Britain’s canny savers who squirrelled away £140bn during the pandemic need to put that money to work for them in pensions and long-term savings.
This is the view of Paul Surguy, head of investment management at Kingswood, who commended people for putting more money aside as lockdown closed the economy down, but warned unless people make those savings work for them, the value of their hard-earned cash will end up eroded by inflation.
Commenting on the Office for National Statistic’s data that showed Britons had tucked away £140bn in savings over past 12 months, Surguy said it was “no surprise” that many who had remained fully employed had been able to save more over the past 12 months.
He said: “For those who have been fortunate to remain in full employment through the pandemic, they will have undoubtably saved more than they would usually have.”
However, he warned that, due to the nature of the pandemic, this has most likely built up in general bank accounts which offer, at best, “paltry returns”.
In addition, with some of that £140bn chunk flooding back into the economy as spending picks up among consumers, he warned this could lead to inflation, which gradually erodes the value of any cash that is sat in the bank.
Over the long term, this reduces the buying power of cash sitting in low-to-no-interest accounts, as the prices of goods and services increase while the value of the cash remains static with interest rates remaining at, or close to zero.
Therefore, he urged that people should consider longer-term savings vehicles such as pensions or ISAs, to make the most of the money built up over the course of the pandemic.
Surguy added: “While we expect some of the savings will be spent, we would also expect that many individuals will consider adding to their pensions, or increasing their regular savings into ISAs.
“In order to reap the greatest benefits, we would suggest talking to a professional adviser.”
This article was written by Simoney Kyriakou and publish on the the FT Adviser website.