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.
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.
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.
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.”