Bank of England figures show lowest saving totals in modern record

Bank of England figures show the British public has been withdrawing money from long-term savings accounts at the fastest rate since the 1970s.

In the most dramatic evidence yet that people are under pressure from the UK’s rising living costs, GBP 23 billion was taken out of long term savings in the past year.

This is equivalent to GBP 900 for every British household.

Data shows individuals then either spent the cash or moved it to accounts which were easier to access.

The Bank of England’s figures show that record low interest rates – sometimes as low as 1% – have seen many people giving up saving and the expected favourable returns.

However, the withdrawals – and the increased consumer spending – may have injected a much needed boost in the UK’s economy.

A short history of saving

The figures reveal a reversal of the post-crisis trend for saving which began in 2007.

Consumers began to increase their savings sharply at the start of the credit crisis; and from October 2008 to October 2009, the nation added GBP 13.9 billion in long-term savings.

The following year, in another significant rise, deposits increased by GBP 14.6 billion.

But interest rates began a downward tumble which hit an average of 2%, following the creation of the Funding for Lending scheme by the Bank of England last year.

Whilst the scheme was implemented to allow cheap funding for high street banks, which was expected to have a knock on effect from small businesses in need to loans, some experts claim the scheme meant bank’s no longer had to offer beneficial interest rates to their customers.

The low interest rates meant that whilst GBP 24.8 billion was added to savings accounts from October 2011 to October 2012, long-term saving totals fell by almost the same amount the next year – a 4.7% decline.

This was the biggest decline in modern record, Sky News found.

Meanwhile, there was an 11.2% increase in spendable cash in wallets and instant access accounts.

A sustainable recovery?

Experts have said the above figures may raise fresh doubt on the British recovery; urging Chancellor George Osborne to use his Autumn Statement to promote saving.

Sources have speculated that rather than providing incentives to promote saving, the Chancellor may cap the maximum individuals can store in ISAs – which are tax-free.

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