Sharp fall in savers after Budget tax hike
THE huge hike in tax on savings has knocked the confidence in people who squirrel money away, and prompted more of us to give up regular saving.
The latest savings index from building society Nationwide UK (Ireland) shows that people's attitude to savings has taken a hammering.
The index, which measures attitudes to saving and savings conditions, has fallen sharply – reversing a big gain recorded in September.
As consumers digested bad news in the Budget and the ongoing declines in interest rates, the overall index dropped 12 points this month to 98, from 110 in September.
Less than a third of people say they are putting money aside every month. In September close to four out of 10 people were regularly saving.
Part of the reason is that deposit interest retention tax (DIRT) is set to surge from 33pc to 41pc from January. And larger numbers of people will also have pay related social insurance of 4pc deducted from any interest they earn on savings. This comes just days after the European Central Bank cut its key lending rate – a move that is expected to mean lower interest rates on deposits for savers.
The interest rates paid by banks had been cut for 16 months consecutively, according to Central Bank data.
Only one in 10 now believes that government policy encourages saving.
Managing director of Nationwide UK (Ireland) Brendan Synnott said the preferred use for spare funds has changed.
In the past 12 months the proportion of people saving for planned purchases has almost doubled to 9pc, while there has been a drop in those saving for unexpected expenses.
"This may indicate that consumers are thinking about spending again. However, any positive indicator is tentative and can easily be offset by uncertainty or negative events in the local or wider economic environment," Mr Synnott said.