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Households less likely to cope with financial shocks in 2022 and 15% of low-income Britons are already behind with bills and debt repayments

  • Households overall became more financially resilient during the pandemic   
  • The picture across regions and parts of society is strikingly uneven 
  • Situation to worsen this year due to inflation, taxes and interest rate hikes 
  • 15% of those on lower incomes already behind on bills or debt repayments










Far more households are less likely to cope with income shocks this year due to the cost of living squeeze, with those on lower incomes at a higher risk of getting into debt, new research has found.

Rising inflation and taxes, falling real wages and interest rate hikes are set to reverse half of the financial resilience people built during the pandemic, when those who still had a job had a chance to save more for a rainy day. 

Britons’ overall financial resilience, as measured by a new barometer by Oxford Economics and Hargreaves Lansdown, rose to 57.7 out of 100 last year, from 54.5 in 2019. 

However, it is expected to fall back to 56.2 as households succumb to the big squeeze, according to the research. 

Money worries: 15% of those on lower incomes have fallen behind on bills or debt repayments

Money worries: 15% of those on lower incomes have fallen behind on bills or debt repayments

Financial resilience is expected to fall back to 56.2 as households succumb to the big squeeze

Financial resilience is expected to fall back to 56.2 as households succumb to the big squeeze

The largest contributor to the forecast decline is a reduction in the level of surplus income, as spending continues to return to pre-pandemic levels and living costs rise. 

Meanwhile, higher interest rates – the Bank of England is expected to gradually increase interest rates to 0.5 per cent by the end of 2022 – will reduce the affordability of debt repayments.

But some parts of society are at biggest financial risk than others.

Those who already struggled to keep their heads above water during the pandemic – those on lower incomes, younger people, and renters – are in for another tough year.

For example, already 15 per cent of those on lower incomes have fallen behind on bills or debt repayments – a proportion more than four times bigger than the national average.

‘With [energy] bills rocketing and interest on their debt rising, the Big Squeeze could pull them under,’ said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown. 

As the economy has further reopened since the summer the savings rate begun to normalise, a process that is expected to continue in 2022

As the economy has further reopened since the summer the savings rate begun to normalise, a process that is expected to continue in 2022

When it comes to cash set aside for a rainy day, a third of Britons overall do not have have access to savings that would cover at least three months’ worth of essential expenditure.  

But again, households who are employed are much more likely to have enough savings than than households who are self-employed.

Looking at the specific ‘save a penny for a rainy day’ barometer, the average score of employees is 64.6 – much higher than 48.1 of the self-employed, the report shows. 

When it comes to pension savings – another pillar of financial resilience – fewer than 40 per cent of working age households are on track for an annual pension income of £26,000, the current average.

And again, some parts of society have significantly lower pensions than others: only 22 per cent of self-employed people have saved enough towards retirement, compared to double that for employees. 

'A world of difference': Baby boomers are much more financially resilient than Generation Z

‘A world of difference’: Baby boomers are much more financially resilient than Generation Z

Even among high income families, a significant number are not putting aside enough for retirement, given their time of life.

Almost half don’t have enough life cover to protect their families, with single-parents the worst hit as only 17 per cent having purchased a life cover. 

‘Our barometer revealed that while our overall resilience increased during the pandemic, there was a world of difference in the experiences of those whose outgoings fell, who were able to save, and those who lost income,’ Coles said.

Those on high incomes had the highest financial resilience score of 69.2, followed by baby boomers at 60.8, while Generation Z along with those on low incomes scored the lowest, both at 47.1. 

There were also stark regional differences, with the South East being most financially resilient region, with a score of 60.8, and the North East the least, with a score of 54.4.

How to become more financially resilient  

The five pillar of financial resilience, according to Hargreaves Lansdown:

1. Control your debt: it is not that debt is inherently a bad thing for consumers. Indeed, there are very sound reasons why households need and do take on debt, for example to finance educational courses or a house purchase. However, ensuring that debt repayments are sustainable is a crucial first step to successful financial management. 

2. Protect your family: once debt is under control, ensuring that there is an adequate safety net to ensure the financial future of dependents in the event of catastrophe should be a priority for households. 

3. Save a penny for a rainy day: having access to a pool of savings that can help to mitigate the consequences of an unexpected shock to income or spending is a prerequisite of sound financial planning. 

4. Plan for later life: age comes to us all and planning for the associated drop in income during retirement is integral to preserve purchasing power during this period. Ensuring adequate pension contributions through working life and more actively managing funds closer to retirement are important in this respect.

5. Invest to make more of your money: finally, once households have accomplished the above, they have the freedom to invest any excess savings into assets that can help to build a better financial future. 

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Households that are panicked about the soaring cost of energy are now facing billing chaos. 

Complaints about energy bill blunders have soared to a record high, with reports rising by 30 per cent.

Money Mail readers say they have been sent inflated demands for thousands of pounds, and had to chase for months to find out what they really owe.

Many of these customers even have a smart meter installed, which is supposed to ensure their bills are accurate.

Monthly bills quadrupled: After having a smart meter installed, former police Peter Howard, 82, (pictured) was told his monthly payments would go from £62 to £285

Monthly bills quadrupled: After having a smart meter installed, former police Peter Howard, 82, (pictured) was told his monthly payments would go from £62 to £285

It comes as wholesale gas price rises drive a cost-of-living crisis, with the average annual domestic fuel bill predicted to hit close to £2,000 this year.

Gillian Cooper, head of energy policy at Citizens Advice, says: ‘There’s clear evidence that billing systems and processes at some suppliers have not been fit for purpose. 

‘Ofgem [the energy regulator] must ensure suppliers are following its rules on providing accurate bills.’

Charged £2,200 instead of £75

Pensioner Carol Leach says she got the fright of her life when British Gas attempted to take more than £2,000 from her account two weeks ago.

Shock £2k demand: Joanna Williams's smart meter failed to record her usage

Shock £2k demand: Joanna Williams’s smart meter failed to record her usage

The 77-year-old former administrator had paid People’s Energy between £70 and £80 a month before the firm collapsed.

She then moved to British Gas, which estimated she would owe £2,195 a month.

When Carol called the supplier to query this, she was reassured it was an error and that her monthly bill would be around £75. 

However, a week later, she was told she would have to pay the original £2,195.

Carol says: ‘I was terrified. This is more than three months’ pension for me.’

British Gas apologises that the initial adviser did not correct the error, and has offered Carol £30 as a goodwill gesture.

Former police officer Peter Howard, 82, was hit with an energy bill for thousands of pounds in December 2020 — and a year on the blunder was still unresolved.

He contested the £2,130 charge from EDF after it arrived and thought it was sorted. In May, he had a smart meter fitted. But a month later, he was told his monthly bills would more than quadruple, from £62 to £285.

In November, a £67 bill arrived, and in December, he received a monthly estimate for £92.

He says: ‘I asked EDF why I was still getting estimated bills when I had a smart meter and was told there were ‘errors’. But everything seems to be an error. This is an appalling way to treat anyone, let alone an elderly couple.’

Peter’s current direct debit is set at £70 a month and EDF has paid him £130 as a goodwill gesture. The firm says: ‘We’re sorry for any inconvenience caused.’

Temperature's rising: Complaints about energy bill blunders have soared to a record high, with reports increasing by 30%

Temperature’s rising: Complaints about energy bill blunders have soared to a record high, with reports increasing by 30%

Soaring number of complaints

The Energy Ombudsman logged a huge 18,944 complaints about power firms between July and September last year. 

This is the highest number of disputes recorded in any three-month period since its records began in 2018.

In total, it received 68,480 complaints about firms last year — 33 per cent more than in 2020.

Bills are the most commonly reported issue, making up more than half of cases in 2021.

One in three billing problems involves disputes about gas and electricity usage.

Complaints website Resolver has also reported a rise in gripes about inaccurate bills.

Martyn James, of Resolver, says: ‘It is about time suppliers sorted out these long-running mistakes and agreed on a simpler system to stop households being regularly overcharged.’ 

An Ofgem spokesman says: ‘We are aware that billing issues can be a cause for complaint. Suppliers must bill their customers accurately. We monitor this and take action where appropriate.’ 

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