Euro instability and DIRT hikes slow consumer saving

CONSUMERS want to save money, but are slow to do so due to their uncertainty over the stability of the euro and DIRT tax hikes imposed on savings in the December budget.

The Nationwide UK (Ireland) and ESRI Savings Index was static in December, having fallen 24 points in November. While the Overall Savings Index stayed the same at 91, the Savings Environment sub-index fell from 98 in November to 95 in December. The average value for this sub-index in 2011 was 115.

Nationwide UK (Ireland) managing director Brendan Synnott said: “People are showing a lack of trust in the Government, with what they view as a penal increase in the DIRT tax from 27% up to 30% — which is hard for people who are relying on the interest on their savings for survival in the current environment.”

In December, 46% of consumers were saving for unexpected expenses. 15% were saving for education or training, while 7% were savings for a holiday.

Some 29% of regular or occasional savers are saving between €51 and €100 a month and 28% are saving €50 or less a month.

The data also showed that 57% of people believe government policy discourages saving. This is the second highest negative response to this question since the index began in January 2010 and 7 points higher than the average response for 2011.

People are also less convinced that now is a good time to save. Some 48% of people responded negatively when asked if they think now is a good time to save, up from 45% in November, the highest since the index began and also 7 points higher than the 2011 average.

Mr Synnott said: “People want to save for a rainy day as they anticipate further problems ahead. However, some people are reverting to managing with cash.

“Uncertainty remains over how and when the current crisis in the euro currency will be addressed while on a domestic front, the increase in the rate of tax on savings introduced in the 2012 Budget is a further disincentive to saving,” Mr Synnott added.