Women, renters and mid-lifers left behind by the recovery

Sarah Coles, personal finance analyst at Hargreaves Lansdown, comments on the publication of statistics from a survey by Focaldata (on behalf of Hargreaves Lansdown), which shows women, renters and mid-lifers left behind by the recovery.

Key points from survey:

As the world starts returning to business as usual, a quarter of people (24%) are still only ‘just about getting by’ financially, while 8% are struggling to manage.
Women are more likely to be struggling than men, and they score lower on every financial resilience metric, from worrying about debt and concerns about their mental health to building up an emergency savings fund or saving for retirement.
Two-thirds of people (67%) worry about their mental health and wellbeing, either every day, most days or sometimes.
More than half (55%) of people worry about a sudden, large drop in their household income.

Sarah Coles says:

“The UK is bouncing back, but while millions of people are rebounding into working and spending as usual, women, renters and mid-lifers have proved far less financially resilient. There’s a real risk they’re being left behind by the recovery.

“Despite the increasing return to business as usual, there are some financial issues which still make around half of us anxious: 45% of people worry about debt at least sometimes, while 54% are worried their income will fall; and 44% are concerned about bills. More than half are worried about saving for retirement (58%) and building a savings pot to cover emergencies (54%).

“Meanwhile, a staggering two-thirds of people (67%) worry about their mental health and wellbeing. According to the Office for National Statistics, personal wellbeing measures – such as anxiety and life satisfaction – have yet to recover to their pre-pandemic level.

“However, some groups of people have been hit harder than others, and many of them aren’t bouncing back at all. Women, renters and those aged 45-54 are particularly vulnerable.”

The gender gap:

“Almost four in 10 women (37%) are just about getting by or struggling to manage, compared to 29% of men. They’re also more worried than men about every aspect of their finances. For example, 61% of women are concerned about a sudden reduction in their household income, versus 48% of men. They worry more about paying the mortgage or rent, saving for retirement, building an emergency savings fund, and their mental health.

“The gender pay gap and the gender pension gap are well-known. Women have lower average salaries and smaller pensions than men, so this may partly explain why they also have lower financial resilience. According to the FCA, 51% of women show one or more characteristics of vulnerability compared to 40% of men.

“They tend to take charge of the everyday finances at home so may also take on the lion’s share of the worrying in their family, because they’re the ones who understand the incomings and outgoings the most.

“They’ve also taken the brunt of the pandemic when it has come to furlough, because women are more likely to have been on furlough for longer than men. This owes much to the accommodation and food sectors having a high proportion of female staff and being affected for longer than other businesses. However, it also owes something to the fact that women are more likely to be in the frame for caring responsibilities, and some have been furloughed for childcare reasons.”

Low incomes and renters:

“The bigger your household income, the more likely you’ll say your finances are in excellent shape. For those earning more than £150,000, 45% describe them as excellent, compared to just 3% of those earning less than £15,000 a year. Those on incomes of less than £15,000 are most worried about debt, paying for essentials and building up an emergency fund. The FCA’s Financial Lives 2020 survey found that 70% of people with a household income of less than £15,000 were vulnerable.

“Renters are also more likely to be struggling than homeowners. Just 3% of renters say their finances are excellent, versus 10% of homeowners. This reflects findings from the FCA which said 66% of renters are vulnerable.

“Some of these people may have already been struggling, or on the verge of struggling, and when coronavirus hit it would have only taken a small adjustment, like being furloughed or getting sick and not being able to claim sick pay, to push them into the vulnerable category. According to the ONS, 17% of people on a household income of less than £40,000 said Covid had affected their finances, compared to 12% of those earning above this level.”

Age:

Mid-lifers (45- to 54-year-olds)

“This group had the highest percentage of people describing their household finances as “just about getting by” or “struggling to manage”, at 43%. A sudden drop in income, saving for emergencies and saving for retirement are particular pain-points.

“Redundancies hit this age group hard. According to the ONS, 35- to 49-year-olds had the highest redundancy level during the pandemic, followed by the 50+ group. Employees over 50 are more likely to have seen a reduction in their working hours due to Covid, and older workers who become unemployed are more likely to become long-term unemployed than younger workers.

“One in eight (13%) of workers aged 50 and over say they have changed their retirement plans, such as retiring later, according to the ONS.”

35- to 44-year-olds

“Debt and saving for retirement worry this age group. They had the second highest proportion of furloughed workers in April 2021. Losing income at a time when you are likely to have a mortgage and more people relying on you to pay the bills is particularly stressful.

“Some have coped by borrowing their way through the crisis. According to the FCA, the use of consumer credit in adults aged 35 to 44 peaked at 68% last year. So, understandably, as the country starts to open up again, getting out of debt is keeping this age group awake at night.”

25- to 34-year-olds

“This age group is worried about being able to afford essentials. Other points of poor resilience are debt (60% worry about this every day, most days or sometimes) and their ability to save (79%).

“This could be due to the fact that this age group has had the highest proportion of furloughed workers. Having your income reduced on furlough – as well as fears you may eventually lose your job – mean debt, bills, and not being able to build up a decent savings cushion, are very real concerns for this group.”

18- to 24-year-olds

“Those aged 18 to 24 are most likely to worry about paying their mortgage or rent or being able to afford essentials, and be most concerned about their mental health and wellbeing. A massive 83% of 18- to 24-year-olds worry about their mental health every day, most days or sometimes. This compares to just 40% of those aged 65 and over.

“The FCA’s Financial Lives 2020 survey found that younger people have lower resilience than other ages, and may not be able to handle financial shocks, especially when they’re hit by life events such as a relationship breakdown or ill health. They are less likely to have savings to fall back on, they’re more likely to fall: they were the first to lose their jobs during the pandemic.

“The prevalence of zero hours contracts among this group puts them at particular risk. ONS data shows that 10.8% of young people were on zero-hour contracts in the second quarter of 2020, a higher level than any other age group. And a higher proportion of young people left their zero-hour contract and became unemployed last year.

“Separate research by the ONS reveals that 16- to 24-year-olds saw their employment rate decline the most during the pandemic, compared with other age groups, while their labour mobility (job-to-job moves) also declined more than older age bands.”

Help if you’re struggling:

“If you’re struggling to make ends meet, then chances are you’ve already done the first step of drawing up a budget and working out how you can cut unnecessary spending. It’s also worth exploring every possible avenue for help. This includes making sure you have applied for any benefits you may be entitled to. If you’re having trouble negotiating the system, you can get free expert advice from StepChange and Citizens Advice.

“If you’re worried about debt, you need to speak to your lender sooner rather than later, to see what repayments you can afford and what they’ll agree to. This will affect your credit score, but not as badly as if you just miss payments. If you can’t face this, debt charities like National Debtline and StepChange can talk to lenders for you – and help you find a solution.

“If your financial problems are affecting your mental health, Mental Health & Money Advice is a useful, free service, as is the charity Mind. The key is to try and talk about your issues with someone you trust. Your GP should also be able to point you in the direction of local support groups.”

Improve your resilience:

“If your income has remained reasonably stable during the pandemic, but you’re worried for the future, one of the best ways to protect yourself is to build an emergency savings safety net.

“Aim to cover 3-6 months’ worth of essential expenses in an easy access account, but if that seems like a huge target, just make a start with whatever you can afford and aim to build it up over time.

“Once you have a savings buffer, you can think further ahead to retirement. Can you increase your pension contributions at work? If you’re a basic-rate taxpayer or self-employed – and under 40 – a lifetime ISA could be a more tax-efficient and flexible to save.”

5 to Thrive – In July 2021, HL launched 5 to Thrive, providing the five building blocks to help people build their financial resilience:

Control your debt– debt isn’t in itself a bad thing, but ensuring you can use it for your benefit rather being controlled by it is crucial. High-cost debt can be particularly damaging for your finances.
Protect your family– no one is immune to something going wrong, and if something happens to you, it can hurt your loved ones. That’s why things like protection insurance, the death benefits on pensions and writing a will are so essential.
Save for a rainy day– it’s impossible to predict when things could go wrong, so it’s important to get ahead of the game by building a cash buffer for unexpected emergencies.
Plan for later life– we can’t just focus on what’s around the corner, so we need to think about the long-term too. Getting to grips with your pension and making sure you’re building a large enough pot for retirement will help protect you when you finish work.
Invest to make more of your money– once you have built your short term resilience and are confident in your pension savings, you can consider investing, which gives you the opportunity to make your money work harder for you.

“HL is putting together a package of educational material, insights, tools and guidance designed to help people become more financial resilient. We’re also building a new financial resilience barometer. This will help people better understand their financial resilience and what they can do to improve it. It will launch in January 2022.”

Kindly shared by Hargreaves Lansdown

Main photo courtesy of Pixabay