One in five Brits expect to reach retirement with £2,500 in savings

Despite a generally healthy attitude towards cash savings, one in five Brits (18%) expect to have less than £2,500 in cash savings when they retire - equivalent to the average monthly wage before tax.

But while that amount may only be enough for a family holiday or new boiler, the Nationwide Savings research highlights the average person anticipates having £42,244 stashed away in savings at retirement, excluding any pension pot.

A further 12 per cent are planning to have more than £100,000 in savings when they finish work.

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The research, which polled 2,000 adults of working age, was conducted to highlight the nation’s savings habits approaching ISA season.

Nationwide figures show the average Cash ISA saver has £13,191 in their account, including previous years’ savings, meaning the majority of people are nowhere near maximising the annual allowance of £15,240, let alone the new enhanced limit of £20,000 when it comes into effect on April 6. Just one in eight (13%) customers deposited the maximum allowance in the last tax year, compared to around a third (34%) in the 2012/13 tax-year when the annual allowance was just £5,640.

Spare cash:

The challenge in saving is clearly linked to having discretionary finances to put aside, with the poll showing six in ten people (60%) don’t have any spare money to save each month. A third of those surveyed (33%) describe themselves as “just about managing” their finances, with no money to fund unexpected bills. A further one in ten (11%) manage but struggle to pay upcoming bills, pointing towards a limited ability to save. Worryingly, many don’t see the situation improving any time soon, as just a third (31%) say they are optimistic about their financial future.

Despite this downcast view, there are many people who remain optimistic, with nearly two thirds (64%) claiming they would always aim to save up to fund a large purchase, such as a holiday or a new car, rather than turn to credit, with half of savers (48%) choosing the tax-free option of a Cash ISA. One in five (20%) claim they are already saving enough, with one in six (17%) claiming they could save more but don’t want to cut back on their current spending.

ISA withdrawals:

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New ISA flexibility rules came into effect at the start of the 2016/17 tax-year giving ISA savers the ability to withdraw and top up their ISA to the maximum allowance; previously, if a saver withdrew funds from their ISA, that part of their annual allowance was lost. The research shows that one in five (20%) savers who withdraw money from their ISA replace it again at the same level. The majority (38%) of savers say they made the withdrawal as they needed to access the money in an emergency or were saving for a particular purchase (31%), such as a deposit for a home, which they are now ready to make.

If a member was to invest just £25 per month into the Nationwide Flexclusive ISA, then after five years they would have a nest egg of £1,529. Increase this to £50 or £100 and within the same time frame they would have saved £3,0579 and £6,114 respectively.

Tom Riley, Nationwide’s Head of Savings, said: “Many people take comfort from having money put aside that they can access in an emergency or that they can dip in to, to fund life’s little luxuries. For some a regular savings habit is a way of life, but others need more of an impetus to put money aside on a regular basis. This could be the desire to fund a certain purchase, such as a deposit for a home or a wedding, but for others the kick-start could be having faced a previous situation where they needed money, but had none put aside.

“If people are able to save even a small amount, they tend to be more confident about their financial future.”

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