Parents 'starting to save more'

The Government's planned hike in university tuition fees is prompting parents to set aside more money for their children's education, a new study has shown.

According to the survey of 1,300 people by the ING Direct bank, the proposed rise is the main factor behind a savings boom in recent months.

Parents have either started increasing the amount of money they save or set up a special fund to help provide their children with better education facilities in the future.

A third of adults who responded to the poll said they are planning to reduce their debts this year, while nearly 50% said the VAT increase would affect their spending plans.

ING Direct chief executive Richard Doe said: "While we've seen savings levels decline for much of the year, the final quarter has brought with it an unexpected bounce, clearly driven by parents saving in response to the proposed hike in tuition fees.

"We'll have to wait and see if this leads to any sort of savings renaissance, as while Britons are clearly determined to restore their cash reserves in 2011, there will be a number of obstacles which will make saving difficult."

James Knightley, ING Group senior economist, added: "2010 was a tough year for savers and unfortunately the environment will become even more difficult in 2011 given the scale of fiscal austerity.

"With wages failing to keep pace with the cost of living and households continuing to pay down debt, this leaves us with two possible outcomes for savers. We suspect that the most likely is that they further run down their savings in order to fund ongoing spending.

"Alternatively they can save more, but this will mean less money to spend on goods and services - a situation that will put the UK economic recovery at risk."

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