Britons are having to dip into their savings to meet day to day expenditures. Schroders Investment Management Ltd. (SIM) released new data showing that 31 per cent of Britons have had to dip into their savings accounts and investments. The amount taken from savings to meet living costs has averaged 4,600 pounds totaling an astounding 60 billion pounds.
Experts believe that low savings interest rates can be partially to blame. When considering the loss of interest income people don’t have a lot of incentive to leave the funds in place.
Families are finding it had to make ends meet. The question is how many will reach major hardship when the funds run out. Many older Britons at pre-retirement age are having to dip into their retirement savings which will be detrimental in the years down the road. Increasing fuel and food prices are pushing family’s budgets to the limit and many have no other choice than to withdraw savings.
Robin Stoakley, managing director of Schroders Investment Management Ltd, said: “At the end of the day people can manage their savings better and their expenditure but the size of this shortfall per person would indicate to me this is a fundamental problem.”
Of those aged 55 to 64 years of age a reported 36 per cent are relying on investment or savings withdraws to boost their income for the past year. This has many analyst concerned about what will happen when those same people reach retirement age.
“The amount of capital being drawn down suggests that it is not just rainy-day funds that are being drained, but a significant proportion of individuals’ long-term savings,” says Robin Stoakley of Schroders.
”This is particularly an issue for those nearing or in retirement as they have less opportunity to rebuild their savings and declining annuity income proves insufficient to cover their day to day expenditure,” he adds.
Of course the government wants to extend the age at which pensions are accessible and make retirement higher than the traditional age 65, so options of staying in the work field may be more of an option for those using their savings right now.
Jasmine Birtles from moneymagpie said: “I think people in their 50s and 60s are so much healthier and stronger and are living longer. I urge them all to have a look at their own earning potential which is much higher than they may realise. We’ve seen a lot recently about people in their 50s and 60s being put on the scrap heap, being made redundant, but I say to them to set up your own business and make use of your skills.”
The rising cost of living will not see any relief soon. Inflation is expected to possibly see a slight rise when the government’s budget cuts take place. Mervyn King, the Bank of England governor, has warned that the economy will see slow growth and that full recovery is a long way off. With that said, how long will savings last those relying heavily on it to help with living costs. In the past years Britons were not especially big savings depositors.
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