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The latest Disposable Income Index (DII) published today by savings and ISA provider Scottish Friendly has revealed that nearly half (45.2%) of UK households are worried about the impact of the EU Referendum on the pound in their pockets. Despite a nearly 10% increase in disposable income compared to last quarter, Brits are still concerned about the impact of unexpected bills and external economic shocks.
The quarterly report, which has been compiled in conjunction with leading think-tank the Social Market Foundation, reveals a small improvement overall (from £905 to £1000) in disposable income over the last quarter, bolstered by continued low rates of inflation, the introduction of the National Living Wage and moderate pay growth across the private sector. Those in part-time work seem to have benefited from the introduction of the National Living Wage in particular.
However, some groups find themselves more squeezed than others. Those aged 35-44 years have just £825 left each month after buying daily necessities, just less than the £831 available to 25-34 year olds and below the national median of £1,000. Those in work continue to find themselves with less disposable income than those in retirement, with the average retiree having a higher monthly disposable income of £1,584.67.
This disparity in favour of the older generation is primarily attributable to them being less encumbered by the burden of housing costs. The median 25-34 year old spends £835.50 on housing costs each month with £625.50 going on rent or mortgage payments alone. By contrast the average over 55 year old pays just £301.33 on housing costs with a median spend on rent or mortgage costs of zero. This combined with the trend for older people to work longer, relatively generous private pension provisions and the fact that younger generations have seen slower pay growth compared to previous generations means that older households are, on average, significantly better off.
Despite improvements in the headline figures of disposable income many households remain pessimistic about their financial prospects and are worried about unexpected financial or economic shocks. Only a third of households (34%) believe they will be better off financially in 12 months’ time. Meanwhile, nearly a quarter (24.4%) believe that things will get worse for them financially and nearly half (47.7%) are worried about how they would cope with a big, unexpected bill like a broken down car or washing machine. Such pessimism is unsurprising with more than a third of households (36.5%) reporting they are worried about their debts and over half (50.9%) stating they are not in a position to regularly save or invest.
The looming EU Referendum also appears to be a worry. Half of households (51.6%) are concerned about the outcome of the vote and a further 45.2% are anxious about how leaving the EU would affect their family financially. The main reason cited is the possibility that a Brexit may cause prices to rise (40.3%), lead to job losses (28.6%) or to changes in labour market protections like paid holiday or maternity leave (19.1%).
Calum Bennie, savings expert at Scottish Friendly, said:
“It’s encouraging to see the median level of disposable income increase this quarter. The introduction of the National Living Wage is clearly a positive step and that, combined with low inflation and moderate private sector wage growth has helped certain sections of society to have more money in their pockets at the end of the month. However, our study continues to suggest that people are feeling financially fragile. Worries persist about preparedness for unexpected bills and debt. Not enough households are in a position to save at the end of the month and that is a concern. With financial security still seemingly very out of reach for many households, policy makers and businesses alike should take heed of the persistent insecure sentiment in the UK.”
“Uncertainty caused by the forthcoming EU referendum is also leaving many UK families feeling concerned. The possibility that prices may rise that jobs could be lost or that rules around maternity leave or paid holiday may change are clearly important points affecting many people considering the impact of the EU referendum on the pound in their pocket.”
Income after housing costs
Income after essentials
Proportion spending more than income on housing costs
Proportion spending more than income on essential costs
|Employed full time||£1,392.83||£999.83||5.8%||12.3%|
|Employed part time||£1,244.50||£800.75||6.2%||13.6%|
Scottish Friendly is not responsible for the accuracy of the information displayed on externally linked third party websites. The Scottish Friendly Group of Companies consists of the following companies: Scottish Friendly Assurance Society Limited – Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Member of AFM, Member of ABI: Life, Savings and Investments. Scottish Friendly Asset Managers Limited – Authorised and regulated by the Financial Conduct Authority. Member of The Investment Association. Registered in Scotland No 187215: OEIC Managers, ISA Managers. Scottish Friendly Insurance Services Limited – Authorised and regulated by the Financial Conduct Authority. Registered in Scotland No 113007. SFIS (Nominees) Limited - Registered in Scotland No 397351. Head office: Scottish Friendly House, 16 Blythswood Square, Glasgow G2 4HJ.