Article date: 30 September 2008
- 180 million hours researching how we spend money on money leaves us none the wiser
Brits are "budgeting blind" through the credit crunch, according to new research from Norwich Union out today*. Despite spending millions of hours researching financial products, most Britons have little idea about what more than half of their hard earned cash is buying.
The research shows that despite the growing list of high profile credit crunch casualties splashed across the headlines every day, Brits are failing to look after their own finances. The UK's largest insurer found that despite 53p in every £1** being spent on financial necessities such as insurance and mortgages:
- 72% don't know what type of mortgage they have (tracker, fixed rate, etc)
- 67% don't know what their monthly mortgage payment is
- 78% don't know the interest rate of their mortgage
- 59% don't know the basic details of their contents insurance policy
- One in 10 (9%) don't know how much their utility or council tax payments are.
The study also revealed that Britons spend 180 million hours each year*** researching essential financial purchases suggesting that the more time we spend researching our financial purchases, the less we know about what we end up buying.
Commenting on the findings, independent financial expert Alvin Hall said: "In difficult economic times like today, it's crucial that each of us understands exactly where every penny of our pound is going. Budgeting blindly or with your head buried in the sand is a high risk strategy.
"When you're embarking on financial commitments like insurance and mortgages it's important to be aware of what's going on in the market and what other products are on offer. However, for many of us there's a two-part barrier to understanding financial products and making the best decisions about them. The first is the language barrier - the legalese and jargon. The second barrier is emotional - we have preconceived ideas about the complexity of these products and we are spooked before we even start our research.
"By taking some time to diligently read and understand the information about different products, and by asking questions that help clarify our understanding, we can empower ourselves to make the right decisions. And remember: don't buy anything unless you know exactly what you're getting."
Where does all the time go?
The internet has revolutionised the way the nation spends money on "money", with 36% of respondents citing the web as their first port of call for information on mortgages, followed by independent experts (22%) and direct suppliers such as banks (12%). One in four homeowners spend more than 15 hours finding the right mortgage deal.
More than three quarters of car insurance buyers (76%) go online before they buy, with 39% spending four hours or more searching for the right policy. Despite this, the majority of homeowners and motorists remain unaware of the detail of their most significant financial commitments.
Steve Genders, head of web at Norwich Union, says: "It's clear from the research that the more time we spend researching, the less we know about what we're buying. People need quality - and not necessarily quantity - searches."
The research comes as Norwich Union, part of Aviva, launches a pioneering way for motorists to purchase their policy with greater confidence. The insurer has launched a new, one-stop-shop web and phone service that gives customers the prices and policy details of its rivals - even if they're cheaper.
Customers seeking a motor quote on www.norwichunion.com will be offered a simple and transparent way to check the insurer's motor policy cover and price against its competitors. Quotes are checked against other insurers to give buyers an instant and easily understandable idea of the deals on offer.
Steve adds: "We know that our customers are concerned about how much their policy will cost, whether the level of cover is right for them and that the price quoted is competitive. Our new online offer will do just that - allow them to check like-for-like policies so they can buy with confidence. No smoke and mirrors. No information overload. Just straightforward, transparent information that saves them time and confusion."
For further information please contact:
Telephone: 020 7908 6545
Telephone: 020 7908 6462
Norwich Union press office
Telephone: 01603 685177
Mobile: 07800 690731
Notes to editors:
Norwich Union is the UK's largest general insurer with a market share of around 15%, with a focus on insurance for individuals and small businesses.
It is a leading provider of life, pensions and investment products and one of the largest financial adviser (FA) providers. FAs provide over 70% of the company's long-term savings business in the UK.
In the summer of 2009 Norwich Union will change its name to Aviva. Aviva is the world's fifth largest insurance group and operates in 27 countries. Aviva is to become the customer brand worldwide, thus enabling the company to compete even more effectively on a global scale for the benefit of customers, staff, business partners and shareholders.
Norwich Union's news releases and a selection of images are available from Aviva's internet press centre at www.aviva.com/media.
Fieldwork was undertaken between 29 August and 1 of September 2008 and carried out online by YouGov. Total sample size was 2,019 adults and the figures have been weighted and are representative of all GB adults aged 18+.
** 53p in every £1 explained
According the Office of National Statistics the average household income is £30,000. After tax and NI contributions this equates to approximately £1,876 per month. According to ONS the
average mortgage costs £572 per month (http://news.bbc.co.uk/1/hi/business/7213177.stm).
When you add the average cost of pension (£268.75 per month according to statistics from Norwich Union), average cost of car insurance (£482.60 per annum according to statistics from RAC), average cost of buildings and content insurance (£360 per annum according to statistics from Norwich Union) as well as Council Tax (£91.75 per month - www.guardian.co.uk/money/2007/mar/27/politics.localgovernment), this totals £1,002.70 per month on financial products. When this total is subtracted from the total net income it represents 53% of household income.
*** 180 million hours explained
According to the Office of National Statistics (ONS), there are 24,700,000 households in the UK www.statistics.gov.uk (Link removed as no longer active). According to the YouGov survey 56% of households (13,832,000), have spent 4 hours or more researching pensions and savings plans. That means we spend more than 55,328,000 hours researching.
According to RAC there are approximately 20,000,000 privately owned cars in the UK. We spend on average 2.7 hours researching car insurance policies which means we spend more than 53,300,000 hours researching car insurance.
According to the Council of Mortgage Lenders (www.cml.org.uk) there are 11,822,000 mortgages in the UK. According to the survey by YouGov we spend an average of six hours researching a mortgage which means we spend 70,932,000 hours in total searching for our mortgages.
By adding each of these figures (55,328,000 for pensions and savings, 53,300,000 for car insurance and 70,932,000 for mortgages), we get a total of 179,560,000 hours spent researching financial products.