Article date: 31 August 2011
- Monthly incomes fall by 2% from £2,062 (May 2011) to £2,018 (August 2011)
- Concerns about the rising cost of living increase
- 95% of families worry they are not completely financially protected
As inflation bites, families are more worried than ever about the rising cost of living, according to research from the latest Aviva Family Finances Report*. The research also shows income and savings are falling as debt increases, yet families still fail to protect themselves against the unexpected.
Falling income and savings:
While families saw annual inflation increase dramatically on essentials such as food (+6.4%) and fuel and lighting (+7.45%), their actual monthly income fell by 2% from £2,062 (May 2011) to £2,018 (August 2011). This appears to be partially as a result of a decline in women’s monthly income, which fell by 8% from £1,935 (May 2011) to £1,777 (August 2011).
The typical UK family has just £982 (August 2011) in savings, down 16% from £1,163 (May 2011). However, while average savings have fallen, this might be due to the fact that the smaller relative savings pots of some new savers have brought down the overall average. Since the start of the year, the number of non-savers has fallen from 40% (January 2011) to 37% (May 2011) to 36% (August 2011). The typical amount saved each month is £34 (August 2011) which is up slightly from May (£32).
Unsecured borrowing remains static but overall debt increases:
The typical UK family now has debts of £79,816 (mortgage and unsecured borrowing) which is higher than the January 2011 figure of £73,690. This increase is due to additional mortgage borrowing as unsecured debt actually fell very slightly from £5,360 (January 2011) to £5,353 (August 2011).
The average family with unsecured debt spends 9% of its income on repayments, but total borrowing has only fallen by £7 since January 2011. This appears to show that living with a certain level of debt has become normal and while people do make repayments, they continue to borrow at the same time.
Families increasingly worried:
With high inflation levels, falling incomes and an uncertain economy, families are more worried than ever about the cost of living rising over the next six months (64% - August 2011 vs 57% - January 2011). The more financially vulnerable single parent families are most worried about potential increases (67%). Loss or changes to benefits (21% - August 2011) are a concern to one in five people, with those who are most reliant on this type of income - single parents - most worried (45%). Divorced/separated/widowed parents (31%) also saw this as a cause of anxiety.
Lack of protection:
In keeping with the increased worries around the cost of living, families are feeling increasingly financially unprotected. Now only 5% feel completely protected (7% - January 2011) and 49% feel under/unprotected (43% - January 2011). This shift highlights the precarious state of many families’ finances and the peace of mind that could be provided by the purchase of protection products such as life insurance, critical illness cover and income protection.
Louise Colley, head of protection for Aviva comments: “Faced with rising costs and largely static salaries, UK families are more worried than ever about their finances. However, we have seen some positive signs that people are looking to change their financial behaviour for the better. For example, almost half of all families now acknowledge they are under-protected, which suggests at least a growing awareness of the need to protect their families. It’s also reassuring to see that some people who had previously not saved have started to put money away - albeit small amounts.
“However, while people are improving their attitudes to finances, many families - especially single income families - are very vulnerable to a loss of income. We therefore urge people to turn this awareness into action and seriously consider some form of protection which can offer peace of mind against the unexpected.”
If you are a journalist and would like further information on a specific family group, please contact:
Aviva press office:
01904 452828 / 07800 691569
The Wriglesworth Consultancy:
Lee Blackwell / Ben Marquand
020 7427 1400
* The Aviva Family Finances report is an in-depth study into the financial needs of the 84% of the UK population who live as part of a modern family. Based on customer profiles and Government data Aviva has recognised the six most common types of modern family as:
- Living in a committed relationship with no plans to have children
- Living in a committed relationship with plans to have children
- Living in a committed relationship with one child
- Living in a committed relationship with two or more children
- Divorced/separated/widowed with one or more child
- Single parent raising one or more child alone
Data was sourced from the Aviva Family Index which used findings from over 6,000 people who are members of one of the six groups of families identified above via OpinionMatters. This report is a definitive look at the personal finances of families in the UK. Not only does it look at personal wealth, income sources and expenditure patterns but also tracks how these change across the different types of family unit.
In addition to the regular data, each quarter a spotlight will be shone onto a different relevant topic with costs associated with schooling being the choice for August 2011.
Notes to editors:
Aviva is the world’s sixth largest* insurance group. We provide more than 53 million customers with insurance, savings and investment products with total worldwide sales in 2010 of £47.1 billion**.
We are the UK’s largest insurer with 19 million customers and one in three households has a relationship with us. Our combination of life, health and general insurance is unique in its scale and breadth in the UK market. Customers can choose to buy our products through intermediaries, our corporate partners or from Aviva direct and we have become the partner of choice for many of the UK’s biggest organisations.
We are ranked as one of the UK’s top 10 most valuable brands and Aviva plc are in the top 10% of socially responsible companies globally in the Dow Jones Sustainability World Index. In 2010 we invested £4.3m into our communities in the UK, which included 1,500 Aviva volunteers giving 24,000 hours for good causes. In addition, our employees gave £600,000 through fundraising and donating. Read our corporate responsibility report at www.aviva.com/2010cr.
Aviva is working in partnership with Railway Children through the Aviva Street to School programme to get children living or working on UK streets back into everyday life. Find out more at www.aviva.co.uk/street-to-school.
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* based on gross worldwide premiums at 31 December 2010.
** at 31 December 2010.