2008
(04/04/2008) High earners to take up second jobs and cut pension to cope with financial strain
- 70% of Middle Britain to cut spending
- Millions of households to eat into savings and reduce pension contributions
- AXA launches Financial Task Force to tackle Middle Britain financial crisis
Middle Britain is facing financial turmoil as households with above average incomes struggle to cope with the increasing strain on their finances, according to a new study by AXA1.
While the problems faced by those on lower incomes are perhaps more obvious, there is a real risk that better off households will ignore their own financial problems.
The AXA study found that 72 per cent of households with a total income of £30,000 or higher will be taking steps this year to cut spending and many will be driven to radical measures as middle-class inflation, or those goods and services typically consumed by middle-income families hits 5.7 per cent2.
The AXA figures, taken from a poll of almost 6,000 people, show that some 15 per cent of more affluent households have been forced to get a second job or to send a non-working member of the household out to work. And around one in five high earners will either stop saving or reduce pension contributions as concerns over the credit crunch hit home in the real economy3. The most common reason for failing to save for retirement was lack of money left over at the end of the month (30 per cent) whilst 15 per cent blamed it on the burden of house prices and the same amount cited that paying debts will be the main obstacle.
AXA says such decisions highlight the extent of the difficulties facing families with higher than average incomes. The findings come as the group launches the AXA Financial Task Force, which will bring together some of the UK's leading economists, psychologists, industry experts and public policy influencers to uncover the financial problems facing Middle Britain and what steps can be taken to solve them.
Over the next 12 months the AXA Financial Task Force will define the specific financial issues facing these families and propose ways to overcome the financial apathy that is rife within this group of people.
AXA spokesperson, Steve Folkard said: "It's no wonder that households with above-average incomes are struggling to cope. A typical family in Middle Britain may have a higher than average income but millions are weighed down by high lifestyle costs and face tough choices as the strain on their finances takes its toll.
"One of the biggest issues however is that many seemingly well off households lack the motivation to tackle their problems. We've had it easy for so long and been happily spending without thinking of the consequences that now people aren't sure what to do. The aim of the AXA Financial Task Force is to investigate the economic issues facing Middle Britain and to propose recommendations for overcoming the psychological barriers to changing behaviour."
"If we don't tackle this issue this group are in for a wake-up call in retirement. A significant proportion of people who enjoy high incomes may now well find that things are a lot tougher later in life. Planning for the financial future and particularly retirement is more than simply deciding what you want to do. It is also about making sure you will have enough money to accomplish these goals - unless this group takes action now they might find it will struggle to maintain its lifestyle once it's too late."
And AXA's research shows how the difficult economic conditions will affect households earning over £30k a year both financially and socially. Around eight per cent of these are considering not renewing protection insurance to cut costs, meaning as many as 1.1 million households could go without life insurance or critical illness cover this year.
The AXA figures also showed that 44 per cent said they will be eating out less to cut costs, while around one in five said they would socialise less with friends (21 per cent).
This latest initiative reinforces AXA's position as a long-standing player in the financial education debate. It follows the recent successes of AXA's other initiatives, AXA Avenue and My Budget Day (see notes to Editor).
- Ends -
Notes to editors
- All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 5,962 adults, of which 36% are households with a total income of £30,000 or more. Fieldwork was undertaken between 20th and 25th March 2008. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+). "Middle Britain" statistics have been cross checked against gross household income of £30,000 or more.
Figures grossed up by Citigate Dewe Rogerson using GB adult population figure of 46,300,400 (Office of National Statistics) - Capital Economics, 26th February 2008
- 17% to reduce savings and 2% to reduce pension contributions
AXA work on financial education
AXA has been at the forefront of financial education for over three years. It is committed to exploring what the financial problems of the nation really are, and how we might best motivate individuals to solve them.
- AXA Avenue
AXA’s year long financial social experiment ran from October 2005 to October 2006 using 20 households in Brighton. Half of the households were given access to independent financial advice while the other half were left to their own devices.
The findings revealed that the ten households that received financial advice were collectively £50,000 better off at the end of the experiment, with massive savings increases and encouraging levels of debt reduction. And the participants were able to make these savings by spending just one hour a month on their finances. In contrast, the households left to their own devices actually got collectively poorer. They frittered away a quarter of their savings and the group saw a three per cent reduction in their net wealth.
- My Budget Day
The AXA My Budget Day campaign was designed to encourage and motivate all individuals to spend an hour a month on financial planning, regardless of their financial circumstances. AXA worked with the CBI, Unite and other business leaders to encourage UK plc to give all employees an hour off work to spend on their finances. It is estimated that around 250,000 employees took part in My Budget Day on 21st November 2007. The website, www.axa.co.uk/mybudgetday, provides all the tools and information to help individuals to kick-start the financial planning habit. - Decision Technology research
AXA recently published the results of a financial research programme undertaken by Decision Technology, the experimental psychology specialists at the University of Warwick and University College London. The research explored how the financial community can best motivate individuals to convert their good intentions into action when it comes to addressing their personal finances.
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About AXA
AXA is a world leader in financial protection and wealth management, with major operations in Western Europe, North America and the Asia/Pacific area. AXA services 50 million customers throughout the world (individuals and businesses). In total, the AXA Group has approximately 110,000 employees and distributors worldwide, working in around 50 countries. AXA UK, a wholly owned subsidiary, operates in the UK and Ireland, and occupies leading positions in its main markets: life & pensions, health insurance and general insurance. AXA UK has been actively involved in the thinking around financial capability and generic financial advice, in particular through the AXA Avenue study which identified the positive impact on consumers of receiving financial advice.