Aviva’s Protecting Our Families report shows that many families have little or no margin to cope with unforeseen events such as ill health, with the average family having just £2,004 in savings and non-pension investments to keep them afloat compared to £2,606 in monthly outgoings on essentials such as groceries, bills and their mortgage or rent.
- 45% of parents with dependent children could not support their lifestyle for a month if the main breadwinner was unable to work
- Parents significantly underestimate the financial impact of a health crisis on their family
- Nearly one in four families (24%) have no savings to fall back on whatsoever
- Nearly one in five (18%) families could not reduce their monthly spending at all
- Parents are more likely to insure their pet (24%) than have either private health/dental (22%) or critical illness (18%) cover for them or their partner
- One in five (20%) parents who have experienced a financial loss due to a health crisis don’t think they will ever recover financially or have no idea how long it will take
Nearly half (45%) of UK families with dependent children1 could only survive financially for less than a month before their savings ran out2 if the main breadwinner was unable to work due to serious illness or death, Aviva’s Protecting Our Families report shows.
However, parents with dependent children estimate they could sustain their current lifestyle using their savings and investments for five months, massively underestimating the financial impact of a health crisis. Aviva’s research paints a very different picture, where nearly half would be running out of funds within the month. The reality of those who have experienced ill health in their family also demonstrates the risks parents are taking by not having plans in place, with one in five parents affected questioning whether they will ever financially recover.
On average, 1.8 million employees have a long-term sickness absence of four weeks or more in a year3. Some serious conditions such as cancer are becoming more prevalent, with one in two people expected to develop cancer at some point of their lives4. It is estimated that by 2030, 40% of the working age population will have a long term health condition5.
Table: The typical finances for a family with dependent children in pounds and pence
| Household finances | |
| Average monthly net income | £2,709 |
| Average monthly outgoings | £2,606 |
| Typical savings and investments, excluding pension | £2,004 |
| Typical amount held in pension savings | £36,364 |
| Typical house value | £199,457 |
| Typical mortgage | £77,122 |
| Typical housing equity | £122,335 |
| Monthly spending patterns | |
| Average monthly spend on the following: | |
| Housing (mortgage or rent) | £402 |
| Food shop – food, drink and basic household goods | £815 |
| Utilities bills and council tax | £195 |
| Anticipated amount they could reduce their monthly spending to | £2,451 (a reduction of £154 reduction) |
| Absolute minimum amount they could get by on each month when asked to reassess every element of their finances | £1,904 (a reduction of £701) |
| Percentage who say they could not reduce their spending at all for a period of at least six months | 18% |
| Percentage who say they could not reduce key items of expenditure for a period of at least six months | Utility bills and council tax – 48% Housing (rent or mortgage payments) – 47% Debt repayment – 20% |
Nearly one in five families couldn’t reduce their spending at all
Even if they immediately reduced their spending to the absolute minimum, more than one in three (36%) families would not last for a month on their savings and investments alone if the main breadwinner lost their income due to ill health.
However, many parents said they would struggle to cut back on their lifestyle to save money. Nearly one in five (18%) could not reduce their monthly spending at all, suggesting that many are already getting by from day to day on the minimum amount possible. Almost half (48%) feel they have no room to reduce their spending on utility bills and council tax, while 47% say the same about their housing costs or mortgage repayments.
Meanwhile, nearly one in four families (24%) have no savings to fall back on whatsoever.
Table 1: How long can families survive by relying on savings and investments to replace lost income?
| Based on families’ normal monthly spending | Based on families’ absolute minimum monthly spending | |
| Less than 1 month | 45% | 36% |
| 1-2 months | 11% | 10% |
| 3-5 months | 10% | 9% |
| 6-12 months | 13% | 15% |
| More than 12 months | 20% | 30% |
When taking into consideration the various forms of insurance families rely on, parents are much more likely to have travel insurance (38%) or insure the family pet (24%) than have private health insurance/dental cover (22%) or protection for ill health, such as critical illness cover (18%) and income protection cover (13%). Half of parents with dependent children have arranged life insurance (46%), while only 35% have arranged a Will.
The harsh reality of a health crisis
One of the most common reasons parents do not have cover in place is the belief they won’t ever want or need it: two in five (40%) parents without income protection do not have it for this reason. But Aviva’s research suggests that one in four (27%) families with dependent children have experienced a loss of income due to ill-health, serious illness or the death of a long-term partner. Only one in ten (9%) of those involved said their finances were not negatively affected.
While 59% recovered financially within a year, one in five (20%) affected do not think they will ever recover financially or have no idea how long this will take.
One in four (24%) affected dipped into a rainy day fund, yet 18% were forced to sell personal possessions and 17% stopped saving for retirement. Most worryingly, 19% sold a home either to downsize, move back in with family or rent or became homeless, while 6% took on debt from a non-high street source such as payday or doorstep lenders.
Government and employers are the most trusted source of support in a financial crisis
If the main breadwinner became ill and had to stop or reduce working for at least six months, nearly three in five (57%) parents would trust the government to provide financial support. However, 15% mistakenly think that government provides death-in-service benefits, while nearly half (45%) of married and cohabiting parents do not know what government bereavement benefits or allowances are.
Similarly, while employers are the second most trusted source of support in a financial crisis (50%), nearly one in five (18%) parents do not know what support they would get from their employer if the main income earner was unable to work for at least six months due to ill health. One in ten (10%) believe they would receive sick pay from their employer indefinitely.
The findings demonstrate there is a real challenge for government and employers to enhance the information it provides on individual and family financial planning, to help improve understanding of what benefits are available and who is eligible.
Paul Brencher, Managing Director, Individual Protection, Aviva UK said:
“It’s a persistent worry that a large number of families are unprotected against a financial shock should they suffer an unexpected loss of income due to ill health or death. The reality of facing this can cause real financial hardship for families. Struggling to stay afloat financially is the last thing families need in addition to the emotional turmoil of falling ill or experiencing a death in the family.
“No one likes to dwell on the possibility of experiencing a period of ill health or worse, but it’s important families have honest conversations about how they might cope in these circumstances. Family finances can be complex, so all areas – such as savings, insurance, housing and other assets – must be considered. A small regular sacrifice now, either by boosting savings or taking out relevant insurance, would help protect families’ financial resilience and ensure unexpected events are easier to financially cope with.
“Employers, government and the insurance industry also have a role to play. Clear communication from employers to their staff about what benefits they offer will help prompt parents to address any protection gaps. We would encourage government to enhance its provision of publicly available information on individual and family financial resilience planning; and ensure people are aware of the government financial assistance available for families when they need it.
“Additionally, the insurance industry must do all it can to correct the perception that insurance is unaffordable and make applying for insurance simple and easy to do.”
- ENDS -
Enquiries:
Instinctif Partners: Jordan Campbell or Rachel Morrod: 0207 427 1400 / 07815 628 825 / 07815 541 791 or aviva@instinctif.com
Aviva Press Office: Olly Douglas (01904 723532 | olly.douglas@aviva.com) or Monique Crockett (01904 684128 | Monique.crockett@aviva.com)
Aviva’s spokesperson, Paul Brencher, is available for comment/broadcast interview
Methodology
The ‘Protecting Our Families’ study was designed by Aviva in collaboration with ICM Unlimited and Instinctif Partners. All findings quoted, unless otherwise referenced, are from research carried out independently by ICM during Q4 2016 among a representative sample of 2,500 UK adults, of which 1,593 were parents with dependent children including 435 who have experienced loss of income due to ill health, serious illness or death within the family.
Technical notes:
A median is described as the numeric value separating the upper half of a sample, a population, or a probability distribution, from the lower half. Thus for this report, the median is the person who is the utter middle of a sample. All figures are medians unless otherwise specified and are referred to as ‘typical’ rather than ‘average’ (mean).
A mean is a single value that is derived by adding all the values on a list together and then dividing by the number of items on said list. This can be skewed by particularly high or low values.
References
1 Families with dependent children are classed in this release as those with children (aged under 18 or 18 and above but mostly financially dependent on their parents), including two-parent families who are married or cohabiting along with divorced, separated or widowed parents.
2 Without making any changes to their current lifestyle.
3 Gov.uk, Work, health and disability green paper: improving lives - November 2016
4 Cancer Research UK, 1 in 2 people in the UK will get cancer - February 2015. Applies to those born in 1960 and beyond.
5 Public Health England, Health and Work Spotlight on Mental Health
Notes to editors:
- Aviva provides life insurance, general insurance, health insurance and asset management to 33 million customers.
- In the UK we are the leading insurer serving one in every four households and have strong businesses in selected markets in Europe, Asia and Canada. Our shares are listed on the London Stock Exchange and we are a member of the FTSE100 index.
- Aviva’s asset management business, Aviva Investors, provides asset management services to both Aviva and external clients, and currently manages over £340 billion in assets. Total group assets under management at Aviva group are £450 billion.
- Aviva helps people save for the future and manage the risks of everyday life; we paid out £34.4 billion in benefits and claims in 2016.
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