Perfect storm

Major long-term ramifications for financial health and wellbeing

A perfect storm of global and domestic factors has contributed to spiralling inflation in the UK, triggering a cost of living crisis. This is pushing up the prices of food, fuel and housing. This crisis is by far the top concern for UK consumers: 58% are very worried about it, rising to 69% of women, according to research[1].

Three-quarters of those aged 50 and over are also worried about how the cost of living will impact their retirement with one in two (53%) fearing that they won’t have enough income to survive financially when they stop working[2].

Weather the cost of living crisis

Interestingly, only 42% of people are very worried about inflation specifically, suggesting a lack of understanding about what’s driving the crisis. After two decades in a low inflation and interest rate environment, an abrupt change in the economic climate has prompted many UK households to relook at their personal finances so they can weather the cost of living crisis.

Everyday luxuries like subscription services and holidays have been first to go as we tighten our belts. But faced with double digit spikes to fuel and everyday essentials, many feel more radical changes to household finances will be required to steady the ship.

Not being able to save enough

Worryingly, the research suggests that families are increasingly prepared to pause savings and investments, and some would even cut back on pensions contributions or dip into their nest eggs, actions which could have major long-term ramifications for their financial health and wellbeing.

The key findings are that more than one in five (22%) people across the UK are having sleepless nights worrying about the economic environment. Their top concerns are 58% cost of living, 42% rising inflation and 29% not being able to save enough towards retirement.

Most people are not prepared for the squeeze – 55% say they are not confident their finances will hold up against the rising cost of living.

Making or considering financial changes

53% are concerned about not being able to save for their emergency fund given the current economic environment, and 54% are worried they’ll use up all of their emergency savings to cover the cost of living rise. 59% of people are concerned they’ll need to work for longer as a result of today’s cost of living.

People are making or considering financial changes which will have long-term ramifications. 11% of consumers have given up investing, and a further 17% plan to do so. Asked more broadly about their finances, more than half of adults (55%) say they are not confident their finances will hold up against the rising cost of living.

Least confident age group

Of this, 34% say they are not very confident and 21% say they are not at all confident. This surges higher among women, with 63% of women saying they’re not confident compared with 47% of men who say the same.

Delving into the detail, those aged 45-54 are the least confident age group around the strength of their finances – 63% are not confident. This is closely followed by 35-44-year-olds (62%) and then 25-34-year-olds (59%) who say the same.

Are you on track to secure the financial future you want?

There is an awful lot to think about when it comes to navigating the financial storm that lies ahead. Making the right decisions when it comes to your retirement is key. To discuss how we could help, please contact us. We look forward to hearing from you.

Source data:

[1] Research was carried out by Censuswide for Charles Stanley among a UK representative sample of 2,086 UK adults. The survey was completed between 09/06/2022 and 13/06/2022.

[2] Conducted by Perspectus Global – 1,000 UK-based Britons aged 50 and over, commissioned by Unbiased during April 2022.