ONS figures have confirmed that average household spending is down in real terms as people tighten their belts in response to cost of living pressures.
This widespread drop in spending has not resulted in big cut backs on pension savings, Aviva has said, which means people have “managed their weekly budgets with care while wisely keeping an eye on their futures”.
The ONS Family Spending report found that average weekly household expenditure was £567.70 for the financial year 2022/23, representing a 7 percent increase of £38.90 from the previous financial year.
But when the figures are adjusted to account for inflation, weekly household expenditure becomes a real-terms decrease of £21.10, or 4 percent, from the year before.
Budget management
Spending on food and non-alcoholic drinks saw the biggest drop, suggesting that households are either consuming less or switching to lower cost or quality alternatives.
Alistair McQueen, head of savings and retirement at Aviva, said: “The report shows that households managed their budgets in response to the financial pressures they have faced.
“Eating and heating were sources of particular price pressures at this time, and households responded by reducing their expenditure in real terms on these items by 11 percent and 20 percent, respectively. ‘Belt-tightening’ appears to have been widespread,” he said.
“The data comes after the latest pension statistics were published by the Department for Work and Pensions. Despite the pressures on household finances, these figures reported no significant cut back in retirement savings.
Pension resilience
“Fewer than 1 percent of savers made the active choice to stop saving in their workplace pension. With record numbers now saving for their retirement, this resilience is to be welcomed,” McQueen continued.
“The years 2022 and 2023 represented a big financial test. And recent reports suggest that households did what they could to balance their books. They managed their weekly budgets with care while wisely keeping an eye on their futures.
“Inflation has since fallen and wages are, on average, rising. But financial management remains a hot topic for many. The data should give us confidence in our ability to navigate these pressures.”
