A recent survey conducted by Royal London has shed light on the increasing financial strains experienced by UK consumers, with potential implications for HR and employee wellbeing initiatives.
According to the survey, approximately 20% of consumers have turned to their savings to manage surging living expenses, with an average withdrawal of £2,623. Interestingly, while savings accounts bore the brunt, 7% contemplated drawing from their pension funds for day-to-day expenditures.
Royal London’s research illuminates the cost-of-living pressures facing consumers. Compared to figures from August 2022, housing, food, and energy costs have escalated by an average of £494 per month. This rise in living expenses has resulted in a staggering £32bn decrease in overall savings.
While overall savings have shown an uptick, the boost predominantly stems from mortgage-free homeowners, holding double the average savings amount compared to those renting or with a mortgage. Specifically, mortgage-free individuals maintain an average savings balance of £33,857, in contrast to the national average of £17,575. Renters, predictably, have the lowest savings, averaging £3,642, compared to homeowners with mortgages who average £11,601. A concerning 21% of individuals possess less than £100 in savings.
The ripple effects of 14 consecutive Bank of England Base Rate increases since December 2021 are evident. An overwhelming 76% of consumers expressed anxiety over rising interest rates. Furthermore, 82% of renters and 80% of homeowners with mortgages are apprehensive about their housing expenses, a significant surge from the previous year’s figures.
Of those delving into their savings, 46% are using their ‘rainy day funds.’ Borrowing, whether from credit cards, friends, or banks, remains a less popular choice. Notably, only a slim 7% would consider tapping into long-term investments, such as pensions, to handle living costs.
For employers, these findings highlight the need for enhanced financial well-being programs, potentially offering financial literacy workshops, counselling, and emphasizing the importance of emergency funds and prudent financial management.
Royal London consumer finance specialist Sarah Pennells says: “We’ve been tracking the impact of the rising cost of living on UK consumers since February 2022 and, while some people, especially those who are mortgage-free, have been able to build up their savings, others have depleted theirs.
“That leaves some people with low financial resilience at a time when household bills have risen by almost £500 a month compared to August last year.
“While some people have been raiding their cash savings and one in 14 have been taking money out of their pension or other long-term savings, very few people have been stopping or reducing their pension contributions, with only 2 per cent saying they’d done that in the last six months.”