savings and investments increases the likelihood that they will raid their accounts.