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This emerged in the latest Scottish Widows household finance index. Household savings declined at the steepest pace for nearly a decade amid the quickest reduction in cash availability since the final quarter of 2013.
Scottish Widows says this heightens the risk that individuals and families could look to make savings in their household budget by decreasing their pension contributions and could be less likely to take out insurance products.
Despite this, income from employment is more buoyant - and households’ sentiment towards their job security was the most optimistic on record, with the respective survey index hitting a series peak of 50.2.
The index, which measures households’ overall perceptions of financial wellbeing, fell to 38.5 in Q1 2022.
Emma Watkins, managing director of retirement and longstanding at Scottish Widows, said:
“It’s tough right now for households trying the manage the surge in day-to-day living costs.
“We know that 60% of households have failed to boost their savings during the pandemic and that over 70% of households will need to eat into their savings in the next 12 months in order to meet their growing expenses.
“Looking forward, the number of households expecting to contribute similar levels of savings towards their retirement hasn’t changed significantly since the start of the pandemic.
“We have also seen an uptick in the level of insurance protection since the outbreak, with the biggest increase being life insurance (one in 10 households have taken out a policy since the onset of Covid), followed by private medical insurance (8%).
“However, many people are leaving themselves exposed to future financial shocks by not having the right protection in place - despite the increase in life insurance take-up, three in five households still do not have any cover.
“It is great to see people are feeling more secure in their jobs, with a greater feeling of job security to the most optimistic on record.
“But, despite rising incomes and workplace activity, we have seen a rapid decline in the amount of cash UK households have available to spend and, as a result, they are likely to be prioritising their daily budget over their long-term savings plans.”