In the first of a planned series of
reports, UK bank Lloyds TSB has delved into the savings habits of
UK households. Its findings suggest that life insurance is losing
ground to deposit-based savings.
Overall, Lloyds TSB found that,
between 2000 and 2009, UK households accumulated £802bn ($1.25trn)
in new savings, including pensions, shares and deposit savings.
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This was 46% more than households
accumulated in the 1990s and after adjusting for inflation amounted
to an increase new household savings of 14% compared with the
previous decade. The £802bn in new savings is equivalent to an
additional average of £30,105 per household, noted Lloyds TSB.
In its study, Lloyds TSB found that
the significant increase in new savings during the past decade was
driven by a substantial rise in deposit based savings.
Specifically, between 2000 and
2009, households put an additional £558bn in deposit savings with
the rising popularity of individual savings accounts helping to
support the increase.
The bank noted that deposit based
savings’ share of total new savings increased to 70% in the 2000s
compared with 49% during the 1990s.
The study also reveals that
household savings took a severe beating during the financial crisis
with the impact most severe in 2008 when households accumulated
£10bn in new savings, 88% lower than the 10 year average of
£80bn.
There was a marked recovery in 2009
with households adding £41bn in new savings, although this was
still well below the record £134bn achieved in 2006.
Life insurance and pensions savings
fared particularly badly in 2008 and 2009, falling to 19% and 13%,
respectively, of total new household savings. This was well down
from an average of 44% recorded between 2000 and 2007 and
significantly lower than the record of 63% achieved in 2007.
Also of note was that, during the
period 2000 to 2009, on a net basis, UK households sold equities
totalling £190bn, more than double the £82bn sold in the 1990s.
Households were net sellers in
seven of the last 10 years with the largest outflow (£82bn) in 2008
at the height of the financial crisis.
Last year, UK households were net
purchasers of equities (£11bn) for the first time since 2003.
Overall, the improvement in savings seen in 2009 appears to be
continuing this year with Lloyds TSB’s study showing that during
the first quarter households added £20bn in new savings, just over
double the £9bn in the final quarter of 2009.
