One in four British adults is living with low financial resilience or other vulnerable characteristics, putting them at greater risk of harm, a survey by the Financial Conduct Authority has found.
The watchdog’s Financial Lives survey found that 27.7m of adults in the UK had characters of vulnerability, such as poor health, negative live events or low financial resilience, a 15% hike on the previous survey. The number of adults with low financial resilience – which can include excessive debt, erratic earnings or low savings – has risen to 14.2m from 10.7m.
Having just one of characteristic of vulnerability leaves people at risk of greater harm, the FCA warned.
Nisha Arora, director of consumer and retail policy at the FCA, said: “While there are some positives in the data, many of the findings are worrying.
“Since the start of the pandemic, the number of people experiencing low financial resilience or negative life events has grown. The pain is not being shared equally, with a higher than average proportion of younger and BAME adults becoming vulnerable since March.”
More than 16,000 people were surveyed between August 2019 and February 2020, with 22,000 then questioned in October to assess the impact of the Covid-19 pandemic on their financial situation.
The survey found that one in six people had taken a mortgage payment deferral, with four in ten reporting they would have struggled without such measures. Around 30% said in October that they expected household income to fall in the next six months, and a quarter said that expected to struggle to make ends meet.
Tom Selby, senior analyst at AJ Bell, said the survey’s findings were largely “unsurprising” given the scale of the pandemic. But he conceded: “Nonetheless, [it] remains seriously worrying. It is also concerning that 8.1m 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.
“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.”
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “For 14m people, the unrelenting financial misery brought on by the pandemic has worn down their financial resilience to almost nothing. One in four were running on empty in October, before the latest lockdown.
“The health crisis has seen vast swathes of the economy closed for months, wiping incomes out or cutting them dramatically overnight. Those with savings have been forced to start eating into them, while those with nothing to fall back on have faced even harsher choices.”
