• Over half the UK adult population – 27.7 million people – show characteristics of vulnerability including poor health, low financial resilience or recent negative life events, new FCA research reveals
• This represents a 15% rise since February, when 24 million people displayed characteristics of vulnerability
• COVID-19 has had a severe impact on financial resilience of Brits, with over a quarter of adults (14.2 million) labelled as having ‘low financial resilience’
• Over the course of 2020, the number of people with low financial resilience increased by a third (3.5 million)
o In October around one-in-three (15.9 million) said they expect their household income to drop in the next six months, while 25% (13.2 million) expected to struggle to make ends meet
o A staggering 5.6 million people said they were likely to use a food bank, while 17.9 million said they could cut back on essentials
o Worryingly, 8.1 million people expect to take on more debt as a result of the pandemic – although 14% of UK adults have seen an improvement in their financial situation
Tom Selby, senior analyst at AJ Bell, comments:
“These latest FCA figures lay bare the profound and harrowing impact Coronavirus has had on people living, working and saving in the UK.
“Over half the UK adult population – a staggering 27.7 million people – are now demonstrating characteristics of vulnerability, while over 14 million have low levels of financial resilience. Both numbers have surged during 2020.
“This is unsurprising given the health, lifestyle and financial impact the pandemic has had on people’s lives, but nonetheless remains seriously worrying. The fact over 5 million people expect to turn to a food bank at some point is perhaps the most striking demonstration of the desperate situation many people are facing.
“It is also concerning that 8.1 million people anticipate taking on more debt to make ends meet, potentially pushing financial problems down the road and piling on debt interest payments in the process.
“Before taking on debt make sure you have looked at cutting other costs first and, if this isn’t possible, have a plan in place to pay the debt off. For many this will feel impossible but borrowing on the never-never will only accentuate the financial pain in the future.”
The lucky ones need to get a cash buffer in place
“The FCA data presents a divided nation, with 48% saying they haven’t been financially affected by the pandemic and 14% actually better-off as a result.
“For those in this fortunate position, it is vital they take time to plan their finances and get a cash buffer in place if they don’t already have one.
“Usually this should aim to cover 3 to 6 months of fixed expenses, but if this sounds too much any amount is better than nothing.
“They should also aim to pay off any high cost debts they might have, which will then leave them with a stronger foundation upon which to save for the future.”
Beware the scammers
“Financial vulnerability is like blood in the water to scammers, and the pensions of people aged 55 and over are often their prey of choice.
“There has already been a surge in scam activity since the pandemic started and heightened activity will inevitably continue throughout 2021 as more people face financial turmoil. AJ Bell research suggests 2 in 5 people have been approached by a scammer during lockdown.
“Because of this, savers need to by on high alert, only dealing with bona fide FCA regulated companies and cross-checking firm details with the FCA register.
“Ignore any approach you receive about your pensions or investments out of the blue, and if someone calls, texts or emails then do not respond.
“There are also tell-tale signs of a fraudster, including high pressure sales tactics and promises of outlandish returns. Familiarising yourself with these indicators and doing your due diligence are the surest ways to avoid becoming a scam victim.”
