The £1 Trillion Savings Mountain by Finance News Bulletin

Published: 09/11/07

For years we've been hearing about the debt ton here in the UK and how it has soared past the £1 trillion height It's currently over £136 trillion consisting of around £115 trillion in mortgage money owing and £215 billion of unsecured credit individual loans, credit cards, hire purchase agreements and so on top of

However, we hear far less about the total amount of investments we hold This is has been growing rapidly too and this fact was highlighted last week in a report from Alliance & Leicester Since the day 2000 our savings mountain has almost doubled and it at present amounts to £867 billion If it keeps up this speed of growth it could pass the £1 trillion mark sometime in 2010

Alliance & Leicester is a little more careful, suggesting this height won't be reached until 2012It's interesting to note that collectively we have four times as much in savings as we owe on credit cards and loans This puts a different viewpoint on the debt crisis although obviously few people that have a significant level of savings will also have much in the method of debt It's a shame these collective figures are not broken down into numbers of populace and the level of debt and savings detained

If we could see how this changed over time this would give us a much clearer image of how healthy the nation's money really areThe increase in savings is a little bit of a mystery however The savings relation, which measures what proportion of our post-tax income we save, has been very near to the ground in the past several years It's averaged around 4%, half the standard level it was over the previous forty years

So if we're saving so little from our usual income where has the add to in savings come from Professor Merlin mineral, who helped compile the report, reckons the increased savings have been at the expense of our pensions, which people preferring the security of money in the wake of the numerous pension scandals we've sufferedHowever, the information that we're all living longer has probably had an impact too Elder populace tend to have more in the way of savings, so the rise in the number of pensioners is probable to denote more in the way of total savings

Unsurprisingly instant access accounts are the most well-liked vehicle for our savings They explanation for 53% of our cash, up from 47% five years ago The average equilibrium held per account is around £5,000 but some people have more than one accountThe biggest area of growth has been tax-free savings, mostly due to the achievement of cash ISAs

The percentage of our savings that we hold in these financial records has risen from 14% to 21% and will no doubt be given a further increase when the limit is raised from £3,000 to £3,600 a year from next AprilChild Trust money may become a significant part of the savings equation in the prospect but at the moment they only engage in recreation a bit part, accounting for just 003% of our total savings usual savings accounts are another little player, due to the low limits they inflict on monthly savings

However, the launch of accounts paying 8% to 12% in the last couple of existence has helped grow their market share from 1% to 2%Fixed-term financial records have remained popular over the existence, especially with elder savers, and they will have been boosted recently by the bumper tax that were on offer this autumn They account for 13% of our savingsThe growth in immediate access accounts and tax-free savings has been balanced by a refuse in notice accounts

Rates obtainable on these accounts used to be the most competitive, but nowadays instant access financial records often pay better rates This has seen notice financial records slump from 23% of our investments to just 8% With few of these accounts being opened, it's reckoned that the refuse in this form of savings will continueAlthough the rates obtainable by different providers can vary enormously, it seems this is a message that is yet to get through

Sadly 44% of populace open a savings explanation with their existing provider and don't shop around for the best rate This is no doubt one reason why most savings financial records (62%) are still opened at a branch gap an account via the Internet is of course becoming more and more popular but mainly, it would seem, at the expense of phone and postal accountsThe report also highlighted the rise of what it calls disciplined savings financial records, which was a new term to me

These are accounts that allow instant right of entry but pay no interest in any month that a withdrawal is made Apparently these are popular with younger savers who like a disincentive to remove their moneyIn my view, this is a disincentive we could all do without For example, take an account of this type that pays interest of 6%

If you make two withdrawals a year, not an unreasonable supposition for most people, the effective interest speed will fall 6% to 5% This will happen even if the amount withdrawn is a small fraction of your total balance considering as these accounts rarely pay more than the highest-rate instant access accounts, I counsel giving them a wide berth> put on't forget that you can use the Fool's savings centre to find an explanation to suit your needs

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