Consumers “robbing Peter to pay Paul” and tightening belts as financial gloom deepens, reports AXA Big Money Index

The third “Big Money Index” from AXA reports another shift towards a more pessimistic financial outlook as the year-end approaches. It reveals a deepening gloom among the population as it re-tightens its belt, particularly among those nearing or in retirement. It also uncovers the worrying fact that almost one in four are resorting to using their savings as consumers face a more restrictive lifestyle, with many robbing Peter to pay Paul to maintain their lifestyles.

24 November 2011

Posted in Financial results

by Jennifer Chilcott (see media contact)

Download the AXA Big Money Index Report Q3 2011

As the general economic decline attracts ever more discouraging headlines, consumers have reacted in Q3 by becoming increasingly cautious and pessimistic. As almost half of UK consumers (48 per cent) agreed the Euro's days are numbered as a currency, the report finds that financial optimism in the UK is still low, with just 16 per cent feeling positive about the next three months.


Such is the sense of gloom that one in 10 agreed they could not see a time when their earnings will cover their outgoings (15 per cent among the Stretched, the Nest Builders and the Under-funded Seniors), and eight per cent have actively avoided opening their bank statements or checking their balance online.

For those nearing or in retirement, financial optimism is at its lowest levels since March 2010, dropping among Prosperous Later Years and remaining near rock bottom for Under-funded Seniors. Indeed, just two per cent of the latter group said they felt their financial situation had improved in the last three months.

The result of this has been a general reigning in of spending and saving, with 18 per cent stopping putting money into savings. Almost one in four (38 per cent) say they are going out less and spending less on clothes, family and friends, while there was a three-percentage point rise in buying own value brands.

Borrowing persists

Although there was on average little change in borrowing on credit cards or loans, Q3 saw a notable shift towards more people trying to pay off their debts, with a clear increase in clearing credit cards and loans among The Stretched. However, despite clearing more off their credit cards and loans, borrowing on overdraft was high at 19 per cent - with this group effectively robbing Peter to pay Paul…

Planning for the future has also had to take a back seat, with 35 per cent admitting that trying to satisfy immediate financial needs means that they were currently not saving anything at all for retirement.

Caution creeps back

A sign that consumers were feeling financial pressure was the return to becoming more risk-averse. Perhaps reflecting the fear of economic uncertainty, ownership of most types of financial products rose in Q3 as consumers sought to protect themselves from potential financial disaster.

Investments were also on the rise, although there was confusion about where best to invest or save money, with 44 per cent admitting they were unsure where to 'get a decent return' - up from 36 per cent in Q2. This perhaps explains the rise in those considering investing in property from 31 to 36 per cent in property investments as consumers sought to invest in something more tangible.

This sense of confusion has led to a rise in consumers likely to turn to independent financial advisers i the coming months, rather than relying on family and friends: 24 per cent now say they would be happy to pay for financial advice (just as with a solicitor, accountant or estate agent) compared to the last wave of research. However, just four per cent have used the Government's Money Advice Service.

Nick Turner, AXA UK's director of customer partnerships, said: "The events of the last few months in the global economy have clearly had an impact on consumer confidence. People are once again battening down the hatches and making cutbacks in response to the seemingly unrelenting negative impact on their finances."

Government intervention called for

These headlines also see consumers expressing clear expectations in the role of the Government in changing the way people, particularly the young, view money.

It is perhaps not surprising to see that 76 per cent agree the Government should play a much stronger role in educating young people that material possessions need to be earned. This may reflect popular opinion arising from the Summer riots.

Meanwhile, more than seven in 10 (71 per cent) of consumers believe the Government should do more to encourage a savings culture, while over two-thirds of UK consumers (69 per cent) agreed that higher university tuition fees (that have to be paid for by larger student loans) are contributing to a culture of accepting debt as 'the norm' in the UK.