Top Five Personal Finance Problems Facing Working Brits

2. Britons are Three Times More Likely to Insure Pets Than Themselves

As Conner observes, “The scarcity of discretionary income is also having an impact on how Britons are choosing to insure themselves. Only 37% of our survey respondents carried Life Insurance of any kind, even though 62% have children and 43% have a mortgage outstanding,” he says.

“What’s most worrying,” he says, “is that just 6% of working Britons have taken measures to protect their personal finances should they be unable to work due to illness or injury. This is just over half the number who have taken out Critical Illness Cover, often as a ‘rider’ on their mortgage.

“Seen from above this looks like another instance where more education on personal finance and protection is required.

“Income Protection covers everything included in a critical illness policy as well as a host of other, far more frequent, health problems. Most personal finance advisers would agree that Income Protection is far more useful than Critical Illness Cover,” says Conner, “but it seems that a great many Britons never got the chance to compare the two.”

Which of the Following Financial Products Do You Currently Hold?

3. Too Many Working Britons Simply Haven’t Engaged with Pensions, Personal Finance and Tax Planning

Over 60% of working Britons have no idea at all about what assets will attract Inheritance Tax (IHT) and indeed, 92% wrongly believed that their pension was liable to Inheritance Tax.

Meanwhile, 87% of working Britons admit to having done nothing to assess their current IHT liability.

“These findings were especially troubling,” says Conner, “due to the huge amounts of time and money that the government, the investment industry and personal finance advisers in general have invested trying to communicate the key points around pensions and ISAs. This will be a telling failure,” he says, “if the current levels of saving and retirement funds do not improve over time.”

Which of These Assets Do You Think You Pay Inheritance Tax On?

4. Brits are Unwilling to Take Investment Risk

“Despite today’s ultra-low interest rate environment,” says Conner, “working Britons still have a clear preference for ‘risk-free’ investments, even though cash held on deposit will naturally decline in value due to the UK’s negative ‘real rates’.

“This underlines that too many Britons still prefer to opt for something familiar that they understand,” says Conner. “It seems clear that it’s an education gap as much as anything else that’s preventing the average Briton from making more use of appropriate risk-based investments.”

Because little knowledge about investment strategies is widely spread, many Britons would prefer to keep the money that they have safe rather than pursue the opportunity to earn more. However, considering the lack of involvement that many Britons have with their pension up until retirement, turning to Income Drawdown when they are drawing an income could be their saving grace.

5. Too Few Working Britons Are Seeking Professional Finance Advice

“On first reading, this looks like a great reflection on the advice industry,” he says, “but with 65% of working Britons – somewhere in the region of 20 million people – never having received Financial Advice it’s clear that we still have a great deal of work to do in order to close the ‘advice gap’.

“With almost two-thirds of us never having received financial advice,” he says, “it’s little wonder that so many Britons are still so poorly equipped for retirement.”

Have You Received Financial Advice?

Overall there are some really interesting findings from our recent research and certainly some food for thought. You can click the following link to see the key findings and full data from our 2017 Annual Wealth & Protection Survey.

Neil Adams
Head of Financial Planning