Policymakers are in danger of being duped into thinking UK households have stopped saving and embarked on a debt-fuelled spending spree, Britain's biggest insurance mutual has warned.
Royal London challenged figures released by the Office for National Statistics (ONS) earlier this year that suggested the UK's quarterly saving ratio had fallen to a record low of 1.7 per cent.
In a research paper, the insurer said:
Far from being a story about consumers going on a credit-fuelled spending spree, the fall in the savings ratio over the period is almost entirely explained by changes in the rate at which individuals built up pension entitlements.
Royal London said the ONS data did not include the change in household's pension rights or take into account that in the first quarter large items such as tax bills need to be settled.
The reported added: "Taking account of the rise in pension saving under this heading could potentially have wiped out the reported fall in the savings ratio altogether."
"There may be legitimate reasons to be concerned about current data on consumer use of credit and levels of household indebtedness."
[But] there is a real risk of policy makers and commentators drawing the wrong conclusions if they fail to dig beneath the surface of the headline figures.
Hargreaves Lansdown senior pension analyst Nathan Long agreed that "the savings ratio appears to be a reflection of developing trends".
He added: "A key element in the changing savings ratio is the bump in contributions people are forced to make into unfunded pension schemes like the NHS and Civil Service Pensions. These are not accounted for in the savings ratio, even though staff are being asked to save more for their future pension rights. The data could also reflect the impact of auto-enrolment."