Mortgage holders, the self-employed & pensioners take ‘hard’ savings hit – guidance issued

BUSINESS

Savers and workers in the UK have faced incredibly difficult circumstances over the last year or so and new research from the Government showed families continued to struggle as 2021 arrived. According to the latest Household Resilience Study, furloughed workers, mortgage holders and even pensioners are still struggling in the face of coronavirus.

Despite these dire findings, it should be noted the report was not all bad news, with it being shown that 67 percent of households had savings in November to December, up from 55 percent in 2019-20.

Additionally, there were improvements seen in general household income, mortgage arrears and adaption to lockdown restrictions.

Nevertheless, the data painted a bleak picture and Sarah Coles, a personal finance analyst at Hargreaves Lansdown, commented on this: “The pandemic has dragged hundreds of thousands of people the wrong side of the resilience gap, and renters, self-employed people, lone parents and furloughed workers have been hit particularly hard.

“Overall, more households have savings than before the pandemic, and 13 percent of people have been in a position to actually put more aside, but those in full time employment and people who own a house with a mortgage are much more likely to fall into this bracket.

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“Meanwhile, a quarter have seen their savings fall, and vulnerable groups are more likely to have suffered. People on lower furlough incomes and the self-employed who lost work have been less able to save. Meanwhile, those who rent are more likely to have eaten into their savings to pay rent.

“They’ve struggled with their bills too. Renters have found it far harder to pay their bills: one in ten are behind on rent, and almost one in four are behind on at least one bill. Lone parents are most likely to have fallen behind with bill payments.

“There are no simple answers when you’re facing this kind of pressure. A year on from the start of the crisis, there are no easy costs left to cut. There are also signs that people have already made bigger changes to their lives to keep a lid on costs.

“Around a fifth of privately rented households have increased by at least one person, which is a sign people are moving in with others to cut costs.

Pauline Van Brakel, the Chief Product Officer at Yolt, dove into these statistics and provided guidance to those who are looking to build a more stable savings habit: “According to StepChange’s, annual Statistical Yearbook for 2020, around 500,000 new people contacted them for help last year, with unemployment or redundancy, reduced income or benefits, and lack of control over finances cited as the main reasons for people’s problem debt. The number of new clients is lower than that of the previous year, but the charity has seen growing levels of personal debt or financial difficulty for households in 2020 and a shift of clients requiring emergency support rather than long term support and solutions.

“We know that the pandemic has impacted people’s finances differently, and it’s been a very challenging time for many, with almost 20 million UK adults experiencing a financial shock of some kind as a result of the pandemic. In order to guard against potential financial shocks our research found one in seven (15 percent ) put money aside in a rainy-day fund.

“However, the challenge becomes clear when looking at Yolt’s own user data, with intentions to save at their peak right after payday and with deposits into saving accounts at their highest in the fourth and fifth weeks of the month on average. However, savings withdrawals peak in week two and week four of the month, indicating that some are dipping back into their savings throughout the month to get by.

“Although understandably, the current climate is difficult for people managing their money, it’s important we take steps towards positive change where possible. Knowing what you have coming in each month, and reviewing your spending and regular outgoings, so you can budget for the weeks or months ahead. For many the true financial pinch may not have been fully felt yet, with some incomes having been propped up by the Government’s various initiatives, such as the furlough scheme. Now, perhaps more than ever, is a time for people to be engaging with their finances, using digital tools and services to help them spend smart, save where possible and identify areas where they may be able to cut back.”

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