Savings ratio at 16 year high - but still way off funding pensions

According to The Guardian, the savings ratio has jumped from 3% in the first quarter to 5.6% in the second quarter of 2009 - the highest level for 16 years.

However, with building societies also reporting savings outflows, it looks like people are using their savings to pay down their debts rather than building up nest eggs - although personal borrowing has levelled off rather than fallen.This suggests that financial capability (see my previous post) is improving - spending less than you earn is a key criterion and those additional pounds are being channelled in the most logical and cost-effective direction.

Given low savings interest rates, that seems sensible - but I was interested to read David Smith's point in the Sunday Times this weekend that historically, even 3% is a good savings ratio - in the 1950s, for example, the savings ratio averaged 0%. I don't think it's unreasonable to suggest that marketers have had some influence on that, with a wide range of savings accounts tailored to different savings needs now available making saving easier, more convenient and often more rewarding than in the past.


At the height of the last recession, the savings ratio hit 12% - suggesting that there is potential for savings balances to rise yet. However, even that figure is some way off the recommended levels needed for people to fund their retirements. With final salary pension schemes closing, as marketers we should be considering what steps we can take to encourage people to continue to increase the percentage of their income they save - and to do so in good times as well as bad. Our old ages - and our economy - depends on it.