Planning Ahead
People of working age in the UK don’t plan ahead:
- 12 million aren’t saving enough for their retirement
- 27 million don’t have a sufficient savings buffer to allow them to cope with a significant income shock
- Only half of people with families have any life cover
Many UK adults don’t have the resilience to deal with day to day events:
- 21 million don’t have a modest £500 savings buffer to replace a fridge or mend the car
- 19 million don’t have an approach to budgeting that they feel works
And too many are in financial difficulties:
- Around 8 million have problems with debt
- Of those, just one in six is seeking help
Managing money day to day
Most people are generally managing their money well day to day, though a sizeable minority are not
- Around four out of ten adults are not in control of their finances, i.e. they do not know their current account balance to within £50, do not feel their approach to budgeting works well or cannot keep up with their bills and commitments without difficulty
- Four in ten adults have less than £500 savings to cover an unexpected bill
- Around a quarter normally revolve a credit card or used high-cost short-term credit in the last year
- There is a gap between what people say and what they do. Many more say it is important to save for a rainy day than are currently doing it
Without the basics in place, it is much harder to prepare for life events, such as having a baby, retirement or bereavement. People who do not keep track of money or have an effective budgeting system are less likely to be able to save and cope with income shocks. The biggest differences in day to day money management are related to household income. People on middle and higher incomes are generally managing better than those on lower incomes. There are particular issues among people in receipt of welfare benefits, living in social housing, and in lower income bands. But problems are by no means confined to these groups.
The state of future financial planning in the UK
Preparing for and managing life events
- Just over half of the population save every month or most months. But far fewer have a significant emergency fund: two-thirds don’t have a savings buffer equal to or exceeding three months’ income. Amongst working-age people this rises to almost three-quarters
- Almost half of working-age couples or families do not have life cover
- Only one in two working-age people are currently paying into a pension or are a member of a previous pension scheme
- Only a third of over-50s have even the roughest plan for how they will pay for long-term care. Again, things improve with income and there are specific groups of particular concern. But the lack of planning and preparation is widespread and not confined to a small number of groups in the population
Dealing with financial difficulties
- Around a third of adults have unsecured debts equivalent to more than one month’s income
- One in ten find their debts to be a heavy burden
- Similarly, one in ten have missed bill payments in three months out of the last six.
Skills/Knowledge
Relatively simple concepts and calculations are challenging for a sizeable minority. This may affect people’s ability to manage their money effectively and choose financial products and services that meet their needs
- One in five could not read a bank statement (and this does not appear to be linked to increased use of mobile banking)
- People aged 75 and over tended to perform noticeably worse on these questions. If anything, the picture is worse than it was in 2005 when the FSA conducted its Baseline Survey
Attitudes/Motivations
- Around half of all adults have a mindset that focuses more on current needs and wants at the expense of providing for the future
- Three in ten people do not openly discuss their household finances regularly with anyone
- People are more likely to save regularly if they have future-focused attitudes or specific goals, plans or reasons to save. By contrast, building up a significant savings buffer – i.e. having a higher ratio of savings to income – appears more driven by a belief in saving for the unexpected and a rainy day
Ease and accessibility
To be financially capable, people need to be able to select products or services that meet their needs and access them via appropriate channels (digitally or offline). Confidence and internet access often pull in different directions
- Confidence in making choices about financial products and services generally increases with age – less than a third of young adults feel very confident, but this rises to two-thirds among older people in retirement
- Internet access, usage and willingness to use the internet for financial tasks such as banking are all high within the working-age population. But they drop off among older adults, especially those in their 70s. This creates very different challenges for different groups: young adults lack confidence in making financial decisions but have fewer access issues, whereas people aged 70 and over mostly feel very confident but may be on the digital margins. In addition, some low-income groups lack both confidence and access.