UK savers are sitting on a record £1.5tn ($1.9tn) but by hoarding this amount, it has meant savers have missed out on £38bn of income. This is the equivalent to £1,350 per household.
According to research from Janus Henderson Investment Trusts, figures show that in the first half of 2020 households had £77bn of cash balances, compared to the £82bn in the entire year of 2016.
The total of £1.5tn comes from Brits’ cash being currently stored in ISAs, savings accounts and current accounts, approximately equal to the combined value of all the residential mortgages in the UK.
However experts have warned that many savers are losing out on huge amounts of potential capital every year while interest rates remain staggeringly low. Those types of accounts currently have little or not interest.
“UK savers are squandering the opportunity to earn tens of billions of pounds extra in income on their savings,” said James de Sausmarez, director and head of investment trusts at Janus Henderson.
“In my view, interest rates are set to stay low for a very long time, so there is no light at the end of the tunnel for cash.”
Sausmarez explained that many savers are put off investing due to the turbulent nature of the stock market, as we saw at the beginning of this year with the coronavirus pandemic and the prospect of a no-deal brexit, as well as dividend payments also being hit.
He also claims UK companies will pay their shareholders much more than they could earn in savings accounts.
“What’s more, this cash is not evenly spread around, but instead is concentrated in the hands of wealthier households,” said Sausmarez.
“Banks call this ‘muppet money’ because they know savers are missing out on much better opportunities elsewhere.”
In June research by Aegon, a pension, life insurance and asset management provider, showed that six in 10 people’s saving habits had been affected by the coronavirus pandemic, some increasing their savings while others were saving less or had stopped saving altogether.
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The self-employed were among the worst hit, as more than half of self-employed workers had admitted to having reduced savings, and one in four furloughed workers had seen a reduction in their savings also.
Meanwhile, lender survey data, published this month, from the Bank of England showed UK households borrowed more through credit cards and overdrafts than they paid off for the first time in four months in July.
The data showed that net consumer borrowing returned to “around its pre-COVID level” in July with households borrowing an additional £1.2bn. That’s higher than the £1.1bn monthly average for the 18 months up to February this year.
Analysts said UK households showed a “return of big ticket purchases” and more normal spending habits after the coronavirus lockdown and recession reined in household borrowing earlier this year.