The latest Cost of Living research from Royal London has established that the cost of housing, food and energy bills have risen by an average of £494 a month by September this year when compared with August 2022.

In the fourth iteration of its Cost of Living research, Royal London surveyed 4,000 UK adults, and found that more than one in five people (23%) have dipped into their savings as a direct result of rising living costs. The average amount that people have had to take out of their savings is £2,623, which equates to £32 billion being used to counter rising household bills.

There was positive news as overall savings levels were up amongst those surveyed, but this was largely driven by mortgage-free homeowners, who have double the average amount in savings of the sample as a whole (£33,858 vs. £17,575). Renters, especially those who live in social housing, have £3,642 in savings compared to those with a mortgage who have £11,601 – which is over three times as much. 21% have less than £100 in savings, a figure that has been consistent since March.

The research also found that three quarters of UK consumers (76%) were concerned about rising interest rates, following 14 consecutive rises in Bank of England Base Rate since December 2021. More than eight in 10 renters (82%) said they are worried about rising rental payments, with the same proportion of homeowners with a mortgage (80%) stating they were worried about mortgage costs. This compares to four in 10 renters and a third of mortgage payers being worried a year earlier.

While the rising base rate has resulted in improved savings interest rates, 16% state that they intend to cover future rising bills with money from their short-term savings, meaning they’ll benefit less from the higher interest rates now on offer as they draw out their savings to cover rising bills. 46% who have or plan to take money from their savings have focused on their ‘rainy day funds’, proving that the sentiment of putting some contingency aside has served many people well, and meant that only 6% of people would fund future living costs increases via more spending on a credit card; 5% of people would turn to friends and family to borrow money; 4% would use a bank overdraft and only 1% would turn to payday lending.

People were also keen to leave their pension savings intact with only one in 14 people (7%) stating that they’d consider using money from their long-term investments, such as their pension, in the future if they needed additional funds to cover increased living costs.

Sarah Pennells, consumer finance specialist at Royal London, said: “We’ve been tracking the impact of the rising cost of living on UK consumers since February 2022 and, while some people, especially those who are mortgage free, have been able to build up their savings, others have depleted theirs. That leaves some people with low financial resilience at a time when household bills have risen by almost £500 a month compared to August last year.

“The amount of rainy-day savings that people have already used to cover the costs of fundamentals, such as keeping a roof over their head and keeping themselves fed, is considerable and maintaining any savings will be very challenging as our research shows that people who have money left over once they’ve paid their living costs only have £192 a month, on average.

“While some people have been raiding their cash savings and one in 14 have been taking money out of their pension or other long-term savings, very few people have been stopping or reducing their pension contributions, with only 2% saying they’d done that in the last six months.”