UK Households Are Saving a Smaller Share of Their Income
UK households are saving a smaller proportion of their income as rising living costs put pressure on household finances, according to new economic analysis published on 12 October 2026.
The Institute for Fiscal Studies (IFS) Green Budget 2026 reports that the household saving rate has fallen from 9.5% to 9.0% so far this year. Its economic outlook also forecasts a further decline to approximately 7.5% in 2028, suggesting that households could continue to put aside a smaller share of their income over the coming years.
The findings come as higher energy prices and renewed inflation pressures threaten to reduce the spending power of UK households. Even where wages increase, rising everyday costs can leave less income available for saving.
However, the figures do not mean that every household is saving less or that the total amount held in UK savings accounts is falling. Understanding what the household saving rate measures is essential to interpreting the findings correctly.
How the UK Household Saving Rate Is Changing
The latest economic outlook distinguishes between the decline reported during 2026 and the further reduction forecast for 2028.
| Period | Household saving rate | Evidence status |
|---|---|---|
| Earlier in 2026 | 9.5% | Reported figure |
| Later in 2026 | 9.0% | Reported figure |
| 2028 | Approximately 7.5% | Economic forecast |
The 2028 figure is a forecast rather than an observed outcome. The saving rate measures the share of household income not spent on consumption, rather than the amount deposited into savings accounts.
Source: IFS Green Budget 2026 — Economic outlook: headwinds on the horizon, 12 October 2026
What Does the Household Saving Rate Actually Measure?
The household saving rate measures the proportion of household income that is not used for spending. It provides economists with an indication of how much income households retain rather than consume, although the official measure also includes adjustments that make it broader than an individual’s everyday understanding of saving.
For example, if a household had £3,000 of income available after relevant deductions and spent £2,700, the remaining £300 would represent 10% of that income. This is a simplified illustration of the principle, rather than the precise method used to calculate the national household saving rate.
Importantly, money counted as saving does not necessarily end up in a savings account. Households may retain money in current accounts, repay debt or build wealth through other arrangements. The national measure also incorporates items such as pension-related adjustments that do not directly correspond to cash being put aside each month.
This means a fall from 9.5% to 9.0% represents a reduction of 0.5 percentage points in the share of income being saved. It does not mean household savings balances have fallen by 0.5%, or that the average person has reduced their monthly savings contribution by that amount.
Why Are Rising Living Costs Putting Pressure on Savings?
The latest economic outlook identifies higher energy prices as an important source of pressure on UK household finances. The conflict in the Middle East has contributed to increases in oil and wholesale gas prices, raising the cost of imported energy and adding to the inflation outlook.
Higher energy costs can affect households directly through domestic bills and transport expenses. They can also influence the prices charged by businesses, particularly where energy and distribution costs form a significant part of providing goods and services.
When essential spending rises faster than household income, the amount available for other purposes becomes more restricted. Some households may reduce discretionary spending, while others may save less in order to maintain their existing standard of living.
The IFS economic outlook expects households to face a squeeze in inflation-adjusted income, meaning the purchasing power of their income could weaken even where the amount they receive in pounds increases.
This helps explain why the household saving rate may fall during a period when some savings accounts are offering relatively attractive interest rates. A higher return on money already saved does not necessarily compensate for an increase in the cost of everyday essentials, particularly for households with limited existing savings.
Our guide to what inflation means explains the wider relationship between rising prices and purchasing power. The important issue in the latest figures is how those pressures may be influencing the proportion of income households can retain.
Does a Falling Saving Rate Mean People Are Using Their Savings?
A lower household saving rate can be consistent with people putting less money aside, using some existing savings or changing their spending patterns. However, the national figure alone cannot establish how many households are doing each of these things.
The economic outlook suggests that some households may use accumulated savings to support spending while their purchasing power is under pressure. It also notes that the financial position of households is different from the period immediately following the pandemic, when unusually high savings had built up during restrictions on everyday spending.
Those additional savings provided some households with a financial buffer during the earlier cost-of-living shock. The latest analysis suggests that the scope to draw on such reserves may now be more limited, particularly where households have already used part of their accumulated savings.
Nevertheless, experiences will vary considerably. A household with substantial savings and relatively low essential costs may be in a different position from one whose income is largely committed to housing, energy, food and other regular expenses.
The distinction matters when interpreting wider reports about the UK savings market. Savings providers can experience growth in deposits even while the household saving rate declines, because existing balances, interest payments and transfers between accounts can affect deposit totals independently of the proportion of current income being saved.
What Could Happen to Household Saving Over the Next Two Years?
The economic forecast accompanying the IFS Green Budget expects the household saving rate to fall to approximately 7.5% in 2028 before stabilising. That would represent a further reduction from the 9.0% reported during 2026, although the outcome depends on how the economy develops.
The forecast reflects expectations for household spending, income growth and inflation. If living costs remain elevated while income growth is weak, households may continue to face difficult choices between maintaining spending and preserving savings.
However, economic forecasts are not guarantees. Changes in energy prices, employment, wages, inflation and interest rates could all influence the amount households are able or willing to save. The actual saving rate may therefore differ from the projected figure.
It is also important to distinguish the national outlook from individual circumstances. Some households may continue building their savings, while others may find it difficult to maintain regular contributions or preserve existing financial reserves.
For readers interested in the practical role of a financial buffer, our guide to how much emergency savings you may need examines that separate question in more detail.
Conclusion
The latest IFS Green Budget provides evidence that UK households are saving a smaller share of their income, with the saving rate declining from 9.5% to 9.0% during 2026. Its forecast of a further fall to approximately 7.5% in 2028 suggests that pressure on household saving could continue.
Higher living costs and weaker purchasing power offer an important explanation for the changing outlook. However, the national saving rate does not reveal how every household is managing its finances or establish that savings account balances are falling.
The central finding is that attractive savings interest rates and households’ ability to save are not necessarily moving in the same direction. The return available on savings is only one part of the picture; the amount of income left after everyday spending is equally important.
