Millions borrowing from family and friends to cover costs

With possible income tax and threshold reforms expected in the Budget, new data from Howden Life and Health reveal families are already under pressure, with millions forced to borrow from friends and family, take out loans, and even cancel insurance policies to cover sudden costs.

As part of its Health Gap report, Howden Life and Health surveyed 3,000 UK adults and 29% – equivalent to 15.7 million people – said they had been hit by a major financial shock of £5,000 or more in the last year. And while the majority (71%) were able to cover at least some of the cost with savings and investments, millions were forced to borrow the cash.

According to the data, 36% – equivalent to around 5.6 million people – used a credit card or loan to cover some or all of the cost, rising to 47% of those aged 35-44, while one in four (26%) – just over 4 million – had to turn to family and friends for help. For younger people, calling on loved ones was the go-to option, with almost half (45%) of those aged between 18 and 24 saying ha to ask friends or family for financial support.

For millions of others, significant financial sacrifices had to be made; one in seven (14%) said they were forced to cut their pension contributions to cover the cost, 12% had to either remortgage or take a mortgage holiday to raise the money.

Worryingly, one in six (16%) – equivalent to 2.4 million people – took the risky step of cancelling or pausing insurance policies, such as Private Medical Insurance, life insurance and income protection – to cover the cost, rising to one in five under 34s.

Jon Carroll Executive Director, Howden Life & Health said “With rising living costs and wages failing to keep pace, it’s understandable that many people are struggling to cope with unexpected expenses. But it’s really worrying to see so many turning to credit, friends and family, or even cancelling their insurance to make ends meet. Protection policies are there to provide a safety net when the unexpected happens – giving up that cover can leave people far more financially vulnerable in the long run.”