Half of UK adults at risk of financial vulnerability

The Financial Conduct Authority (FCA) has warned of significant vulnerabilities in the UK housing market.

In its survey Understanding the Financial Lives of UK Adults which was published on 18th October 2017, the FCA found that half of UK adults (25.6 million people) could be vulnerable to financial harm. The survey tracked the financial habits of nearly 13,000 UK consumers aged 18 years and over, collating information about financial products and attitudes towards managing money.

While the national average of vulnerable adults was found to be 50%, the risk was much higher in the older generations. 69% of those aged over 75 were vulnerable and the percentage increased to 77% in those aged over 85.

Insufficient financial insurance protection cover

While it used to be the case that a life insurance policy was mandatory when taking out a mortgage, the survey found that a significant number of people between the ages of 35-44 who have a mortgage or financially dependent children have no protection cover that would help them financially if they were unable to work.

Only 24% of renters said they have home insurance.

Critics have blamed the ‘have it now’ generation, and called for insurance providers to make products simpler and more easily accessible.

Rate increase worries

15% of those who have a mortgage and 47% of those who rent said they would struggle to make the payments if they increased by less than £100 per month.

Who is the most at risk?

The survey found that unemployed people looking for work and the estimated one million people without a bank account were the most vulnerable.

Single parents aged 18-34 are three times more likely to take out a high cost loan, and 3.1 million adults have taken out a payday or home collected loan in the last twelve months.

4.1 million people said they had missed payments for domestic bills or missed credit payments in three or more of the last six months, including 13% of those aged 25-34. Of this group, 23% are over-indebted – the highest of any group – and 37% have taken out a payday loan.

Those aged over 65 are the least likely to check the safety of an internet site before parting with bank or credit card details.

Retirement plans

Only a third of those aged 45-54 have considered how they will manage financially in their retirement, and two million adults with a defined contribution (DC) pension admitted that they did not understand their annual statement. Only a quarter of the 55-64 group with a DC pension know the value of their pension pot.

40% of people with an interest-only mortgage are aged 45-54, for which they may have insufficient resources to cover the debt at the end of the mortgage term.

The Financial Lives Survey is one of a series scheduled for publication in autumn 2017.