FINANCIAL SHOCK

Many workers don’t have enough savings to cope with wage falls

While most workers could cope with some loss of income, the young and less well-off are more at risk.

New figures from the Office for National Statistics show nearly threequarters (73%) of households in Great Britain, whose head of household is an employee, had enough savings to cover a 25% fall in income for three months.

Where the head of household was self-employed, it was 76%.

However, that falls to 54% and 61% respectively if they were asked to cope with the loss of 75% of their income.

Generally, those who are selfemployed had more of a savings buffer, as did those who were earning more and in older age groups.

Higher-income employee households are 1.5 times more likely to be able to cover a 25% drop and 1.7 times as likely to be able to cover a 75% drop than the lowest earners, likely reflecting their increased ability to save.

Those aged between 55 and the state pension age were similarly more likely to be able to survive income drops than those aged 16 to 34, with the ONS suggesting this reflects higher earning potential as people move through their career, as well as bigger outgoings, such as childcare, for younger people.

The ONS collected the data before the coronavirus pandemic started to impact the UK, but said the information could provide insight into groups that may be more likely to experience difficulties in the current economic climate.

While government support may help, a savings buffer - measured here as assets relative to earnings - is likely to form a key part of many households' overall financial resilience.

People were also asked to assess how long they could make ends meet if they lost their main source of income, with a third (34%) saying a year, but one in 10 (10%) unable to cope past a week.

Again the more vulnerable are less likely to be able to survive long - 45% of students, 60% of the unemployed, 66% of the sick and disabled and 52% of those looking after family and home reported being able to make ends meet for less than a month.

Varun Kanish, Campaigns Manager at Turn2us, said: "Millions of people across the country only survive paycheque to paycheque. The coronavirus pandemic has increased the likeliness that they will fall into financial crisis - if help isn't made available now.

"With rent to pay yet a decreased income, a great many people in our communities will resort to taking on high cost credit and other forms of loans, in order to cope. This will leave them with unaffordable debts on the other side of this national crisis.

"We urge anyone who may be worried about money to claim the benefits they are entitled to and to also find out if they are eligible for any grants.”