Cost of Living Crisis Forces Many Britons to Dip into Savings and Cut Pension Contributions
The ongoing cost of living crisis and high interest rates have had a significant impact on how Britons save and plan for retirement. Lifetime ISA unauthorised withdrawals have surged by 139% from 2020/21 to 2023/24, indicating financial strain for many households.
Finder data shows that the average UK savings in 2025 stand at £16,067. However, 39% of people have £1,000 or less in savings, with 23% holding £200 or less. The personal savings rate peaked during the 2020 lockdown but has since declined as many have been forced to use their savings to cover rising costs.
Many individuals are stopping saving completely or reducing their pension contributions, impacting both long-term savers and those already financially vulnerable. Several case studies illustrate this trend:
In Essex, Andrew has around £4,000 in savings and stocks each but has paused saving due to monthly outgoings of approximately £2,800 despite having a £30,000 workplace pension.
In Glasgow, Ryan has no savings at all, reflective of the 16% of UK adults with zero savings; this rises to 18% among millennials and Gen X. Some have faced harsh realities such as months without food.
Manchester resident Carrie has a £70,000 pension via salary sacrifice but lacks emergency savings. Renting and caring for a sick husband raise concerns about loss of income.
In Shropshire, Jon has £15,000 in an ISA, £2,000 emergency fund, and a substantial £250,000 pension. He plans to overpay his mortgage if interest rates increase. He and his partner are both employed with no children.
North Yorkshire’s Neal, with £6,000 savings and a £135,000 workplace pension, is planning to have his first child amid worries about affordability and uncertain pay rises.
These stories highlight the diverse challenges faced across the UK, reflecting wider economic pressures on savings and pensions amid rising living costs.
