Employees’ lifestyles at risk from ‘savings gap’

BRITAIN’S employees could maintain their current lifestyle for just a month if they lost their source of income and had to rely on savings, according to new research from insurer Legal & General.

The survey of 2,000 full and parttime employees found the average employee’s “deadline to the breadline” was just 32 days. This figure drops to 26 in Wales, compared to 36 days in Northern Ireland.

However, more than a quarter (26%) said their current savings would last just a week or less, highlighting that UK families are at threat should the main breadwinner die or become critically ill.

The research found that while the deadline rose to 36 days if respondents reined in their spending, a fifth (21%) would still only be able to live off their savings for up to one week. Furthermore, while the average employee had a little more than £6,500 in savings, they believed they would need a further £9,830 to feel financially secure. Nearly a quarter (23%) said they did not save any income each month.

The statistics also showed a variation in the deadline across the UK. Northern Ireland had the longest deadline, with individuals saying their savings would last 36 days on average. In contrast, Wales had the shortest deadline, with those surveyed saying they could sustain their current level of spending for on average just 26 days after losing their primary source of income.

Richard Kateley, head of intermediary development at Legal & General said: “Whether you are enjoying the benefits of your monthly salary, going through the process of buying your first home or starting your own family, it’s all too easy to avoid thinking about how you would manage your financial wellbeing if something went wrong.

“The death or critical illness of a main earner and the financial impact that could have on a family or household has the potential to be significant, yet unfortunately the UK still clearly suffers from a savings and protection gap.

“We merely rent our lifestyles and we pay each month for it through our earnings – take away those earnings and it may not just be your house that you are thrown out of, but your entire lifestyle.

“It is vital that individuals and families plan ahead for such a critical event, either by saving money each month to ensure their financial security or by speaking with an adviser about a protection policy that could support them in their time of need.”