Austerity reaches the affluent, finds AXA’s Big Money Index

14 September 2012

Posted in Financial results

by Jennifer Chilcott (see media contact)

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AXA’s first bi-annual Big Money Index of 2012 finds that austerity is now firmly gripping more affluent consumers as a third of higher earners switched to cheaper supermarkets and dipped into savings to make ends meet. It also showed that almost one in seven Brits across all groups cannot see a time when their income will cover their outgoings, rising to one in five among the most ‘stretched’ consumers.

The unrelenting financial gloom has seen consumers remain pessimistic about their situation in the six months to June 2012. As households' real spending power fell in the first three months of the year* (by 0.6 points), so too did their confidence in the future. In fact, there was a significant five-point drop from Q1 to Q2 to just 16 per cent agreeing that their financial situation will improve in the long term, reaching a nadir among the older sections at just three per cent of Under-funded Seniors. Contrasting glimmers of hope emerged among the more optimistic groups at 29 per cent of Young Professionals and 24 per cent of Nest Builders.

The widespread pessimism saw spending cut remarkably across the board, with 28 per cent of consumers cutting back on food spending and almost one in four also forced to spend less on gas, oil and electricity. But most striking in this report was the evidence that even the wealthier groups continued switching to cheaper supermarkets for their basic food shopping (32 per cent of Exclusive Lifestyle and 25 per cent of Successful Security) and dipping into savings to make ends meet (31 per cent of Exclusive Lifestyles admitted to this). The report also uncovered a surprising admission from one in 10 (13 per cent) Exclusive Lifestyles that they are not opening bills until the final demand arrives.

Life's necessities: a credit card

Fourteen per cent agreed that in Q2 they 'simply could not survive without a large overdraft facility or credit card', rising to 19 per cent among The Stretched. One in five consumers (20 per cent) also stopped putting money into savings (a three-point rise since December 2011), and was again higher among The Stretched at 27 per cent.

The relentless squeeze on household finances was seemingly too much to face for some: six per cent of Under-funded Seniors did not know how much debt they have on cards and loans (not including the mortgage), while 15 per cent of Young Professionals and more than one in 10 of The Stretched (11 per cent) - actively avoided opening bank statements.

Call for better financial education

It was felt there was a clear need for consumers to take more financial responsibility - and that the Government should play a prominent role in equipping them. Four in ten (38 per cent) believe that financial education should be part of the national curriculum, while 44 per cent (a four-point rise) strongly agree that the Government should play a much stronger role in educating young people that material possessions should be earned.

Headshot of Cheryl Toner, Marketing Director at AXA UK

A pattern of relentless economising has set in since our Big Money Index surveys began in early 2011, and it's showing no signs of easing. It's alarming to see that even those deemed ‘untouchable’, the more comfortable sectors, are now feeling the pinch. Severe cutbacks are evident almost regardless of affluence levels. However, it is encouraging to note that the younger population feels quietly confident, and that there is growing sentiment that better financial education and more personal responsibility is needed to take control of financial concerns.

Cheryl Toner, Marketing Director at AXA UK

Views on the NHS and its future

Consumers seemed to view private healthcare as the solution to the NHS funding issue: more than four in ten (41 per cent) agreed that those who can afford private treatment should do so to free up NHS resources. Similarly, six in ten (63 per cent) believed that those who pay for private healthcare cover are taking the burden off the state, a view rising among the wealthier parts of the population (64 per cent of the Successful Security group and 77 per cent of Exclusive Wealth).

More than half (57 per cent) also agreed that more treatments will have to be privately funded in the future - indeed 62 per cent expect more people will need to use private medical insurance in the next five years.

* Office for National Statistics