The pandemic savings illusion

by Linda Balkema
Business & Finance

Earlier in the year, optimistic headlines appeared about how many of us might be able to save more as lockdown would prevent us from going about our normal spending ways.1 While this may be the case for some, by July, 35% of people in Britain reported that the pandemic had negatively impacted their income.2

Britons have seen an increase in their cost of living since the coronavirus outbreak, two in three (65%) said the cost of food, groceries and household supplies have increased, while 30% said their utility bills have gone up, meanwhile 25% are spending more on entertainment.3 All of this has contributed to people dipping into their savings, or in some cases, putting a halt to their saving schemes altogether.

In our CovidWatch documentary ’Blindsided’ – the trailer of which you can watch here – we found that some working adults stopped contributing to their pension as they would rather have the money available to them right now.4 With job security confidence dropping from -19 to -38 in October 2020 compared to 12 months ago,5 the number of payroll employees falling by 782,000 since March6 and the Bank of England projecting unemployment to rise to 7.5% by the end of the year,7 the likelihood of increased savings looks more set to veer towards credit dependability.

Inequality in wealth distribution across Britain looks set to grow

man buying online using credit card

So, are we getting richer or poorer?

In November, the Bank of England reported that household savings have risen on average. More than a quarter (28%) of those surveyed had increased their wealth as a result of the pandemic, but that hid that one in five (20%) had eaten into their savings. Unsurprisingly, those drawing on their savings were most likely to be furloughed or unemployed.8

As many well-off households in Britain watched their wealth grow (42% of high-income employed households saved more during the pandemic), the reality for the low-income households tipped in the other direction, as the Bank of England report painfully demonstrates. Inequality in wealth distribution across Britain looks set to grow.

“The reported income of households that had increased their savings was 45% higher on average than households that had decreased their savings, and their reported holdings of deposits were over three times greater.”

Bank of England, 25 November 2020

To protect vulnerable members of the public from further harm, the Financial Conduct Authority has updated its guidance to finance companies to offer payment holidays to customers experiencing payment difficulties as a result of the coronavirus pandemic. Consumers will now have until 31 March 2021 to apply for an initial or a further payment deferral.9

Although customers who are struggling to keep up payments for personal loans, credit cards and other credit products will be safeguarded against repossession of cars and homes, financial education among the public will remain critical. Simply stopping payments can affect credit ratings with credit providers generally asking customer to contact them in order to discuss a payment deferral. The onus is on the customer, whereas providers could be more proactive to anticipate customer needs.

As we gear up for 2021, savings inequality and credit dependability look set to accelerate. While some may be looking into their next investment proposition, many will be keeping a close eye on new ‘buy now, pay later’ schemes.

Linda Balkema

Linda Balkema

Associate Director


  2. Ipsos MORI, Public Affairs (October 2020). The Health Foundation COVID-19 Survey – second poll. July: All respondents (2,246 GB adults aged 18+, interviewed via telephone between 17–29 July 2020)
  4. Ipsos MORI CovidWatch ‘Blindsided’ (April to October, 2020). 30 households in UK, US, Italy, France, Russia and China. 2,500 videos collected.
  5. Ipsos Consolidated Economic Indicators
  6. Labour market overview, UK: November 2020. Office for National Statistics.
  7. Monetary Policy Report (August 2020), Bank of England.
  8. How has Covid affected household savings? (25 November 2020). Bank of England: