Credit, Collections & Insolvency News
Ofgem has confirmed that the energy price cap will rise 9.5% in October, to £1,717 for an average user, adding £148.92 to an average bill or £12.41 a month. The removal of the winter fuel payment for those on low pension incomes, who don’t qualify for pension credit, will make it even tougher to make ends meet according research by Hargreaves Lansdown.
The analysis also. showed that food inflation rose in July – for the first time this year – it comes on the back of a 28.4% rise in the two years to September 2023. For households on lower incomes, buying budget own-brands, prices rose 29.1% (IFS).
The data showed that the average household on the lowest fifth of incomes (average household income of £11,764) has just £4 left at the end of the month, and the next lowest fifth (average household income of £22,262) has £41. Middle earners (households earning £34,054 on average) have £169 left at the end of the month.
Sarah Coles, Head of Personal Finance at Hargreaves Lansdown said “Energy bill rises will fuel another widening of the gulf between those who are emerging from the depths of the cost-of-living crisis, and the millions of people who are still trapped in the jaws of vicious living expenses.
“The HL Savings & Resilience Barometer shows that on average, half of us (49%) have enough cash left at the end of the month to be resilient, but among those on the lowest incomes this drops to zero. Even for those on middle incomes, almost two thirds don’t have enough spare cash. It means only above-average earners can comfortably weather the storm of this autumn’s price rises.
“Those on higher incomes are sitting pretty. National Insurance cuts have made a difference, and wages are now comfortably outpacing price rises, opening up some welcome space in their budgets. On average, the top fifth of earners (with an average household income of £78,394) have £843 left over at the end of the month, which is why so many are happy that for them at least, the cost-of-living crisis is over. For those living in a wealthier bubble, it might be easy to assume that everyone is recovering.
“However, further down the income spectrum it’s a very different picture. People in this position also often don’t have savings to fall back on. The average person who doesn’t have enough emergency savings or any investments has just £40 left at the end of the month. It means they’re stuck – because savings can’t get them out of a jam, and their painfully tight budgets mean they can only work on their safety net incredibly slowly.
“There’s a fine line between those who can manage rising costs now, and those who are struggling because of a change in circumstances. Those in poor health have an average of £24 left at the end of the month, those suffering from anxiety have £53 and those who are out of work have just £8. Meanwhile, single people living on their own have £39. It means that even if you’re coping now, you need to build protection in case unemployment, illness or a breakup lays waste to your finances.”