Scots must return to traditional values of thrift and prudence

A major study of Scottish savings habits conducted for leading pensions company AEGON by independent pensions expert Stewart Ritchie, OBE, has found evidence of worryingly low levels of short-term saving, even in higher income groups. More than four out of ten households (42%) have no savings or investments and the figure is almost a quarter (23%) even in households earning over £30,000 a year.

Grampian households are most likely to have some savings or investments (65%), North Lanarkshire (36%) and Glasgow City (38%) least likely. Half of Edinburgh City households (50%) have some savings or investments, close to the Scottish average of 51%.

It is generally accepted people of working age should have ‘rainy day' savings of between three and six months of expenditure of earnings. These findings suggest many Scots fall far short of having this financial cushion.

Looking at longer-term pension savings Scots fare slightly better with a higher proportion of workers in, typically, more generous public sector pension schemes. Nearly a quarter (24.9%) of the Scottish workforce is employed in the public sector compared to one in five (19.7%) for the UK as a whole. Scots are therefore less likely to have been impacted by the move from defined benefit to defined contribution pensions. However the report suggests Scotland could be storing up problems for the future as politicians face up to soaring public sector pension liabilities.

The report indicates retired Scots have been less successful than their English counterparts in saving for a pension as a significantly higher proportion of Scottish pensioners claim Pension Credit than in other parts of Great Britain (28.5% compared to 24.6%).

There is evidence household savings ratios have begun to rise during the recession though this could be partly due to falling mortgage costs and does not necessarily imply a conscious change in savings behaviour. However the report shows savings could continue to rise in economies like the UK and US, where households had previously relied largely on wealth accumulation through capital gains rather than net saving out of income.

Stewart Ritchie, OBE, says: "It's time to return to the traditional Scottish values of thrift and prudence. Scots haven't been putting away enough money in the good years and there's a clear evidence of a worrying lack of ‘rainy day' savings. This doesn't bode well for those who lose their jobs in the current recession.

"The picture for longer term saving is little better. The higher proportion of Scots employed in the public sector may have cushioned many from the shocks of inadequate pension saving but could simply be storing up problems for the future. Future governments are likely to have to address public sector pension costs which could hit Scots harder than people in the rest of the UK.

"For too long people have relied on an expectation houses will go up in value and stocks and shares will rise and that capital gain will therefore provide them with retirement savings. The credit crunch has shown this to be a dangerous assumption.

"There are grounds to hope the recent increase in private saving may be sustained after the recession as Scots get used to the idea that the easy path to wealth through capital gain will have to be replaced by a return to more traditional savings habits."