Professional Documents
Culture Documents
January 2013
Income committed couples with plans for children stay ahead as incomes register a rise (pg 4). Expenditure monthly expenses bloated by debt repayment and rising transport and fuel costs (pg 5). Family wealth saving pots grow as families make a concerted effort to put more aside each month (pg 7). Housing wealth homeownership falls as families increasingly shift to rented properties (pg 10). Family borrowing debt levels grow, but fewer families are drawing on credit cards, loans and overdrafts (pg 12). Look to the future financial fears hold fast or shrink as families grow accustomed to making ends meet (pg 13). Spotlight more first-born children are spending their early years in rented accommodation (pg 14). Spotlight todays parents of young families face far greater financial pressure to support their childrens futures (pg 18). Across the UK Londoners have the UKs largest monthly incomes and most valuable homes and the most relaxed attitudes to long-term financial security (pg 20).
* For the purposes of this report, a committed relationship is defined as either one where two people are married or living together.
Income
The typical monthly net income among UK families rose slightly in the last quarter to 2,043, up by 40 (2%) from August 2012 and by 60 (3%) compared with November 2011. The highest earning families continue to be those in committed relationships with plans to have children (2,265).
2,065 2,265
1,932
2,216
1,124
1,239
Looking at families with children, those with two children have the largest typical monthly incomes of 2,016, followed by one-child families on 1,989 and 1,818 for three-child families. The fact that four-child families are typically surviving on the lowest monthly net incomes 1,600 suggests they will be particularly pressured financially unless their number includes adult children who are supporting themselves. This quarter saw no movement at either end of the income scale since August 2012, with the number of families surviving on less than 1,250 (22%) or earning more than 2,500 (31%) remaining stable. However, compared with November 2011, when 30% earned less than 1,250 while 36% took home more than 2,500, the situation seems more positive for lower earners in terms of income growth.
Income sources
The number of UK parents drawing income from a primary breadwinners main job has fallen slightly from 72% (August 2012) to 70% (January 2013). However, the number of families drawing on a spouses primary job has increased from 32% (November 2011) to 34% (January 2013) suggesting a slight growth in the number of families with two working parents. Secondary or part-time work remains an income generator for 18% of families, as it was back in January 2011.
Expenditure
For the fourth consecutive quarter, typical monthly expenditure by UK families grew, with current typical outgoings of 1,819 up by 3% from 1,765 in August 2012 and 22% higher than in November 2011 (1,488.56). While annual inflation stood at 2.7% in October 2012, the impact of rising living costs is clearly visible over the last twelve months. With the average price of rail fares increasing by 5.9% in January 2012, combined with 4.96% inflation, expenditure on day-to-day travel has grown more than any other cost since November 2011, with the typical UK family spending 341 more every year to meet this need. A further average price rise of 3.9% in January 2013 means this is likely to increase in future. Inflation on energy bills has been -0.57%, but with utilities providers raising prices across the board, increased costs are draining an extra 221 from household budgets every year. In addition, despite ownbrand labels and budget supermarkets having grown in popularity during the recession, outgoings on food shopping are rising. Inflation of 3.13% means the typical family now spends 234 more on annual food bills than they did in November 2011.
76 244 80 273
135.57
154
18.43
221.16
* Based on the monthly increase over a 12-month period please note that some expenses are subject to seasonal changes.
During the same period, average debt repayments have also increased by almost 20 a month and nearly 240 a year. With more pressure on their finances, families are instead making efforts to cut back on non-essential spending. Changing priorities have impacted the number of families who spend on a range of non-essential items each month, while the figures also suggest that a significant number of parents are sacrificing motoring costs to reduce their outgoings.
94% 55%
72%
Motoring
Nov 2011
Jan 2013
Type of expenditure
While family incomes have risen slightly, the impact of ination and price rises from transport and utilities suppliers means that few families will enjoy the benets of extra disposable income to spend on luxury items. In the interests of building a stable foundation for their future, it is encouraging to see that these growing expenses have not prevented families increasing their debt repayments or savings.
Louise Colley, head of protection sales and marketing, Aviva
Family wealth
Despite increased outgoings, it is encouraging to see that the typical familys savings are at their highest point 1,277 since the Family Finances Report series launched in January 2011. This is a marked improvement on the 967 which the average family had saved in November 2011 and suggests that after median savings sank to 928 in January 2012, people have been making a concerted effort to increase their savings pots. The biggest gains in family wealth since January 2011 have been made by those in committed relationships with plans to have children, where average savings have grown by 1,180 to 2,698 in January 2013. Having a larger family predictably impacts on savings levels: across all tracked family types, the average one-child family typically has 974 put away in January 2013, compared with just 436 for families with four children. Since January 2011, those in committed relationships with one child have seen their average savings pots fall; but the gains made by those with more than one child suggest financial planning becomes easier as people grow more accustomed to parenting.
1,499 597
2,096
1,518 1,180
2,698
1,237 -206
1,031
815 630
1,445
199 -142
57
0 0
Jan 2011
Jan 2013
Change
A further sign of improved savings habits comes from the falling percentage of families putting no savings aside from month to month. This represented 39% of families in November 2011 and 37% in August 2012, but has now fallen to just 34% (January 2013). Single parents (53%) and those who are divorced, widowed or separated (45%) are the most likely to save nothing in a typical month, along with families who have at least four children (40%). Those in committed relationships with plans to have children remain the most likely to save each month (73%).
Savings products
After basic bank or building society savings accounts (79%), ISAs are the most popular savings vehicle in January 2013 for UK families (35%) followed by employer pensions (32%). The uptake of premium bonds has remained stable at 17% since August 2012; use of fixed-term bonds has grown slightly from 6% to 7%; while the number of families investing in stocks and shares has also increased from 11% to 13%. Having no children and no plans to do so in the future, means these families in January 2013 are the most likely to channel their savings into an ISA (44%), private pension (25%), premium bonds (21%) or fixed term bonds (9%), and stocks and shares (16%). Committed couples who plan to have children are the least likely to have premium bonds (10%), private pensions (8%) or fixed-term bonds (5%) as they look to ensure their savings pots are readily accessible.
ISA
Fixed-term bonds
Premium bonds
Private pensions
Employer pensions
Making regular savings is fundamental to achieving nancial stability and guarding against unexpected expenses or life events. Current savings patterns give plenty of cause for optimism, and while families with children understandably have less capital to put towards savings products, it is important to consider how pensions and other savings products can add a valuable resource for both parents and children in later life.
Louise Colley, head of protection sales and marketing, Aviva Playing it safe
Uptake of protection products has remained relatively stable over the last twelve months suggesting that, while savings are increasing, families are also mindful that a further safety net could make all the difference should unforeseen circumstances arise and are striving to avoid cutbacks to formal protection plans. Those in committed relationships with two or more children are the most likely to have life insurance in place, with almost half (46%) protected by an existing policy. They are also the most common holders of private health insurance (14%), and in common with those in committed relationships with a single child are the most likely to have income protection in place (both 9%). It is reassuring to see that having children increases the likelihood of families taking out protection products. However, as the graphic below demonstrates, the financial pressures of supporting a large family mean that those with one child are more likely to take out each of the main protection products than those with four children.
26%
11% 8%
Families without children
5%
41%
12% 13%
Families with one child
8%
30%
9% 10%
Families with four children
6%
Life Insurance
Housing wealth
Homeownership by UK families either outright or with a mortgage fell from 61% (August 2012) to 59% (January 2013), having stood at 64% in November 2011. The biggest year-on-year falls have been experienced in committed relationships, whether they have no plans for children (down from 73% to 61% in January 2013), plan to have children (down from 58% to 43%) or already have one child (down from 69% to 54%). In contrast, the increasing trend towards renting means 25% of families are now in private rented accommodation, compared with 19% in November 2011: a significant rise. The biggest rise has been among committed couples who plan to have children with 12% more currently renting (45% in January 2013 compared with 33% in November 2011). Among families with children, committed couples with one child (27% January 2013 vs. 19% November 2011) and single parents raising one or more children alone (38% up from 29% in November 2011) have also seen a significant shift towards rented accommodation.
29% 21%
Other notable changes since November 2011 include the increasing use of social housing, such as council housing, both by couples with one child (up from 11% to 15% in January 2013) and couples with no plans to raise a family (up from 6% to 9%). However, fewer single parents are using social housing (down from 39% to 32%) potentially linked to the current supply shortage. Additionally, an increasing number of couples who plan to have children are living with their parents up from 2% to 6% between November 2011 and January 2013. The likelihood is that the cost of climbing onto the property ladder is prompting more people to take this temporary measure in order to help save for their future. The value of the typical family home is 220,603 in January 2013, which is virtually unchanged from January 2012 (220,229) and compares with the average of 161,605 across the whole of the UK population. Among the tracked family types, those raising more than one child in a committed relationship have the most valuable properties on average (243,491), while property values exceed 250,000 among families across all categories with three or four children.
The typical mortgage among families, for those that have them, has also risen to 107,820 and is again the highest figure recorded by this report series. This represents a 13% rise since November 2011, when the typical mortgage was 95,466, indicating a spate of home moving, buying or remortgaging. Single parents raising children alone have the largest mortgages on average at 127,679.
102,561
118,608
109,358
106,190
127,679 101,894
Taking all homeowners into consideration, the mean equity tied up in their properties has recovered to 136,416 (January 2013), after falling from 141,889 in January 2012 to 127,424 in August.
Families have experienced the highs and lows of the UKs turbulent property market in recent years, and the renewed caution of mortgage lenders is limiting the options of rst-time buyers looking to establish a family home of their own.
Louise Colley, head of protection sales and marketing, Aviva
Second homes
More than one in five (21%) families now counts a second property alongside their main residence, whether it is a buy-to-let investment, holiday home or time-share property. The average value of a buy-to-let property is 200,313, up from 185,824 since August 2012, with an average outstanding mortgage of 148,902.
Family borrowing
The typical UK family owes 11,101 in unsecured lending in January 2013, which has grown from 10,563 in August 2012 and is the largest amount of family borrowing recorded by the Family Finances Report. Credit cards continue to be the most popular form of borrowing (39%), followed by overdrafts (26%) and personal loans (22%). However, the number of families with these types of credit has fallen, indicating that debt is increasingly concentrated, and while typical borrowing on credit cards has risen by 17% since August 2012, overdrafts have been scaled back by 10%.
Most common borrowing methods in January 2013 compared with August 2012
39% 22% 26%
6,055
+921
8,591
+36
3,955
-428
Personal Loans Typical amount owed by those who use this type of credit
Credit cards are most common among widowed/divorced/separated parents (44%), while single parents are the family group most likely to have an overdraft (34%), personal loan (28%), storecards (19%) or use hire purchase (12%).
Monthly repayments
Despite levels of unsecured debt among UK families reaching their highest point since the Family Finances Report launched in January 2011, monthly debt repayment has fallen to 123 (January 2013) compared with 141 in August 2012. The largest cutbacks have been by divorced, separated or widowed parents (-29), committed couples with one child (-25) and committed couples with no plans to have children (-20). However, despite debt levels growing and repayments shrinking, families concerns about their ability to keep up with debt repayments over the next six months have actually fallen slightly from 12% in August 2012 to 11% in January 2013. This suggests lower debt repayments may be a temporary measure as people adjust their outgoings to allow for extra expenses such as end-of-year festivities and seasonal family engagements.
21% 17%
56%
45% 43%
Jan 2013
20% 18%
Significant increase in the price of the basic necessities for living (e.g. food or utilities) Losing my / our jobs (i.e. redundancy) Unexpected expenses (e.g. major repairs to home) Loss / changes to current Government benefits Serious illness (for me or my partner or children)
Recent announcements over the Governments Funding for Lending Scheme and discussions around a further decrease to the base rate has calmed some families fears, and just 13% are worried about higher mortgage rates (14% Aug 2011). Couples in a committed relationship with more than one child (16%) are most worried about an increase in mortgage rates.
Home ownership
Overall, 59% of families are homeowners by the time their first child is born. Following the credit crunch which started in August 2007, homeownership by first-time parents has fallen noticeably. While 61% of parents with children aged 4 to 7 owned their own home when their first child arrived, as did 63% with children aged 8 to 10, only 52% of parents with children aged 1 to 3 were homeowners at the same stage of family life.
Renting vs homeownership among UK families when their first child was born
54%
26%
66%
14%
66%
13%
29%
23%
Homeownership
Renting
Instead, noticeably more first-born children are spending their early years of family life in rented accommodation: 26% of families with children aged 1 to 3 and 20% with children aged 4 to 7 rented when their first-born arrived, compared with 13% or fewer families with older children. For 12% of parents with children aged 1 to 3, having a young family has meant renting for longer, compared with 7% of parents overall. Having a young family has other implications on homeownership for the modern family. One in eight (12%) of those with children aged 1 to 3 have been prompted into buying a home earlier than they would otherwise have done, while 6% have had to borrow money from other family members in order to afford a deposit.
The Aviva Family Finances Report 14 The Aviva Family Finances Report 14
The Aviva Family Finances Report 15 The Aviva Family Finances Report 15
17%
Gave up membership of a gym or sports club
51%
Ate out or got take-aways less often
52%
Took fewer holidays / weekends away
29%
Took shorter holidays / holidays in the UK
25%
Gave up personal goods and services (e.g. make-up, manicures)
23% 31%
Did food shopping in a cheaper supermarket Stopped saving
48%
Went out for entertainment and recreation less often (e.g. bars/nightclubs/gigs/cinema)
6%
Stopped paying into a pension
11%
Cancelled a satellite TV subscription
35%
Did clothes shopping from cheaper retailers
The added financial pressures of raising a young family are evident in the fact that 44% of parents worry about their income and finances and the extent of these fears seems to be more prevalent among young families. Among parents whose children are now aged 16 to 21, only 33% said having a young family caused them these concerns, compared with 56% of parents with children currently aged under two years. Up to 32% of families say that raising young children has increased their level of household personal debt, for example through additional credit card spending or loans. For 18%, this is a temporary increase but the remaining 14% say their increased debt has been permanent. A similar number 15% have been driven to borrow money from family, while financial stresses and strains have caused arguments between partners or family members for nearly one in five (18%) of families. Unsurprisingly, the likelihood of personal debt rising and family arguments occurring as a result of raising a young family increases with family size but only marginally. Eighteen per cent of parents with one child found their debt increasing temporarily, compared with 21% of parents with four children. The comparison in terms of permanently increased debt is 14% vs 17%; where family arguments are concerned, it is 18% vs 22%.
The Aviva Family Finances Report 17 The Aviva Family Finances Report 17
Looking to the future: more pressure, more expect to help adult children
Modern parents of young families clearly feel they have to deal with a greater level of financial pressure than their own parents. Almost half (41%) of parents subscribe to this view, increasing to 47% among single, divorced, separated or widowed parents. Only 16% of parents overall feel they experience less pressure than their parents did before them. It is also telling that, when asked about a range of significant costs that may be encountered during parenthood, there is a greater expectation among modern parents that they will be called upon to help their children, compared with the help they received during their own upbringing.
Learning to drive
Starting a family
The Aviva Family Finances Report 18 The Aviva Family Finances Report 18
The children of modern young families face a very different future to their parents, with average annual university tuition fees now more than 8,500 for 2013/14 following the tuition fees reform in 2010, and 17% of Englands 16 to 24 year olds not in education, employment or training (NEETs) in the third quarter of 2012. For these reasons, the areas where financial expectations have increased the most for modern parents centre on their childrens education and employment prospects. These also feature among the issues of greatest concern for modern parents: 33% worry about their ability to help their children with higher education costs, 23% are concerned about supporting them during their A-levels, and 22% worry about providing financial help for their children to pursue a career. With the average deposit for first-time buyers in the UK reaching 27,375 in October 2012, almost a third of parents (29%) are also worried by their capacity to help their children onto the property ladder in later life.
Parents with young families nd themselves faced with many nancial challenges and pressures that are less familiar to older generations. Flexible employment means they may be able to keep working, but when it comes to buying their rst home this is likely to be much harder. With children anticipated to become more dependent on family support to boost their employment and education prospects, it is even more important for todays parents to ensure their incomes are protected and to explore how best to save and invest for their familys future.
Louise Colley, head of protection sales and marketing, Aviva
The Aviva Family Finances Report 19 The Aviva Family Finances Report 19
Borrowing
Credit card borrowing is most prevalent in Wales, where 47% of families have credit card debt with the average amount owed 8,276. This is followed by Northern Ireland and the North West, where 45% and 43% of families have credit card debt. In contrast, in Scotland only 32% of households owe money on credit cards. This suggests there is not necessarily a correlation between areas of lower household incomes and levels of credit card borrowing. Instead some areas of the UK seem to have different approaches to managing their household budgets than others.
Housing
In London, prices have continued to rise, with the average family home now valued at 371,081. This represents a significant gap when compared to the rest of the UK, as the national average currently stands at 220,603. Outside of London, the UKs most expensive homes can be found in the South East (271,341). By comparison, houses in the North East are significantly less expensive, with the average family home now valued at 159,856. London also leads the way in terms of the number of families in private rental accommodation (31%), followed by the North West and Wales (both 29%). Renting is least common in Scotland (17%) and the East (17%), although Scotland also has the highest proportion of families in social housing (23%).
Average monthly income Average total savings Average monthly savings Credit card borrowing Average house value
Scotland
2,043 1,277 1,891 1,181 72 1,646 1,136 168,994 249 56 1,803 1,966 43 210,620
UK
N. Ireland
1,899 1,499 0 1,511 166,875
159,856
N. West
1,923 962 64 2,169
N. East
175,098
Yorkshire
E. Midlands
2,020 1,443 56 1,988 771 64 187,758 1,718 398 42 170,122 8,276 3,608 998 43 239,118 1,966 1,131
179,706 2,078
Wales
London
S. East
Methodology
The Aviva Family Finances Report was designed and produced by Wriglesworth Research. Over 2,000 people aged 18-55 who live as part of one of six family groups were interviewed by Opinion Matters in order to produce the reports latest findings. In total, 16,222 UK consumers have been interviewed between January 2011 and January 2013. This data was combined with additional information from the sources listed below and used to form the basis of the Aviva Family Finances Report. All statistics refer to figures released in January 2013 unless stated otherwise.
Department for Education (DfE) NEET Statistics Quarterly Brief Quarter 3 2012, November 2012 First Time Buyers, Lending and Affordability October 2012 Council of Mortgage Lenders (CML) Land Registry House Price Index October 2012 Office for Fair Access (OFFA) OFFA publication 2012/07 2013-14 access agreements, institutional expenditure and fee levels Office of National Statistics (ONS) Inflation Figures June 2012 Passenger Focus Individual Fare Increases 6 December 2012
l l
Technical notes
l
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. An average or mean is a single value that is meant to typify a list of values. This 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.
For further information on the report or for a comment, please contact Sarah Poulter at the Aviva Press Office on 01904 452828 or sarah.poulter@aviva.co.uk
GN 20 644 01/2013
Aviva plc