Back in February, the Financial Conduct Authority (FCA) released its latest Financial Lives Survey. Firstly, and unsurprisingly, it revealed the severe strain the COVID-19 pandemic had put on the nation’s finances. Secondly, around a quarter of UK adults were showing signs of poor financial resilience, including over-indebtedness, low savings and low or irregular earnings.
The survey was carried out in two stages, with the first analysing the period between August 2019 and February 2020, and the second examining the financial impact of COVID-19 between March and October 2020. Even before the pandemic struck, there were points of concern among some of the more positive findings, including a general lack of protection insurance cover.
The protection gap
Positively, the number of people holding an insurance product of any kind increased to 88% in 2020, from 81% in 2017. However, with 53% of respondents holding no protection products at all (albeit less than the 57% that said the same in 2017), the FCA highlighted what it called ‘a significant protection gap’.
The gap was particularly pronounced among young adults aged between 18- 24, as well as vulnerable consumers and those who lack confidence in managing their finances. Concerningly, many people who fit these criteria have families who, were they to die or become too ill to work, would suffer significant financial hardship. Younger generations and those in vulnerable groups may have many pressures on their finances, but it is important to take out adequate protection cover if possible – perhaps with familial help and encouragement, depending on the circumstances.