Savings ratio UK

  • Definition of Household savings ratio: The percentage of disposable income that is saved. (1)
  • Total savings = Disposable income – Household consumption

UK Saving Ratio

  • Latest UK household savings ratio: 2021 = 10% But, by 2021 Q4 the saving ratio had fallen to 6.2%
  • By contrast, the average savings ratio in the past 54 years is 9.2% of disposable income.

Rise in savings during Covid Pandemic

2020/21 saw a spike in the savings ratio due to the unusual circumstances of the Covid Pandemic. With normal economic activity curtailed many households were unable to spend on usual items like holidays, leisure and going out. Therefore, household savings rose sharply. With the end of covid lockdowns, the savings ratio fell. The forecast for savings in 2022 and 2023 is for savings to fall sharply due to the cost of living crisis, with many households seeing a fall in real income. This will cause households to run down savings to meet the rising cost of fuel and energy.


UK Saving ratio. Source: National income accounts  NRJS dataset

NRJS = Households + NPISH (Non-Profit Institutions Serving Households)

Low saving ratio 2017-2019

This period saw a significant fall in the UK savings ratio to a record low. This fall in the savings ratio has been caused by

  • Fall in real wages
  • Depreciation in Sterling post-Brexit – pushing up the cost of living and contributing to falling in real wages
  • To maintain spending, consumers have borrowed and dipped into savings
  • Temporary factors (high tax payments on dividends)

Saving ratio and base interest rates


In theory, lower interest rates reduce the incentive to save. But, the interest rate is only one of many factors influencing decisions to save. The most important factor is the state of the economy. In 2009, we saw a rapid rise in the saving rate because of the recession – despite interest rates cut to zero.

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The Paradox of Saving


Looking at graphs for the saving ratio, I noticed a paradox. When people felt it was a good time to save more, they actually saved less. When people felt it was a bad time to save, they actually save more. Is it a Good Time to Save? As part of the GFK consumer confidence survey. …

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Can we save our way out of the Pension Crisis?

Readers Question. We hear much about the “pensions time bomb”, as people tend to live longer and there is a bulge as “baby boomers” reach retirement age. We also hear much about the need to save for retirement. Saving *money* may mean people have more money in retirement but surely the real problem is to ensure there is more output; money is worth only what it can buy. Is there a risk that money saving will simply reduce current output and so reduce the income and incentives needed to ensure we have the investment that will enable us to increase output over time?

It is easy to see how it makes sense for an individual to save for retirement but at the national level, it may be counter-productive.

Basically, is there a concern that higher savings for pensions will lead to lower economic output?


Forecast for Dependency Rates

Source: Dept for work and Pensions

Firstly, western economies do face a pension time bomb. Dependency rates are forecast to rise (though the UK is unlikely to be as badly affected as other countries, such as Spain, Italy and Japan.) An ageing population means state pensions will take up a bigger % of GDP. Higher savings would help with the private sector pension deficit and provide more funds for pensions. But, would higher savings lead to lower growth?

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Japan Savings Ratio 2012

Japan has traditionally had a high savings ratio, but, in past decade the savings ratio has fallen to be close to European / US levels. Graph showing Japan Savings Rates Japan’s economy chasing illusions Since 1998, though Japanese saving rates have declined. The graph is a bit hard to read, but, since 2004, Japanese saving …

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