Consumers can survive just 19 days on average if they were to suddenly lose their income, down from 24 days in 2020, new research looking at the UK’s financial resilience has found. Almost 2m adults have no money left at the end of each month, a rise of 330,000 since 2020, and 64% live with significant debt. 

 

New research by Legal & General Retail has exposed the UK’s financial vulnerability. On average, people believe they can survive 60 days without an income, but based on actual savings and spending patterns, the average consumer is just 19 days from the breadline, and just 12 days in the North East of England. Even cutting back to just the essentials would only lengthen the time to the breadline by three days. 

 

 

The average UK household has £2,431 in savings and is £610 in debt, excluding mortgages or student loans; worryingly, most households (64%) have significant debt. A sizeable minority (37%) have less than £1,000 savings, including 16% who have no savings.  

 

Once rent or mortgage payments are made, utilities and food are covered, the average household has £700 left to pay for everything else, from fuel to mobile phone contracts and broadband. One in 17 (6%) is left with nothing, L&G’s ‘Deadline to Breadline’ report has found. 

 

 

The current acute cost of living crisis is therefore coming against a backdrop of a chronic lack of financial resilience in the UK and has among others meant that people have started to cut back on pension saving. According to L&G, nearly 17m people are not currently contributing to a pension, mainly because they believe they cannot afford to, and 2.4m plan to rely on just the state pension, including one in five of those aged 55-65.  

 

The 10th anniversary of automatic enrolment has shown that the policy has brought millions into pension saving, but some groups are still notably ‘underpensioned’, including those earning less than £10,000 from a single job – mainly women – and the self-employed, while young people are only currently enrolled from age 22. The report found that almost one in four 18-24-year-olds (22%) says a pension is not a priority yet, while 39% believe they are too young to start saving for pensions.  

 

Older groups have felt an immediate impact on their pension from the pandemic and cost of living crisis. Just 16% of people nearing pension age feel positive about their retirement plans following the pandemic, with one in five having decreased contributions to savings and 18% now expecting to retire later. 

 

 

There are also signs that opt-outs might be increasing. Three-quarters of those impacted by both Covid and the rising cost of living decreased their contributions to their savings, and more than a third reduced their pension contributions, the report states.  

 

The Trades Union Congress warned in August that workers were opting out of both public and private sector schemes, and the Royal College of Nursing said last month that the number of staff leaving the NHS pension scheme has doubled from 30,270 to 66,167 in just one year, including more than 4,000 nurses. Many who did so said they decided to opt out because of affordability, according to the RCN, and fewer than half (47%) said this was a temporary decision.  

 

A newly qualified nurse in England and Wales on a salary of around £27,000 would pay about £183 on their basic salary into their pension each month, which would leave about £1,700 net a month excluding student loan repayments. 

 

“There’s a real risk that people are making cuts now that will have catastrophic long-term impacts. Anyone cutting their pension or savings contributions needs to think about the future impact this will have and have exhausted other cost cutting moves before doing so,” warned Laura Suter, head of personal finance at investment platform AJ Bell. 

 

She pointed out that women are particularly impacted by the cost of living, being just 14 days from the breadline. 

 

“We know that the pandemic already widened the gap between men and women’s finances, and it appears the next crisis – the cost-of-living squeeze – is only exacerbating that,” she said. “While the report shows women are being thrifty at the moment and cutting back on both luxuries and essentials at a greater pace than men, those cutbacks can only go so far." 

 

The squeeze on women’s incomes means they are far less likely to be able to put money away for the future in their pensions or investments, said Suter. “The research found the average woman has less than half the pension pot of the average man. In reality, women should have bigger pension pots as they live longer and so will tend to spend longer in retirement.” 

 

Are pension funds doing enough to explain the effects of cutting back on pensions to people?