Renters more financially vulnerable due to lack of savings and protection products

Article date: 19 September 2015

Yet 1.5 million UK renters have dependent children

  • A quarter of renting families do not have any savings, and 80% do not have life insurance
  • However, 1.5 million renters have dependent children – a 19% annual rise
  • Renting families are less happy with their homes, but 30% cannot afford a house deposit

Families who rent their homes are less likely to have a cushion of savings or protection products to protect them against financial shocks, according to Aviva’s latest Family Finances Report. A quarter (25%) of private renting families do not have any savings or investments, equating to almost 650,000 people* that may struggle to cope with any unexpected expenses. More than one in five (22%, or 569,000) private renting families do not hold a savings account.

This compares to just 11% of homeowning families with a mortgage that have no savings or investments and 5% of those who own their home outright. Only 17% of mortgaged families do not have a savings account, falling to 16% of those who own their home outright.

Renting families are also less likely to have insurance in place to provide financial cover should they become ill or die. Just one in five (20%) families who rent privately have life insurance, compared to 25% who own their home outright and 48% who own their home with a mortgage. Similarly, 4% of renting families have critical illness cover and only 3% have income protection. 

Table 1: Financial products held by families who rent or own homes

Product Private renters Own home with a mortgage Own home outright
Savings account 78% 83% 84%
Life insurance 20% 48% 25%
Private health insurance 10% 16% 12%
Critical illness cover 4% 17% 5%
Income protection 3% 12% 5%

The findings follow a significant rise in the proportion of families with dependent children living in rented accommodation, according to Aviva’s analysis of data from the Office for National Statistics (ONS).

In 2013, 17.7% of couples with dependent children were private renters**. This rose by 3.6 percentage points to 21.3% in 2014. The same trend is true for single parents: 31.9% were in rented accommodation in 2014, compared to 30.2% in the previous year: a rise of 1.7 percentage points.

As a result, there were 1.5 million families with dependent children in rented accommodation in 2014: a 19% rise since 2013 (1.3 million).

Table 2: Parents with dependent children in private renting, 2013-14

Family type (with dependent children) % in private renting 2013 No. in private renting 2013 % in private rent 2014 No. in private 2014 Difference (percentage points) Difference (number)
Couple 17.7%  808,000 21.3% 1,009,000 + 3.6 +201,000
Single 30.2% 465,000 31.9% 512,000 + 1.7 +47,000

Louise Colley, managing director, protection at Aviva, comments:

“Renters might not have a mortgage to pay, but they still have financial obligations like bills and monthly rent. Not having a savings cushion in place means unexpected costs could make day-to-day living a struggle, while a lack of income protection could be disastrous should they become ill and unable to work.

“With growing numbers of parents in rented accommodation, it’s vital all families think about the future and put financial plans in place, regardless of whether they are a homeowner or not.”

Renters less happy with homes, but 30% of families cannot afford a house deposit
Aviva’s Family Finances report also reveals renting families are less happy with their homes. While 32% of homeowning families with a mortgage feel emotionally attached to their home, this falls to just 18% of families who are private renters. The take-up of home contents insurance is also lower amongst renting families, with 42% owning this product compared to 81% of families with a mortgage.

Unsurprisingly, the majority of renters have ambitions to move on. Only 4% of privately renting families want to stay in their current home for the rest of their lives (versus 20% who own their home with a mortgage) and 76% would like to become homeowners in the future.

However, the need to save for a deposit is the main barrier to the property market for today’s renters: 30% of families who rent privately say they cannot afford the deposit and fees associated with purchasing a house, equating to 775,800 households.

Add to this the 574,500 social renting families (30%) who say the same, and 1.35 million families feel trapped in the rental market because of deposit requirements.

Table 3: Barriers to the property market for private and social renting families

  Private renters Social renters Total
Cannot afford the deposit and fees required to buy a house 30% (775,800) 30% (574,500) 1.35m
The general cost of living is making it too hard to save 22% (568,920) 26% (497,900) 1.07m
House prices in the area I/we want to live in are too expensive 21% (543,060) 13% (248,950) 0.79m
I/we are unable to save because our rent is too expensive 13% (336,180) 6% (114,900) 0.45m

Social renting families are more likely to say the general cost of living is making it too hard to save up for a house (26% versus 22% of private renters), although those who rent privately are more likely to struggle with high house prices (21% vs 13%).

More than one in ten (13%) private renting families are unable to save for a house because their rent is too expensive. In June 2015, private rental prices rose 2.5% annually*** – the biggest increase seen in more than two years (January 2013).

Louise Colley comments:
“Homeownership has always been a major ambition for British families and most renters would like to own their own home in the future. However, with rents at record highs, many are struggling to save enough for a house deposit.

“It’s easy to get stuck in a cycle of paying rent and bills and not prioritising saving, but even saving just a small amount each month will eventually add up. Government schemes such as the upcoming Help to Buy ISA can also help families to build on the amount they have saved themselves.”

- Ends -

*According to the English Housing Survey, there are 2,586,000 families in private rental accommodation (excluding single and other multi-person households) and 1,915,000 families in social rental accommodation (excluding single and other multi-person households).
**English Housing Survey, table FA1221. A total of 1,521,000 parents (either single or as a couple) with dependent children were in rented accommodation in 2014, up from 1,273,000 in 2013.
***ONS Index of Private Housing Rental Prices

If you are a journalist and would like further information, please contact:

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Notes to editors

The Family Finances Report is designed and produced by Aviva in consultation with ICM Research. The 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

Unless otherwise specified, data was sourced from the Aviva Family Index which used findings from over 26,000 people who are members of one of the six groups of families identified above via ICM research. 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. Due to a change in research methodology, some median values from previous reports have been re-calibrated in this edition to allow direct comparisons with previous years.

This edition also includes analysis using figures from Aviva’s own customer database.

Technical note

  • A median is described as the numeric value separating the upper half of a sample, a population, or a probability distribution, from the lower half. Thus for this report, the median is the person who is the utter middle of a sample. All figures in this release are medians unless otherwise specified and are referred to as ‘typical’ rather than ‘average’ (mean).
  • A mean is a single value that is meant to typify a list of values. This is derived by adding all the values on a list together and then dividing by the number of items on said list. This can be skewed by particularly high or low values.

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