Poorest households have less than £1,000 in savings

Over 11 million working aged people in Britain have less than £1,000 in savings, according to a new report. Research from the Resolution Foundation warns that the poorest households are finding it difficult to build up financial resilience during the cost-of-living crisis.

The think tank concludes that Britain is facing a "triple savings challenge" - people don’t have sufficient savings, they can't cope financially with major life events or costly emergencies, and they have inadequate retirement pots.

Half of the households with less than a grand in savings live in the poorest third of households across Britain, the report reveals. It says those with the lowest levels of savings are more than twice as likely to use credit cards, overdrafts or borrowed money than those with more than £1,000 in savings.

Government needs to encourage saving

The Resolution Foundation is urging the government to take action to encourage saving by extending auto-enrolment pensions to begin from the age of 18 and removing the lower earnings limit. It is also calling for the default pension contribution to increase from 8% to 12%.

It states making the UK’s pension pots more accessible during people’s working lives will help them cope with unexpected life events. Currently, you can’t take anything from your pension before you’re 55 without a significant penalty in tax.

Molly Broome, an economist at the Resolution Foundation, said:

“We can address all three challenges by building on the success of pensions auto-enrolment to opt more people into both easy access and long-term saving.

“We should also offer people more flexibility over their pension pots, as other countries do, to help them with difficult circumstances. These reforms will improve families’ financial resilience during their working lives and into retirement too.”

Do you have less than £1,000 in savings?

If you’re on working tax credit or getting universal credit and struggling to build up savings, you may be eligible for a Help to Save account.  The scheme is backed by the government, so the money you save will be protected.

Check you’re getting all the benefits you’re entitled to.

What is a Help to Save account?

With a Help to Save account, you get a bonus of 50p for every £1 you save over four years. You’re allowed to save between £1 and £50 each calendar month but you don’t have to pay money in every month. If you saved the maximum amount allowed each month, you’d add £1,200 to your savings.

You can pay money into your account by debit card, bank transfer or standing order, and you can make as many payments as you like, as long as the total amount paid in during one calendar month is no more than £50.

You can carry on saving into a Help to Save account even if you come off benefits. And if you and your partner claim benefits as a couple, you can both apply for your own Help to Save accounts. 

Find out how to set up a Help to Save account . 

Check what other cost-of-living help you could get.