THE UK’S savings rate could more than double after details of a major overhaul to the way pensions savings are recorded was outlined yesterday by the Office for National Statistics (ONS).
Earlier this month statisticians at the ONS said that the UK’s five per cent savings rate could increase to as high 10 per cent.
But yesterday the group admitted it could grow even further, more than doubling to 11 per cent.
The UK has regularly been described as having a low savings rate, especially for pensions, but the changes will drastically alter perceptions of the economy. The changes do not mean that UK pension pots have got any bigger, but the UK’s low savings may now look less unhealthy against other nations.
The state of GDP is also thrown into question by the alterations to how the economy is measured, raising the measure of output by somewhere between 2.5 and five per cent.
Economists currently expect the UK will reach its pre-crisis GDP peak in the second quarter of this year, but such a large upwards revision, equivalent to more than a typical year’s growth, means the point may already have passed.
The changes also alter the amounts that different sectors of the economy borrow and lend. The ONS says that the increased liabilities of financial firms would have brought their estimated net worth down by £30bn to £50bn a year if the changes had been applied between 1997 and 2010.
The method would also have trimmed the position of non-financial firms. These businesses are net lenders, but their position would likely be worsened by up to £11bn under the alternative system.
The opposite is true for households, who were recorded as net borrowers through most of the period, and could have their overall position improved by £35bn to £67bn per year.
Another article on the impact of the changes to GDP will be released in May, and the changes will be completed by the release of full national accounts figures in October.