New research by Royal London has revealed a startling picture of people’s personal finances during the pandemic. the figures above show, household incomes have fallen while bills have risen, with many people believing that things are going to become even bleaker.
The company found that the self-employed have been more acutely affected by Covid-19 than the UK population as a whole. In addition, households with an annual income up to £40,000 are worse off than higher-rate taxpayers and renters are significantly worse off than all homeowners, with self-employed renters suffering the most.
As the Government imposes a second lockdown and fears grow over soaring unemployment, the research found that there has been a shift towards using debt for essentials and day-to-day needs. But 30% of borrowers (and 41% of self-employed borrowers) said the amount they could repay each month had gone down since the virus hit.
Although credit cards can be an expensive way to borrow money, they are the most popular (63%), followed by mortgages (36%), overdrafts (25%), and unsecured loans (19%).
The research was carried out six months into the pandemic from September 29 to October 2, 2020. Among the key findings was the contrast between homeowners and renters. With rents continuing to rise, tenants are worse off than homeowners, and self-employed renters are particularly badly affected]. For example, 35% of self-employed renters reported that their outgoings have increased compared to just 18% of self-employed homeowners.
Sarah Pennells, Head of Financial Capability at Royal London, said “Our research reveals the devastating effect of Covid-19 on people’s finances. Those who are self-employed have been particularly hard hit, as have people on lower incomes. And with many self-employed still not covered for various government support schemes, more needs to be done to make sure they don’t fall through the net.”
“While recent Government and regulatory announcements on new payment holidays for mortgages and consumer credit products are to be welcomed, it’s crucial that people get the help they need to understand what they’ll owe when the payment holiday ends, and are given support if they are still struggling financially.”
Commenting on the research Jamie Grier, Director of Income & External Affairs at Turn2us, said “This new research shows just how disproportionate the impact of coronavirus has been in recent months, including to those who are self-employed. Far too many self-employed people slipped through the Government support schemes and have had to rely on Universal Credit.”
“The income from this benefit is far from enough to meet people’s basic needs, even with the Minimum Income Floor being suspended. We welcome the news that the Government is going to keep the Minimum Income Floor suspension, however we urge them to go further and retain the £20 standard uplift to Universal Credit, in order to give people a fighting chance to keep themselves afloat during these difficult and uncertain times.”