Savings drop to lowest level for 40 years, says Bank of England

Savers have been withdrawing money from their bank accounts at the fastest rate for 40 years, figures released by the Bank of England show.

More than £23bn has been withdrawn from long-term savings accounts in the past 12 months, roughly equivalent to £900 for every household in the country.

Account holders either spent the cash, which in many cases was earning less than 1% interest in their accounts, or moved the money into easy access current accounts.

The Bank of England figures suggest that many people took their money out, realising that leaving it in the bank meant they were not accruing any meaningful returns.

However, the withdrawn money may have bolstered the UK economy as spending confidence has risen, with sales of consumer goods increasing.

The figures show a marked change in the nation’s saving habits. After the recession, people were keen to save money – in the year to October 2012, £24bn had been added to savings accounts. But long-term savings have since fallen by around the same figure in the year to October 2013. According to Sky News it marks the biggest fall in long-term savings since the 1970s.

But the amount of cash that consumers were physically holding plus money stashed in current accounts rose by over 11%. On Monday evening experts said the news would lead to fresh fears over the sustainability of the economic recovery.

Ros Altmann, a former Downing Street policy adviser, said to The Telegraph: “The figures are desperately worrying. People are stopping saving for the long term because all the policies of the last few years mean you would be a mug to save.

“The problem is no economy can thrive in the long run without people saving. You can’t run it on borrowing and debt, you need to save and invest for the future. If you just withdraw money and spend you are talking about a recipe for long-term economic decline.”

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