Savings boom as 40% of adults debt free

FOUR in 10 adults are completely debt free as consumers save nearly four times as much as they did at the height of the boom.

According to the latest Postbank Savings Index, personal debt is also being slashed as the recession bites, with 26% of those surveyed having actively reduced their personal debt in 2009.

The survey also reveals that a new savings culture has taken hold, with three quarters of all adults putting away an average of €283 a month for a rainy day, down slightly from a high of €305 in the third quarter of 2009.

The drop in consumer spending is reflected in a reduced tax take, however.

Yesterday’s Exchequer returns show a budget deficit of €780 million in January, compared with €747.2m in the same month last year.

Tax receipts were just over €3 billion compared to €3.7bn in January 2009.

The figures also show the income tax take of €1bn was down 10% compared with January 2009. VAT revenues were also down almost 18% to €1.6bn, a strong signal that consumer spending remains weak.

Corporation tax fell 66.5% to €41m, with stamp duties falling almost 41% to €30m. Excise duties were over 16% lower at €260m.

According to the UCD Smurfit Graduate Business School and the Marketing Institute of Ireland, Irish people saved 11% of their disposable income last year, compared to just 3% in 2007.

These figures compare with a personal savings rate of 4.7% in the US during November 2009, and an average of about 2% in 2007.

Head of marketing at Postbank John Donegan also predicted debt levels would fall again in 2010.

“Just 6% of people surveyed indicate that they will increase their borrowings in the next three months, with 25% planning to reduce their borrowing levels.”

The survey also revealed how half of 18 to 24-year-olds had no borrowing, 25% of people aged 25 to 34 are debt free, with 27% of people aged 35-49 and 70% of people aged 65 plus having no borrowings.

The index, a quarterly survey of 1,000 Irish adults carried out by Millward Brown Lansdowne, also found that while more women than men are saving money for a rainy day, men are saving almost 40% more.

Mr Donegan said the trends at the moment show that people still want to have a secure nest egg.

“People are paying down their debt and if they are likely to make big purchases it will be based on savings and credit as opposed to the buy now pay later approach of recent years,” he said.

The survey also suggests that saving for pensions and retirement has declined by over 50% since late 2008.

The survey also hints that consumer spending looks to take a further hit in 2010. Women in particular will be cutting back, with 56% planning to trim their budgets in 2010.