More than 11 million working-age people in Britain don’t have basic “rainy day” savings of at least £1,000, according to a report that warns that the poorest households are struggling to build up financial resilience amid the cost of living crisis.

The Resolution Foundation said people across Britain faced a “triple savings challenge” of insufficient savings, an inability to cope financially with major life events such as family breakdown, and inadequate retirement incomes.

It said 11.2 million people lived in households that had savings of less than £1,000, accounting for about one in three working-age households. As many as half lived in the poorest third of households in Britain.

In a report with the abrdn Financial Fairness Trust, the foundation estimated that the UK had a £74bn shortfall of funds saved for emergencies and for retirement compared with a country in which every family had at least three months of income kept in precautionary savings.

It said fewer than half of working-age households in the UK had savings worth at least three months of income, leaving them ill-equipped to face events such as unemployment or family breakdown.

Highlighting the risk to households struggling with the cost of living crisis, it said those with lower levels of savings were more than twice as likely to use credit cards, overdrafts or borrowed money than those with more than £1,000 held back.

The thinktank urged the government to take action to encourage saving, calling for an expansion in auto-enrolment contributions by employers and workers to boost levels of financial resilience, suggesting a rise to 12%. Currently employers must enrol eligible workers into a pensions scheme with contributions of 8%. Employers must pay at least 3% and the employee the remaining 5%.

The Resolution Foundation said employer and employee contributions should be matched at 6% each, with 2% of this amount contributed to an easy-access “sidecar savings” scheme of up to £1,000 to provide more readily available savings before retirement.

Molly Broome, an economist at the Resolution Foundation, said: “We can address all three challenges by building on the success of pensions auto-enrolment to opt more people into both easy access and long-term saving.

“We should also offer people more flexibility over their pension pots, as other countries do, in order to help them with difficult circumstances. These reforms will improve families’ financial resilience during their working lives and into retirement too.”

A government spokesperson said auto-enrolment had helped almost 11 million people save for the future. “And to help those on the lowest incomes save, we offer targeted support including through our Help to Save Scheme, which offers a 50% bonus on monthly deposits of up to £50 and saw use increase by over a quarter in the last year alone.

“We also encourage people to take advantage of the government’s midlife MOT offer, which helps them take stock of their finances and plan for retirement.”

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