Extract D: UK household savings ratio (%), 2018 to 2021

Note: The household savings ratio is household savings expressed as a percentage of total household disposable income.

Extract E: Pandemic-era savings rates experience wild swings

Recent economic data show that the rate at which households are saving reached unprecedented heights during the COVID-19 pandemic, peaking at over 23% in mid-2020 before falling back rapidly as inflation and living costs spiked.

The initial surge was driven by 'forced savings' as consumer spending opportunities in hospitality, travel, and high-street retail were heavily restricted by government lockdowns, alongside precautionary savings prompted by widespread economic uncertainty. Conversely, the subsequent drop in the savings ratio indicates that, as inflation began to erode real disposable incomes, many households had to reduce their ongoing saving rates or dip into existing reserves just to maintain their standard of living. However, saving behaviour remains highly unequal; some households may respond to shifts in consumer confidence or prospective interest rate changes by choosing to accumulate funds, while others are driven primarily by the need to secure a pension for retirement.