Aviva finds UK family finances under pressure with 39% feeling too stretched to take on extra financial obligations

Article date: 19 January 2011

  • Over half are concerned about inflationary pressures on everyday living costs
  • A third of families have no savings and 40% save nothing each month
  • 13% of families are worried about mortgage rate hikes over the next six months.

Many UK families are under extreme financial pressure with 39% saying they are too stretched to take on any additional financial obligations, according to research from the first Aviva Family Finances Report.

The findings were revealed in this new quarterly report from Aviva, designed to develop a true understanding of the financial issues faced by the 84% of the UK population who live as part of a family*. Overall the Aviva report paints a picture of UK families who are surviving – and even thriving – but are in debt, apprehensive about additional costs, and unwilling or unable to put aside money for the future.

Families’ financial concerns
Among the greatest concerns to families in both the short (six months) and long term (five years) are the significant increases in the cost of necessities (57% and 54% respectively), redundancy (45%, 49%) and unexpected expenses (39%, 37%). 

In addition, almost two thirds of families in the UK own their own home (average value ­– £207,548) and housing is the largest single expenditure for UK families, making up one fifth (20%) of their monthly outgoings. Therefore, any sudden changes to mortgage rates are likely to hurt this group in particular. Notably 13% of families see this having a significant impact on their standard of living over the next six months (18% over the next five years). 

Debt repayments
While most UK families own their own homes and have some savings, they also have significant debts. Indeed, the average mortgage debt is £89,018 and the average credit card/loan/overdraft debt is £5,360. Single parents (40%) are actually most likely to be free of these debts, while those in a committed relationship with plans to have children (26%) are least likely.   

While this data might appear to suggest single parents are relatively debt free, this is not the case across the board. Indeed single parents say they spend 29% of their monthly income on debt repayments, so a lack of available credit may mean this group relies on less traditional borrowing arrangements.

Saving habits
A third (33%) of families have no savings and 40% currently save nothing each month – which might suggest that some people who have saved in the past have stopped doing so. Even among families that do save, one in four (25%) have less than £2,000 put aside, meaning they have very little to fall back on should an emergency occur. 

Single parent families are those likely to struggle the most financially in this situation with 60% having no savings and 62% not managing to save anything each month. For more information on the UK’s protection shortfall seeFirst Aviva Family Finances Report finds major concerns over lack of protection insurance.

A reliance on benefits
With 42% of single parents relying on state benefits as part of their income, they are the group most reliant on Government support. But as part of the 2010 Comprehensive Spending Review, the Government has undertaken a universal cap, restricting total benefits per family to approximately £500 per week by 2013 - in line with the median earnings after tax for working households. 

The potential impact of these changes is understandably something families are concerned about and 45% of single parents consider changes to current Government benefits to be one of their biggest fears for the next five years.

Louise Colley, head of protection marketing at Aviva comments: “This report gives us an interesting insight into the financial issues facing modern families in the UK. Not surprisingly, in today’s society, some families are struggling to make ends meet and 39% feel they cannot take on any additional financial obligations. While it is encouraging to see that most families are trying to save something every month, it is clear that other demands on their finances mean this amount remains below what is needed to guarantee a secure financial future.

“At Aviva, we understand the challenges facing families dealing with a period of high inflation and reduced support from the Government. We encourage families to seek professional financial advice to ensure they are making the most of their money to provide financial security for their family.”

To see a full copy of the Aviva Family Finances Report see: www.headlinemoney.co.uk.

–ends

Download a full copy of Aviva's Family Finances Report (756KB) 

If you are a journalist and would like further information on a specific family group, please contact:

Aviva Press Office
Sarah Poulter: 01904 452828 / 07800 691569: sarah.poulter@aviva.co.uk

The Wriglesworth Consultancy
Lee Blackwell / Emma Beresford: 020 7427 1400 / l.blackwell@wriglesworth.com

* Based on customer profiles and Government data Aviva has recognised the seven most common types of modern family as:

  1. Living in a committed relationship with no plans to have children
  2. Living in a committed relationship with plans to have children
  3. Living in a committed relationship with one child
  4. Living in a committed relationship with two or more children
  5. Divorced/separated/widowed with one child
  6. Divorced/separated/widowed with two or more children
  7. Single parent raising one or more children alone.

Methodology:

Management information was provided by Aviva and the remaining data was sourced from the Aviva Family Index which used findings from over 2,000 people who are members of one of the seven groups of families identified above. 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 protection being the choice for January 2011. A press release highlighting the other key points from Aviva’s Family Finances Report can be found at: First Aviva Family Finances Report finds major concerns over lack of protection insurance.

Notes to editors:

Aviva is one of the world's largest insurance groups* with 53 million customers worldwide and 46,000 employees.

Aviva’s main activities are long-term savings, fund management and general insurance, with worldwide total sales of £45.1 billion and funds under management of £379 billion*.

In the UK, Aviva takes care of its 19.2 million customers by helping them look after their future, protecting what’s important – from their health to their homes, their cars to their business – and saving for the future.

Aviva has a 10.5%** share of the UK life and pensions market and insures one in six homes and one in 10 cars in the UK. It is also one of the oldest UK insurers, with a heritage stretching back more than 300 years.

RAC, which is owned by Aviva, provides breakdown and insurance services for individuals and businesses and has around seven million customers.

Aviva is carbon neutral worldwide, and is ranked in the top 10% of socially responsible companies globally by the Dow Jones Sustainability World Index. In the UK, Aviva invested £3.8 million into local communities in 2009. Read our corporate responsibility report at www.aviva.com/cr

Aviva’s global Street to School programme is working in partnership with Railway Children in the UK to get children living on the streets back into education and everyday life. Find out more at www.aviva.co.uk/street-to-school

The Aviva media centre at www.aviva.com/media includes images, company and product information and a news release archive.

For broadcast-standard video, please visit www.aviva.com/media/video

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* based on gross worldwide premiums at 31 December 2009
** Source: ABI data released August 2010

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