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UK adults are increasingly reducing the amount they save and invest as price rises continue to weigh on household finances.
The percentage of people in the UK who either stopped or reduced saving or investing as a result of the high cost of living rose to 44 per cent in January this year, compared with 40 per cent a year ago, according to a survey from the Financial Conduct Authority.
The rate of inflation in the UK peaked at 11.1 per cent in October 2022 but has not yet come down to the Bank of England’s 2 per cent target. Despite wages increasing during this period, the rate of price rises has put fierce pressure on household finances.
While the data from January shows improvements from a year ago, it is still worse than historic data, the FCA said. Some 14 per cent — equal to 7.4mn people — said they were struggling to pay bills and credit repayments in January, down from the 10.9mn a year before but far above the 5.8mn recorded in February 2020, before the cost of living began its sharp rise.
The survey, which included answers from 3,450 UK adults questioned between December 2023 and January this year, showed nearly four-fifths of the population were spending less or working more to make ends meet, and just over half — 52 per cent — had reduced the amount of electricity or gas they used to save money.
Despite this, just 3 per cent of respondents stopped or reduced their pension contributions to make ends meet, and only 2 per cent cashed in a pension fully or took out a lump sum to cover day-to-day expenses.
Tom Selby, director of public policy at investment platform AJ Bell, said it was “encouraging” that the vast majority of people had chosen to keep saving for retirement.
“While raiding your pension early might be tempting as living costs rise, taking out too much, too soon from your pot could risk you running out of money in later life and land you with a fat income tax bill to boot.”
