Over half (59%) of middle income households would be unable to provide for themselves and their families for longer than six months if they lost their main source of income, according to a report being published today by Friends Life.
Fuelled by the fear that over half of people unemployed in the UK have been so for over six months (52%), this group – termed the ‘Coping Classes’ – is now focused on reducing debt to stave off the threat of a potential financial survival gap.
According to the report, entitled ‘The Coping Classes’ and part of Friends Life’s Vision of Britain 2020 series, the recent recession has radically altered attitudes towards debt for a generation. The group, who make up one in five working age adults in the UK, are committed to shopping around and reducing their borrowings as part of a series of coping mechanisms to help them survive the ongoing effect of the downturn.
The Coping Classes are middle income earners (£25-50k) who have been impacted by the recession and feel disproportionately affected by public sector spending cuts, as part of the government’s deficit reduction plans.
With their finances under attack from rising inflation, an expected hike in interest rates and a fragile housing market, the Coping Classes are embracing a new set of behaviours to halt further erosion of their income, including a radical change in attitude towards debt. 84% of them say they are committed to avoiding taking on any more debt in the next six months and nearly three-quarters say they are putting plans in place to pay off most of their debt within ten years.
Commenting on the findings, David Hynam, Executive Director, Operations at Friends Life, said:
“Five years ago the Coping Classes were comfortably off, but the recession and the effects of public spending cuts seemingly tilted against them has changed their status. We’re now seeing them take clear, decisive and urgent steps to address this, in the knowledge that state support and assistance in many areas is unlikely to return.
“Most striking is the new attitude towards debt. We’re witnessing a slow march down the debt mountain, which will have huge implications for financial planning and for the financial services industry.”
Other coping mechanisms being employed to survive the downturn identified in the report, include:
– A renewed commitment to retirement funding: Almost half of the Coping Class identify saving for retirement or for a rainy day as the main reason for saving compared to the rest of the adult population who put saving for a holiday or travel top of the list. Nearly 60% of the Coping Classes believe it is more important than ever before to invest in a pension.
– The Alexander Effect: the Coping Classes lead the way in shopping around for the best deal. Encouraged by the nation’s favourite meerkat, 70% of them use price comparison websites (compared to just 61% of other adults). According to the report, this has created an emerging social kudos attached to getting the best deal, with more than one in four of the Coping Classes claiming people go to them for financial advice as a result of their savvy approach.
– Looking after the pennies: overall there has been a 20% increase over the last two years in the number of households who say they are ‘carefully budgeting’ their household spending, with 95% of those that do budget maintaining that they adhere strictly to their budget plan.
The Coping Classes emerge in the report as a savvy group who are already responding to government spending cuts by assuming more responsibility for their futures. Fifty percent of them agree that it is the individual’s responsibility to make provision for their own retirement, rather than rely on the state.
Yet they are also calling on the government and financial institutions to help ease their way. When asked which of a raft of measures would benefit them most financially – including help with care for elderly relatives and access to affordable childcare – the most highly-rated answer was less complexity in the tax and benefits system, followed by financial products tailored to needs.
“We’re seeing a new kind of financial activism at play amongst the Coping Classes. They’re introducing their own personal programme of spending cuts but they want the government and industry to meet them half way”, said David Hynam.
Source : Friends Life Press Release
