- Unemployment, reduction in earnings or sudden illness are major exacerbating factors
- Average personal debts amount to nearly £14,000
- There’s an opportunity for employers to support staff through financial wellbeing initiatives
A leading charity has warned they’re seeing ‘record numbers’ of people struggling with debt, thanks to ‘unexpected life events’ such as unemployment, illness and reduction in earnings.
Some 331,337 people reached out to debt charity StepChange in the first six months of 2019 according to the charity’s research and 190,484 of those were new clients whose average personal debt amounted to nearly £14,000. The charity say it shows a 6 per cent increase since 2016.
The research also found that among one third of these new clients, their outgoings were more than their incomings, leading to an average deficit of around £365 per individual situation.
18 per cent had experienced a reduction in earnings, 16 per cent had experienced an injury or illness and a further 16 per cent had experienced job loss.
Aon’s Financial Wellbeing expert Martin Parish comments – “the research continues to evidence that a growing number of people are experiencing deteriorating financial wellbeing and with limited financial resources at their disposal the exposure to debt and everything that is associated with debt becomes prevalent. Understanding debt ‘triggers’ – such as unexpected life events – might enable organisations and employers to provide specific event driven financial education at the time of these ‘triggers’.
Phil Andrew, chief executive of StepChange told the media that many households are ‘struggling’ and ‘ill-equipped’ to deal with financial problems resulting from sudden changes in circumstances. He pointed to Universal Credit and ‘unlawful bailiff behaviour’ as exacerbating factors and called on concerted action to be taken to address the rising debt issue.
Universal credit has been met with much controversy over the years since its introduction in 2010, where it was intended to simplify the benefit system by combining six benefits in one single payment. But critics have argued that it puts people on low incomes or those who are unemployed at a disadvantage. New claimants have to wait up to five weeks for their first payment and many people face a loss of around £1,000 a year from the old system, according to a report by the Institute for Fiscal Studies.
Martin Parish at Aon added that even those in employment were also struggling with debt and said increasingly we are meeting with employers who are taking responsibility to provide workplace financial wellbeing initiatives to tackle the problem; “the workplace is a natural environment to deliver employee financial wellbeing initiatives, whether this be better information and education or access to transaction based solutions”.
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