Third will stop saving as wage freeze goes on

The squeeze from high living costs and stagnant wage growth is continuing to hold savers back from putting cash aside, according to a new quarterly savings index from Lloyds TSB.

Around 30 per cent of savers plan to reduce their saving or stop putting any money away in the next 12 months, while four in 10 consumers currently have no cash left at the end of the month to put into savings.

Some 84 per cent of those surveyed said they would prioritise paying off debts over savings. Two-fifths of people said that low interest rates means that it is not worth saving in any case – although most (54 per cent) disagreed with this.

Savings rates have plummeted further in recent months following the introduction of a Government scheme last August called Funding for Lending.

This scheme has given lenders access to cheap finance, but it has also gave them less need to attract savers’ deposits.

Financial information website Moneyfacts recently found that the choice of easy-access accounts offering an introductory bonus has halved since last August and bonus rates themselves have also plummeted.

More than 3,000 people took part in the Lloyds TSB study between January and March.