The Financial Conduct Authority (FCA) found that one in four of us are struggling to keep up with commitments or don’t have savings to help with difficulties.
One in 10 people have no cash savings at all, and another fifth have less than £1,000 tucked away for emergencies.
However, there was also good news from the FCA’s survey on the financial health of the nation, with an increase in people holding current accounts and only 2% unable to bank online, compared with 14% eight years ago.
The cost of low resilience
Financial experts said those with low resilience were “walking a financial tightrope”.
Rachael Griffin, tax and financial planning expert at wealth manager Quilter, said the FCA report “rightly highlights that people with low savings are more likely to be overwhelmed by their commitments, with financial fragility widespread.”
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“With rent, childcare and food costs still elevated, the capacity to save is being squeezed from all sides,” she added.
The study also showed that the British public is vulnerable to financial fraud, with one in seven (14%) adults having experienced a financial scam or fraud in the past year.
Griffin said this is also a resilience issue.
“Falling victim to fraud can have lasting consequences, particularly for those already struggling with low savings or debt. The FCA’s data shows that younger adults and vulnerable financial individuals are often disproportionately affected, while scammers are becoming increasingly sophisticated,” she added.
Uncertainty in retirement
The study also revealed that many of us are facing an uncertain retirement thanks to a lack of pension savings.
One fifth of those who have not yet retired have no private pension, with two-fifths currently not contributing to one.
A third of those with defined contribution pension (those based on their contributions, not their salaries) have less than £10,000 saved for retirement.
Dan Coatsworth, finance expert at DIY investment and savings platform AJ Bell, said this meant many would be “too reliant on the state pension to pay the bills and support their lifestyle once entering retirement”.
“The full state pension currently adds up to £11,973 a year, and while that should help keep a roof over your head, it doesn’t leave much left over for any of life’s luxuries.
“A lot of people use a combination of the state pension, workplace pensions and personal pensions to fund their retirement, together with cash savings and ISA investments. Unfortunately, not everyone is in a position to draw from a range of accounts. Some might only have a tiny nest egg by the time they retire,” he said.
More using credit
The study also showed that more of us are using credit, perhaps due to the rising cost of living.
The use of high-cost credit surged from 2.8 million to three-and-a-half million adults, which is 6.4% of the population. The use of buy now, pay later (BNPL) has jumped too, with 40% of lone parents using it and over a third of women aged between 25 and 34.
The median amount owed in unsecured debt is £2,500 excluding student debt.
“With household finances squeezed by the lingering cost-of-living crisis and elevated mortgage rates, more people are turning to credit cards and short-term borrowing to make ends meet.
“A growing number are falling back on products that offer convenience but little protection. This underlines why proactive financial education and accessible support is urgently needed before people find themselves trapped in cycles of borrowing,” said Coatsworth.
Savings in all the wrong places
The FCA also found that 40% of adults are holding their savings in a current account instead of putting it into a higher-paying savings account.
Derek Sprawling, managing director of Spring Savings, said these people are allowing the value of their money to be eroded by inflation.
“I urge people to take their savings seriously and find a provider that offers a good rate and ease of access for those who want to be able to withdraw their money should they need it,” he said.
Others pointed to the fact that adults with over £10,000 of assets that could be invested were still holding three-quarters of savings in cash as evidence that money is not working as hard as it should.
Chris Cummings, CEO of the Investment Association, which represents investment firms, said: “We must create a culture of inclusive investment that educates and encourages people across the country to make financial decisions that benefit them, both now and for the long term.”
