Financial Lives 2022 survey: insights on vulnerability and financial resilience relevant to the rising cost of living

• In May 2022, 12.9 million UK adults had low financial resilience – 1 in 4 (24%) of all UK adults. These are people who are in financial difficulty, or who could quickly find themselves in difficulty if they suffer a financial shock, because, for example, they have little to no savings or are heavily burdened by their domestic bills or credit commitments.
   
• This result is worse than we recorded in our February 2020 Financial Lives survey. At that time, 11.9 million adults had low financial resilience, 1.0 million fewer than in May of this year.
   
• The main reason for this increase is an increase in the proportion of adults who say they are heavily burdened by their domestic bills and credit commitments: 7.8 million adults (15% of all adults) felt this way in May this year, compared with 5.8 million adults (11%) in February 2020. This is not surprising, as there has been a significant increase in the cost of living in the latter half of 2021 and in 2022.
   
• We did not see an increase in the number of UK adults in financial difficulty – those missing domestic bills and credit commitments in 3 or more of the last 6 months: 4.2 million in May 2022, compared with 4.4 million in February 2020. As many adults are already heavily burdened by their debts, we expect this number to increase.
   
• Part of the reason why many more people are not already in financial difficulty, despite the increased burden they face keeping up with domestic bills and credit commitments, may be due to savings accumulated during the pandemic. Financial Lives data on investible assets and debt levels shows that many adults – particularly those in higher income brackets – managed to increase their savings over the 2 years to May 2022.
   
• There are stark differences in our results across different demographic groups. Consumers who were female, younger, unemployed, working in the gig economy, renters, or in an ethnic minority group, were more likely in May 2022 to have low financial resilience or be in financial difficulty.
   
• We also see geographical differences. For example, people in the North East and North West are much worse off in May 2022 than those in the South East and South West. Adults living in the most deprived areas of the UK are nearly 7 times more likely to be in financial difficulty than those living in the least deprived areas.
   
• There are some signs too in our May 2022 data that many more people than those we describe as having low financial resilience are not well prepared for considerable increases in the cost of living. For example, 24.0 million UK adults (45%) were already finding it somewhat of a burden to keep up with their domestic bills and credit commitments. And half of this group didn’t have savings to cover 3 months of expenses, which many experts recommend as a buffer. 
   
• Low financial resilience is 1 of our 4 drivers of vulnerability, along with poor health, recent negative life events and low capability. Between February 2020 and May 2022, the number of consumers with characteristics of vulnerability fell slightly (from 25.1m to 24.9m), although this change is not statistically significant. The increase in those with low financial resilience was offset by a reduction in those with low capability.

All consumers are at risk of harm. This risk is increased if they are in vulnerable circumstances, eg if they display one or more characteristics of vulnerability related to the four key drivers set out in our Vulnerability Guidance[1] – health, life events, resilience and capability. In May 2022, 47% (or 24.9m) of UK adults showed 1 or more characteristics of vulnerability, unchanged from 48% (or 25.1m) in February 2020.

The results in Figure 1 use the same definitions of vulnerability, as described in Appendix B of our last report[2].

When we look at the 4 drivers of vulnerability, in Figure 2, we see that the greatest change between February 2020 and May 2022 is in resilience, which increased by almost 2 percentage points, and in low capability, which decreased by a similar amount.

The May 2022 results are an improvement on the levels seen during the pandemic. For example, 53% of all UK adults showed 1 or more characteristic of vulnerability in October 2020 – this result is from a separate panel survey of 22,267 consumers we conducted in that month and reported on in our last report[3]. This spike was caused by an increase in redundancy, by reduced working hours, and by a worsening financial situation for younger working age adults and the self-employed. In contrast, the retired population and those with higher household incomes were better insulated from the financial impacts of Covid-19.

Figure 3 shows that there was a significant increase in the proportion of UK adults with low financial resilience between February 2020 and May 2022 – from 23% of all UK adults (or 11.9 million) in February 2020 to 24% (or 12.9 million) in May 2022.

Adults are described as having low financial resilience if they have little capacity to withstand financial shocks, because, for example, they do not think they would be able to withstand losing their main source of household income for even a week or are finding it to be a heavy burden keeping up with their domestic bills or credit commitments, or because they have already missed paying these bills in 3 or more of the last 6 months. So, our definition includes both those adults who are already in financial difficulty (because they are missing bills – so this is an objective measure) and those who could quickly find themselves in difficulty if they suffer a financial shock (by more subjective measures).

Figure 3 also shows that there was no increase in the proportion of UK adults in financial difficulty – those missing domestic bills and credit commitments in 3 or more of the last 6 months: 8% (or 4.2 million) in May 2022, compared with 8% (or 4.4 million) in February 2020.

Figure 4 shows a large increase over February 2020 to May 2022 in the proportion of adults who feel that keeping up with their domestic bills and credit commitments is a heavy burden: from 11% (or 5.8 million) to 15% (or 7.8 million). It is this increase which largely accounts for the significant increase we have seen over this same period in adults with low financial resilience. This is of concern in the context of rising energy, food and other household bills.

Post pandemic we see average increases in savings and investments, yet more people have low financial resilience. This disparity highlights the fact that some groups of consumers are worse off than others.

Figures 5 and 6 show the results for unsecured debt and investible assets – the amount consumers have in cash savings and investments combined. Looking at the ‘All UK adults’ results, we see that the finances of the ‘average UK consumer’ improved between February 2020 and May 2022, due in the main to savings accumulated during the pandemic. In May 2022 fewer UK adults held unsecured debts, fewer had no savings or investments, and more had at least £10,000 in investible assets. For many adults, therefore, these savings may provide some opportunity to offset against the rising cost of living. This is particularly the case for adults in households with an income of £100,000 or more. 

It is important to identify those UK adults likely to be most affected by further increases in energy and other costs this year and next, because their financial resilience is already low.  

Table 1 shows selected statistics for socio-demographic groups more likely to have low financial resilience or to be in financial difficulty, in May 2022. Consumers more likely to fall into these groups, compared with their opposites, are female; younger; unemployed, working in the gig economy, or on a very low household income; renters; in an ethnic minority group; or living in a more deprived area. 

Table 1: Socio-demographic groups of consumers more likely to have low financial resilience or be in financial difficulty

Source: Financial Lives 2022 survey

Some quite stark comparisons in our results include:

• Being almost 3 times more likely to have low financial resilience, if you are renting (47%) than if you own your home with a mortgage (17%).
• Being nearly twice as likely as the UK average (24%) to have low financial resilience, if you are Black (44%). Black adults were also almost twice as likely to have said that they find keeping up with their domestic bills and credit commitments to be a heavy burden (27%, compared with 15% of all UK adults).
• Being nearly 7 times more likely to be in financial difficulty, if you live in the most deprived areas of the UK (20%) than in the least deprived (3%).

Figure 7 shows low financial resilience and being in financial difficulty for adults by nation and English region. Among the 4 nations of the UK, results differ little, and the differences are not statistically significant. Compared with the UK averages for low financial resilience and for being in difficulty (24% and 8% of UK adults, respectively), the North East (31%; 12%) and North West (28%; 10%) stand out as having worse results. In the South East (19%; 6%) and the South West (21%, 6%) the results are noticeably better.

Our survey highlights a material increase in the proportion of UK adults who find keeping up with domestic bills and credit commitments a burden. In May 2022, 60% of all UK adults (or 31.9 million) were finding it a heavy burden or somewhat of a burden to keep up with their bills, up from 52% (or 27.1 million) in 2020 – as shown in Figure 8.

45% of UK adults, or 24.0 million people, felt keeping up with these payments was somewhat of a burden, up from 41% in February 2020 and 38% in 2017 – these are adults whom we do not describe as having low financial resilience.

Many in this group of adults in May 2022 finding it somewhat of a burden to pay their bills were also borrowing using high-cost credit or had persistent credit card debt, for example – as Figure 9 shows.

Half (50%) of those finding it somewhat of a burden to pay their bills told us they would be unable to cover living expenses for 3 months or more if they lost their main source of household income, compared with 41% of all UK adults and 78% of those with low financial resilience. This means they do not have savings to cover 3 months of expenses, which experts generally recommend[4] as a buffer.

Figure 10 shows that many people do not have savings that could be used to offset predicted rises in costs. 3 in 10 (30%) UK adults have no investible assets or less than £1,000. Another 18% have less than £5,000.

In summer 2023 we will be publishing full results from the Financial Lives 2022 survey, including a report, data tables and raw data. 

In our report we will explore vulnerability and financial resilience in more detail. This will include looking at what lies behind some of the results. It will also include reporting for some other characteristics of vulnerability such as financial abuse, erratic incomes, and low emotional resilience – for which questions have been added to the survey for the first time in 2022.

Download an early slim volume of data tables[5], so you can further explore the profiles of consumers with characteristics of vulnerability, or who have low financial resilience, or are in financial difficulty. The structure of the data tables is that each figure in this report has its own tab in the data tables.

The question information provided under each chart on this webpage will make it easier to find fuller results in the material we publish next year.