Saving is used here as a verbal adjective (a participle). It modifies time and tells us more about its nature; namely, that it is characterized by the activity of saving daylight. It is a saving daylight kind of time. Similar examples would be dog walking time or book reading time. Since saving is a verb describing a single type of activity, the form is singular.
Nevertheless, many people feel the word savings (with an 's') flows more mellifluously off the tongue, and Daylight Savings Time is also in common usage, and can be found in dictionaries.
Part of the confusion is because the phrase Daylight Saving Time is inaccurate, since no daylight is actually saved. Daylight Shifting Time would be better, but it is not as politically desirable. In fact, scientifically misguided politicians sometimes misunderstand. In 1995, the British Time (Extra Daylight) Bill was introduced by John Butterfill, attempting the impossible -- to legislate extra daylight. The bill did not pass.