35 million consumers could be over paying for financial and utility products

17th February 2017

A five year study from Experian has revealed new insight into the financial attitudes and behaviours of people across Britain. The Financial Strategy Segments (FSS) tool identifies four key financial trends seen in the UK today, looking at how we spend, save and borrow, both now and in the future.

Tax on Inertia
Experian research found that over 35m people in Britain may be paying more than they should for inappropriate financial products and utility plans. These people haven’t made the best choices when it comes to planning for their future. Many don’t put enough aside for their pension soon enough, pay too much for bills and fail to switch to the best utility deals. The effect of this is an invisible tax on inertia, which has a cumulative impact over the course of people’s lives.

Savvy Switchers and Digital Devotees

The research also found that those who embrace new digital possibilities are more likely to switch and save. This group consists of 12.8 million people in 5.5 million households, who are likely to be younger and digitally savvy. This means that older consumers, as well as those in rural areas or with poor internet connectivity, are at a disadvantage in terms of the ease of switching. However, connectivity is not the only factor. Those living in London and the South East are most likely to shop around for the best deal and switch providers, while Skegness, Birmingham and Manchester top the locations where residents are least likely to switch and save. (Switching map available on request**).

Jilted Generation and Helping Hands

An entire generation (in their 20s and 30s) is less well off than the last and families are increasingly coming together to act as one financial unit. Nearly one million* households have received a loan or financial gift from other family members. Experian has found that almost 6 million* households in Britain have no savings, with 423,000 Britons relying on unauthorised overdrafts or payday loans to make ends meet.

Life Escalator: Age vs. Affluence

Experian analysis shows a series of events and actions that see an individual passing through life and rising in affluence and assets over time. However, for many starting out with the lowest incomes getting on ‘life’s escalator’ is difficult, while more affluent young people are most likely to retire with the largest assets. It is those in the middle who have the greatest chance of changing their financial trajectory by taking control of their finances.

Richard Jenkings Location Analytics Consultant at Experian said “Your financial future is certainly impacted by the situation you are in now, but the good news is that practical steps can be made to improve those circumstances in the years ahead. By being proactive and taking the guesswork out of your finances, the savings that households could make is significant.

“A consumer’s financial path is often like a game of Snakes and Ladders. People can move up and slip down, depending on what life throws at them. Using data we can predict probable life-paths through time, however small changes could see consumers beat the crystal ball and improve their financial situation, enjoying more savings and less debt.”

“Whether through a lack of information or because they’re offered fewer alternatives, people often choose the most expensive ways to borrow money, such as payday loans, unauthorised overdrafts and home collected credit loans.Clearly, there’s an opportunity here for financial service providers to help consumers make the most of their financial situation by guiding them to the most appropriate products, and making it simpler to switch. It’s clear from our research that those who stick to old financial behaviors are likely to fare worse in the future than those who change.”

Top 5 Switching Areas:

  • London
  • St Albans
  • Bracknell
  • Windsor
  • Watford

Bottom 5 Switching Areas:

  • Skegness
  • Great Yarmouth
  • Birmingham
  • Manchester
  • King’s Lynn

Nick Hill, Money Expert at the Money Advice Service, said “These findings clearly illustrate a number of the money management issues faced by people all over Britain on a daily basis. The fact that 6 million households across the nation have no savings at all shows that huge number of people are vulnerable to shock expenses that can seriously harm their financial wellbeing.

“Shopping around for utilities and financial products is an incredibly important step towards managing money effectively. For example, only yesterday I switched energy provider, which should save me around £160 this year, and it only took me about 20 minutes. Finding the best deal to free up a little extra cash each month can make a huge difference to people’s quality of life, for a comparatively small amount of effort. We’d encourage consumers to be aware of how much they’re paying and to shop around for the best deal. A great step to take might be to put any money saved from switching aside into a separate account on a regular basis, which can be a great way of building up that all-important savings buffer.”