The Financial Conduct Authority says one in 10 people have no cash savings at all, and another 21% have less than £1,000 to draw on in an emergency.
The regulator’s research also shows that one in four people in the UK have low financial resilience, meaning that they have missed payments, are struggling to keep up with commitments, or don’t have savings to help them through difficulties.
However, there is also good news. The FCA found when consumers seek support it makes financial pressures more manageable. Of the 1.7m who had used a debt advice or debt management service in the previous 12 months, 61% said their debts were more manageable as a result.
There has also been progress on access to basic banking services such as an increase in consumers who hold current accounts and a reduction in people being denied basic bank accounts. There are also more people banking online or with a mobile app. Some 1.2m adults (2%) were digitally excluded, a dramatic improvement from 6.9m (14%) in 2017.
Even those who are better off could take steps to improve their long-term financial health. 61% of people with more than £10,000 in investible assets held at least three-quarters of these assets in cash, rather than investments. The FCA wants to see more people holding mainstream investments to improve long-term returns.
Looking towards retirement, the FCA’s survey found that one-third (33%) of adults with a defined contribution pension have less than £10,000 saved.
In light of these findings, the regulator is urging consumers to reach out to their lender if they’re struggling with their payments and get help with pensions and investment decisions to improve their long-term financial health.
As part of its new strategy, the FCA is working to improve people’s access to help, guidance and advice so that everyone can access the support they need, at a cost they can afford, to make informed decisions for their financial future.
An FCA spokesperson says: “Our data shows that finances are stretched for many – with some unable to save for a rainy day. And we know that some do not have the confidence to invest. But there are improvements – more people with current accounts and less digital exclusion. Our strategy will build on this to help people better navigate their financial lives.”
The FCA says it’s helping consumers through:
- New rules for a new form of support so that consumers can be guided on how to make the most of their pensions and to invest with greater confidence, without taking costly personalised financial advice.
- Helping consumers to make better-informed investment decisions through its InvestSmart campaign.
- Supporting the government to develop a national plan for financial inclusion.
- Continuing to set high standards across financial services through the implementation of the Consumer Duty.
- Driving better value for money in workplace pension schemes.
- Scrutinising the insurance sector to make sure people get fair value, for instance on pure protection and premium finance.
