How to Close your Savings Gap
Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.
What is the Savings Gap and How Can We Close It?
The Savings Gap is the shortfall between the amount of money people will need in the future and the reality of how much they are on track to have. Our research shows that only a minority of savers will have enough funds for a comfortable retirement.
Our Savings Gap Research
We’ve surveyed over 50,000 people about the Savings Gap since 2013. The results show that only a minority of savers will have enough funds to reach their financial goals.
Our polling shows that people expect they’ll need £23,000 a year in retirement to live comfortably. However, based on their actual savings behaviour, Brits are on course to receive an income of just £6,000 per year from their retirement fund.
That leaves a Savings Gap of £17,000 every year. With such a significant shortfall, it’s clear that the UK needs to fundamentally change the way it approaches its finances.
What Causes the Savings Gap?
We’ve identified three key reasons for the Savings Gap:
- The Knowledge Gap – research by the Organisation for Economic Cooperation and Development found that only 38% of UK adults understand the term “inflation.”
- The Agility Gap – the need for simpler savings and investment products.
- The Technology Gap – ensuring that people have accessible and easy-to-use methods for saving and investing..
What Are We Doing to Help?
We’re pro-active in helping people tackle their personal Savings Gap.
With the Knowledge Gap, we’ve partnered with the Open University and launched the ‘The True Potential Centre for the Public Understanding of Finance’ (True Potential PUFin).
The centre has produced three free online course, with over 500,000 people registered to date:
The Agility Gap can be closed by smart and useful savings tools. Savers need simpler savings and investment products. We have long made this case in Westminster and were happy to see the introduction of the Lifetime ISA, which offers subsidised routes to saving for both first time home buyers and those saving for retirement.
We believe the ISA cap should increase to £25,000 per year and that pensions need to be simpler, more transparent and more accessible. We’re therefore campaigning for a ban on pension exit fees and a cap on Annual Management Charges.
In terms of the Technology Gap, we’ve developed new technologies to give investors more power and control over their money. Our clients have 24/7 access to their account through our free mobile app, where they can check their investments and top up from just £1.
What Can You Do to Close Your Savings Gap?
- Set Financial Goals
Setting an accurate goal is the most important step in determining your financial future. Goals create a focal point to help keep you on track over the long-term. By checking your progress against your goal, you’ll be able to see if you have a Savings Gap.
With visibility of your long-term financial position, you can make the changes you need to stay on track and do more with your money.
· Set up a monthly Direct Debit
One of the simplest ways to close your Savings Gap is setting up a Direct Debit.
Adding a Direct Debit to your investment means you’re taking the effort out of securing your financial future. Think of it as investing on autopilot. You’ll automatically be adding a consistent contribution to your investment every month, without lifting a finger. In the same way you pay your mortgage or bills, you can begin to consider it an essential outgoing and factor it into your disposable income for the month.
Once your Direct Debit is set up, you can sit back in the knowledge that your regular monthly investment is taken care of.
- Top up when you can
Our unique impulseSave® feature enables you to top up your investment from £1. Saving little and often when you have spare funds can help you reach your goal faster.
In 2019 alone, people like you impulseSaved £56 million into their investments.
To conclude, the best way you can make sure you’re prepared for your future financially, is by saving little by little over a long period of time. You should make sure you are aware of all of the financial tools available to you, set yourself a financial goal and stick to your plan.