The financial wellbeing of UK households is at its lowest level for two years amid the cost of living crisis, according to a survey released on Wednesday.
The Scottish Widows Household Finance Index, which measures overall perceptions of financial wellbeing, fell to 38.5 in the first quarter, marking the fastest decline since just after the pandemic began in the second quarter of 2020 and among the lowest on record.
A reading above 50.0 indicates an improvement and a reading below signals a deterioration.
The survey also showed that household savings fell at the steepest pace for nine years amid the quickest reduction in cash availability since the final quarter of 2013. Nevertheless, income from employment is more buoyant and households’ sentiment towards their job security was the most optimistic on record, with the respective survey index hitting a series peak of 50.2.
Emma Watkins, managing director of Retirement and Longstanding at Scottish Widows, said: “It’s tough right now for households trying the manage the surge in day-to-day living costs. We know that many households have failed to boost their savings during the pandemic (60%) and that over 70% of households will need to eat into their savings in the next 12 months in order to meet their growing expenses.
“Looking forward, the number of households expecting to contribute similar levels of savings towards their retirement hasn’t changed significantly since the start of the pandemic. We have also seen an uptick in the level of insurance protection since the outbreak, with the biggest increase being life insurance (one in ten households have taken out a policy since onset), followed by private medical insurance (8%). However, many people are leaving themselves exposed to future financial shocks by not having the right protection in place; despite the increase in life insurance take-up, three in five households still do not have any cover.”