Income Protection  

Lack of income protection putting Middle Britain at risk

Lack of income protection putting Middle Britain at risk

Mounting debt and an inability to save are putting families in ‘Middle Britain’ at risk should they experience a financial shock, according to a report by LV.

The insurance provider’s latest Income Roulette report reveals three quarters of ‘Middle Britain’ - people who are married or in civil partnerships, have one or two children and an average gross household income of £35,000 – struggle to save because of outgoing bills.

The figure for this group – often referred to as the ‘squeezed middle’ - is much higher than the national average of 56 per cent.

Article continues after advert

Some 32 per cent of these people said they were not confident they could handle a financial crisis and 44 per cent were worried they would never be able to save for a rainy day.

People in this group were found to be significantly more likely than the national average to have mortgage commitments (63 per cent vs 27 per cent), credit card debt (41 per cent vs 26 per cent) and unsecured personal loans (20 per cent vs 9 per cent).

They were also much more likely to say that unexpected monthly costs, such as their children, prevented them from saving (54 per cent vs 19 per cent).

As a result, around three in five (59 per cent) people in this squeezed middle group fell short of the Money Advice Service’s recommendation to have three months’ worth of outgoings in the bank in order to cope with a financial shock, compared to the national average of 37 per cent.

Yet despite these findings, just 5 per cent said they had an income protection policy, meaning they could be at risk if they were unable to work due to accident, sickness or disability.

The data in the report is based on online interviews with 9,495 UK adults between 5 and 10 July 2017 by YouGov.

Justin Harper, head of protection policy at LV, said: “In theory, you’d assume families on average earnings or above would feel relatively financially secure, but our research reveals this is far from the truth. 

“At a time when wage increases are failing to keep up with price increases, household incomes are stretched more than ever before, and families – with responsibilities like mortgage payments and dependants – are struggling as much as ever to make ends meet.”

Daren O’Brien, director at London-based Aurora Financial Solutions, said a lot of smaller firms were putting income replacement schemes in place for employees – but pointed out this would not help workers in the growing ‘gig economy’.

He said: “For individuals, [income protection] is an additional cost if they are struggling as it is, and in an environment where people are going into the gig economy they can’t get cover because they can’t guarantee or prove their income.”

Mr O’Brien added that 50 per cent of firms moving to auto-enrolment or auto-enrolment renewal had been putting income replacement schemes in place.

“The income replacement products do seem to be some of the more relevant ones we are putting in place for employers at the moment,” he said.