Nearly 28 million adults in the UK, over half the population, now have the characteristics of vulnerability such as poor health, low financial resilience or recent negative life events, following the devastating effects of the coronavirus, the Financial Conduct Authority (FCA) has warned.
The watchdog’s latest financial lives survey (FLS) paints a bleak picture of consumers’ well-being nearly a year on from the outbreak of Covid-19.
The number of at risk Brits is up 15% from February 2020 when 24 million displayed characteristics of vulnerability.
Resilience
The FLS showed that the number of consumers with low financial resilience, such as over-indebtedness, low levels of savings or low or erratic earning, increased from 10.7 million to 14.2 million over the course of 2020. This represents over a quarter of the adult population.
One in three adults that responded to the survey said they expected their household income to fall during the next six months, while 25% expected to struggle to make ends meet.
To cope with these hardships 17.5 million adults (33%) said they were likely to cut back on essentials or use a food bank and 8.1 million (16%) said they would take on more debt.
“It is tragic to see so many adults plunging themselves into debt just so that they can eat or heat their homes,” said Keith Richards, chief executive of the Personal Finance Society (PFS).
“Covid-19 has shone a light on vulnerability and shown how we can all find ourselves in vulnerable circumstances in need of a safe pair of hands capable of showing us the way to greater financial security and improved mental wellbeing.”
‘Vulnerability is like blood in the water to scammers’
The increased financial vulnerability is offering opportunities for fraudsters to exploit the situation.
Between September 2019 and September 2020, Action Fraud, a fraud reporting service, received 17,000 reports of investment fraud, a 28% increase compared to the previous year.
Research from AJ Bell suggests that two in five people have been approached by a scammer during lockdown.
“Financial vulnerability is like blood in the water to scammers, and the pensions of people aged 55 and over are often their prey of choice,” said AJ Bell senior analyst Tom Selby.
However, the pandemic has not affected everyone equally. Whilst a higher than average proportion of younger and Bame adults have become vulnerable since March, 48% of adults have not been affected financially by Covid-19, and 14% have actually seen an improvement in their financial situation.
Selby highlights the lessons to be learnt for those affected by the pandemic, advising that “it is vital they take time to plan their finances and get a cash buffer in place if they don’t already have one.”
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