Millions in UK forced to sacrifice tomorrow to survive today

FCA Financial Lives Survey reveals the impact of the pandemic on the population.

The Financial Conduct Authority this morning published its Financial Lives Survey 2020, which showed a rise from 10.7 million in 2019 to 14.2 million people experiencing low financial resilience last year. The FCA said 27.7 million people in the UK now have characteristics of financial vulnerability, up from 24 million last year.

Younger people and ethnic minorities were among those who suffered the biggest drop in financial resilience.

Becky O’Connor, Head of Pensions and Savings, interactive investor, said: “People have been forced to sacrifice tomorrow in order to survive today. Financial difficulty can take years to unwind. Even once lockdowns have eased and life returns to something like normal, millions of households will continue to pay the price of the pandemic for years in the form of higher debt, lower savings and smaller pensions.”

Myron Jobson, Personal Finance Campaigner, interactive investor, said: “The fact that 8.1 million (16%) expected to take on more debt in October shows that there has been little financial reprieve for many. While financial support may still be available for those struggling with debt, the expiration of the FCA-enforced ban on the repossession of goods and vehicles at the end of January marked the beginning of the end of much-needed financial amnesty measures for borrowers struggling to meet repayment obligations during the pandemic.

“However, others have been more fortunate. Many Britons have found themselves with more money in the bank, resulting from a dramatic dip in their expenditure on travel and outdoor entertainment because of strict lockdown restrictions.

“The light at the end of the Covid tunnel is now in sight, thanks to the roll-out of the coronavirus vaccine, but people’s financial positions won’t change overnight once the government takes its first tentative steps to ease some strict coronavirus lockdown measures and slowly begin to reopen society. The importance of paying closer attention to your financial well-being and taking some time to plan ahead to help fortify your finances against the coronavirus economic uncertainty still rings true.

“This may translate to doing an emergency budget, cutting down on non-essential spending and squirrelling away more money into a rainy-day fund, if you can afford to do so.

“These are worrying times. For parents, many (me included) are worrying that our kids might have it even tougher than previous generations – and that’s just on the economic side of things.

“Good quality financial education – at school and at home – has never been more crucial.

“At a time when most [children] have been learning from the kitchen table for a big chunk of the last year, when they go back, there must surely be room for more homespun, real-life, everyday lessons about money.”