The Financial Conduct Authority (FCA) has issued the results of its comprehensive Financial Lives study, the second edition covering 2017 to early 2020.
The main survey ended before the arrival of Coronavirus, but it gives a view of the ability of households to withstand shocks in the pre-virus period. A follow-up survey in October 2020 showed the effect of the virus.
In early 2020, about 46% of UK households had some degree of financial vulnerability, amounting to about 24m individuals. Characteristics associated with vulnerability included:
- Poor mental health
- Mental or physical disability
- Relationship breakdown
- Poor access to advice – this has improved since previous reports, with more access to digital services
Around 11m individuals were assessed as having low financial resilience (ie: low ability to withstand “shock” events), mainly due to high levels of debt.
These figures are concerning and Coronavirus is found to have increased financial vulnerability still further, rolling-back progress made up to 2017.
By October 2020, the number of individuals with some financial vulnerability had increased by nearly 4m, moving from 24m to 28m.
This change was mainly due to changes in income (eg: lower wages, shorter hours or loss of income from self-employment).
Those of working age were worst-affected. 38% of survey respondents said that Coronavirus had made their financial situation worse, versus 15% who had seen an improvement.
Source: Financial Lives, Financial Conduct Authority, February 2021. Base: 22,267 adults, excludes “don’t know” responses
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