Live now, pay later: families say there’s no point saving

Britons are addicted to debt with little regard for long-term savings, a major new study revealed yesterday.

A survey of Britain’s wealth by the Office for National Statistics showed that 44 per cent of the public are more inclined to spend their money than save it, saying that they would rather have a good standard of life now than provide for a comfortable retirement.

While 19.3 million households, nearly 80 per cent of the total, had racked up an average of £7,200 each on credit cards, loans and other non-mortgage related debts, only 40 per cent of men and 32 per cent of women are paying into a private pension. The figures, coming a day after the Government set out its plans to tackle Britain’s soaring deficit, show that more than 20 per cent of the population would rather “buy now, pay later”, with women far more likely to express the devil-may-care attitude towards credit. But the survey, the first of its kind, shows how these attitudes are taking their toll. More than 2.5 million households, or one in ten, were in arrears, having been unable to meet payments for at least two consecutive months. The Consumer Credit Counselling Service warned that the picture is likely to deteriorate as more people struggle to manage their debt.

Struggling with monthly finances was the main reason that people said they were not saving, and 35 per cent admitted that they had never been able to save any of their monthly income at all.

Of those who had credit or store card, who account for a quarter of all non-mortgage borrowing, 15 per cent said that they were unable to meet the minimum payments, while over half of active users said they felt the payments were a burden.

The immediacy of these concerns was reflected by the fact that almost 80 per cent of those asked said that they would rather get a guaranteed £1,000 now than receive a one in five chance of winning £10,000.

Worryingly, the data was collected over a two-year period ending in June 2008, before the recession took hold and day-to-day finances hit rock bottom for a large part of the population, making saving for retirement an even bigger struggle.

The ONS said it was unable to confirm the impact of the recession because recent data was still being processed. But the National Debtline echoed the Service’s concerns over the potential for the situation to worsen. It answered 142,710 calls from people struggling to cope with debt during the first 10 months of last year. That number was up by 23 per cent by the end of October this year.

“We have seen a continued rise in demand for advice from people with mortgage arrears and we believe that this Christmas will be our busiest on record,” a spokeswoman said.

But it was not all bad news, with 40 per cent of households saying they had saved some of their monthly income over the last year, citing retirement funds and holidays as the main incentive. In fact, over 60 per cent of the population said that they have a savings account, even if a quarter of them have only managed to amass under £500 each.

The survey found that Great Britain held a total wealth of £9 trillion, or an average of £204,000 per household, made up of the value of assets such as property and savings after debts had been deducted.

The fact that the majority of this wealth was made up from property and pension values casts doubt on the £9 trillion, since the global financial crisis has wiped millions from the value of the property and stock markets.

The ONS found a marked imbalance between the rich and poor, with the poorest half of households accounting for just nine per cent of the £9 trillion, while the wealthiest 20 per cent 62 per cent. One in ten households had almost no assets, and two per cent, of half a million households debts which added up to more than anything they owned.

The estimates of wealth also varied greatly across Britain, with London and the South East faring dramatically better than the North West and Scotland. The wealthiest area was the South East, where the median wealth came in at £287,000 per household. The North West region, however, was significantly poorer, with just £168,000. This pattern was reflected across all types of wealth measured, from property value to the value of household goods and collectibles, all amounting to less in Scotland and the North West. That education pays was in evidence, as the survey showed that households headed by someone with a degree had significantly more wealth at £400,200, whereas households where the head of family had no qualifications has almost a quarter less.

The report also highlighted the discrepancy between public sector workers and others on final salary pensions who enjoy pensions worth an average of £83,000, compared with those on defined contributions who have less than £7,000. The majority of those not saving for retirement said they could not afford to, but 40 per cent of people said they did not feel they understood enough about pensions to make an informed decision. The statistic should ring alarm bells for the Chancellor, Alistair Darling, who is encouraging voters to take saving for retirement more seriously to ease the burden on the Treasury.

The ONS acknowledged that it will be difficult to make comparisons with other surveys, as this is the first to include all the elements that make up personal wealth. But a spokeswoman said it might publish updated information next summer.

In September, the Halifax bank published its own findings on the nation’s wealth, putting the household figure at just under £6 trillion. Almost three quarters of all households owned one or more cars, while 8 per cent owned either vans or motorcycles and 5 per cent owned other vehicles such as caravans and boats. Thirteen per cent said that they owned collectables or valuables with an average value of £5,000, though it is possible people could have overestimated the value of some of their cherished goods. Those with the highest “physical” personal wealth, i.e. cars and collectibles, were more likely to be self-employed and from the South East. London households had a lower physical wealth than some regions, which could be attributed to fewer owning cars.