50% of Brits now financially vulnerable

27.7 million people are financially vulnerable. 4.1 million people in the UK are in serious financial jeopardy. These are sobering statistics.

25% Brits financially vulnerable - A-Plan Insurance

A study conducted by the FCA (Financial Conduct Authority) and analysed by Experian, illustrates that 27.7 million people in Britain are financially vulnerable. It goes further to say that one in six surveyed would be unable to cope with a £50 increase in monthly bills.

The cause? Yes, the pandemic is playing its part, however it is believed that stagnating wages, rising household bills and an aging population is the primary cause, but ‘online influence’ and lack of advice are also to blame.

How is vulnerability measured?

First of all, it’s important to define what the FCA means by ‘vulnerable’; ‘customers who, due to their personal circumstances, are especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.’ And it then identifies four key drivers of vulnerability:

  • Health – physical or mental health issues that affect a person’s ability to undertake daily tasks.
  • Life events – this could be bereavement, relationship breakdown or a loss of employment. One could argue that this could also be environmental to include the restrictions imposed by the pandemic, for example.
  • Resilience – this describes the person’s ability to cope, or withstand, financial or emotional shocks. So, how they cope with that loss of employment, for example.
  • Capability – which describes the person’s level of financial confidence and knowledge.

Are people more financially vulnerable since COVID?

We knew we weren’t out of the water, but I don’t think any of us anticipated the Omicron strain and all the disruption it brought with it. According to WHO, COVID-19 is estimated to be around for another five years. Not only could this impact health, it also impacts employment.

With the hospitality industry, expecting a merrier Christmas suddenly hit hard by consumer nervousness, and international travel restrictions changing regularly, these sectors alone, and the many that support them, could well continue to feel the impact of uncertainty.

The studies have highlighted the enormous threat, and perceived threat, to people’s incomes from the pandemic, with one in three (or 15.9 million adults) say they expect their household income to fall, while 25% (or 13.2 million adults) expected to struggle to pay the basics. While 60% of those aged 65 and over are potentially vulnerable, shockingly, it is now those aged 25 to 34 years old who are the most indebted.

Factors that could affect your finances

Although the UK had a generous scheme compared to other countries, furlough didn’t save everyone and there is no way to know whether the Government is willing or able to fund a return of the scheme, or equivalent SEISS grants, should we face another lockdown.

Many who found themselves unemployed and suddenly without any income during the pandemic, quickly realised that benefits just don’t cut it when you have a mortgage and other commitments. Not only due to recent cuts to Universal Credit, but also how difficult it can be to claim in the first place!

We all talk about savings for a ‘rainy day’. However, if you do find yourself out of work, have savings but they aren’t quite enough to live on, or a partner who is still earning, chances are you are unable to claim Universal Credit.

While Jobseekers and Employment Support offer some help to those unable to claim Universal Credit, £73 per week doesn’t go far when you have a family, rent or mortgage payments to make alongside other commitments, from food shopping and utilities to debt.

And there are still some that are unable to receive this if they are unfortunate enough to have lost their jobs, or lost their own businesses, before they have paid enough tax into the system to receive it.

And those considering raiding their pension pot for financial support may find that this is becoming less of an option. As reported by Employee Benefits, the number of Brits paying into their workplace pensions during the pandemic has reduced by an additional 300,000 people during 2020/2021, as a result of unemployment or furlough.

Of course, it hasn’t helped that the Bank of England has now raised interest rates from 0.1% to 0.25% in December as inflation hits the highest levels since 2011. This means that those without a fixed rate mortgage could now start paying more per month, at the most unexpected time.

If you have been, or know someone, affected by debt, it is important to reach out for support. Many find that taking control of the situation with the right support to be a huge relief.

If you are self-employed, Business Debtline is a supportive, free debt advice charity that covers business and personal debt, and a good place to start. For all other debt support, the free charity Stepchange can help with everything from ‘breathing space’ to mental health support.

What is unemployment insurance?

One option to consider now, if you haven’t already, is an unemployment insurance. You can take this out to cover your income should you lose your job. Or you can opt for an accident, sickness and unemployment insurance mix.

This provides a monthly benefit if you are unable to work due losing your job, or to a health-related matter, like accident or illness, and can offer a genuine solution to a major problem.

Of course, each of us is very different, so the sum paid out depends on the policyholders personal requirements, so it’s worth speaking to the experts to have a clear understanding of how much you will need to sustain your basic living standards. There are also many additional options available that many aren’t aware of, such as shorter term policies for say 12 or 24 months, which may suit some better than others.

Self-employed people can also take out these insurances too. This could be a lifeline considering the furlough scheme was not available to the self-employed during the pandemic, nor are the self-employed entitled to sick pay or redundancy.

To claim for this type of insurance you would normally need proof of your job loss from your employer, and/or proof of ill health from your doctor. Of course it’s worth flagging that if you quit your job or are fired due to misconduct or similar, you won’t be able to claim.

We know this can be a financially complex and often emotionally difficult topic for many, so it’s our job to make it easier to understand and help you through the process and provide appropriate levels of support and transparency when it comes to finding the right policy. If you have any questions, our protection insurance experts would be very happy to speak with you.

You can find out more about A-Plan’s life and health insurances here.