Drewberry’s annual Wealth & Protection Survey finds that over half of Britons are now stuck in the ‘JAM’ zone.
- In a JAM: 38% of working Britons regard their finances as ‘Just about managing’, while 14% describe their finances as ‘hanging by a thread’ (or worse).
- Spread thin: Over 1 in 4 working Britons (26%) have £100 or less a month left after paying for basic living expenses while 44% have £200 a month or less.
- Lack of buffer: 39% of Britons have £1,000 or less in cash savings while 42% have over £1,000 in debt. Over 1 in 4 Britons (26%) has more than £5,000 in non-mortgage debt.
- Pension shortfall: Over 50% of Britons don’t know how much their pension is worth. Of those that do, 44% report current pension savings of under £10,000 while 47% of 50-somethings report having less than £50,000 in their pension pot.
- Not so great expectations: 53% of today’s millennials expect to be worse off than their parents in retirement. 15% of Britons don’t expect to be able to afford to retire before they reach their 70s, while almost 13% don’t believe they’ll ever afford it.
Caught in a JAM
Commenting on the headline results from this year’s survey, Tom Conner, Director of Drewberry, observes that,
“Our findings provide a startling snapshot of what life’s currently like for the average British worker. More than half are feeling the squeeze,” he says, “with over 50% of the country reporting that they’re ‘just about managing’ or worse. Only 15% describe themselves as ‘comfortable’ with enough left over each month to contribute to pensions and savings plans.
“Meanwhile, cash savings are pitifully thin on the ground. Over a quarter of working Britons [28%] have less than £500 in cash savings, and more than a third [39%] have less than £1,000. Based on our findings, we estimate that only around 1 in 3 working Britons currently has a sufficient cash buffer to last three months or more if they were suddenly unable to work or they lost their job.
“Our survey also found that only around 6% of Britons have insured against the risk of losing their income, which means that a great many UK households are exposed to the risk of an accident or sudden ill-health de-railing their finances.
“Unfortunately, income protection remains one of the least utilised insurances, despite the fact that it’s arguable the most important type of cover for most working Britons.”
Living from pay cheque to pay cheque
As Conner highlights,
“We’re locked in a low-wage economy where the average working Briton has long since abandoned any financial ambitions greater than paying their bills and maybe squeezing a holiday or two from their annual budget. This is a long way from what you might expect from one of the richest countries in the world,” he says.
“If anything, our findings suggest that many working Britons have become so used to austerity that they just don’t realise how badly off they are. Our survey shows that more than a quarter have less than £100 a month left after paying their bills but only about 1 in 7 Britons regard their finances as being in trouble.
“Household income continues to fall, the saving ratio has cratered and personal borrowing has taken a sickening lurch but almost half of working Britons [48%] still think their finances are in good shape,” he says.
Will the penny drop?
“The reality is that saving into ISAs and pensions has become a luxury,” says Conner, “even to the minority that understand these products. Sadly, working Britons are being forced to subsidise the here and now with what they should be putting away for retirement or just for a rainy day,” he says.
They’re also borrowing freely on credit cards and loans to make ends meet. “Personal debt levels remain high,” says Conner, “with over a quarter of us owing over £5,000 in non-mortgage debt. The impact of student debt means that younger Britons have by far the greatest debt burden. We found that 34% of 20-somethings owe over £10,000, compared to just 14% of 40-somethings,” he says.
“The big concerns from here is that with discretionary income [what’s left after you’ve paid your taxes and basic living costs] so tight, a great many Britons will be in the firing line if inflation continues at its current rate or if interest rates start to rise – both of which look likely.
“Ironically, working Britons helped to create these conditions when they voted to leave the EU last year,” says Conner, “but with belts already so tight, a great many will struggle in the event of a hard ‘Brexit’.”
To help working Britons better prepare for retirement, Drewberry created its Pension Pot Calculator, which works out the future value of your pension pot based on your contributions and illustrates how long it’s likely to last based on the level of income you decide to draw.
See the full data from the annual Drewberry Wealth & Protection Survey