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State of Consumer Finances 2016


Consumer confidence is currently at a high point, and official economic data shows spending in todays’ money is higher than ever per household, with consistent growth evident since 2012. Yet at the same time this spending increase has coincided with a period of stagnant income growth, and only now might incomes be close to their peak 2009/10 levels. Which?s tracker data suggests that Consumers’ debts appear to be accumulating, with savings levels still appearing low for many groups. Significant numbers of people are worried about the value of their pensions, and although with auto-enrolment the majority will have some form of private pension vehicle, there are a large number of people inadequately preparing, or a significant minority not preparing for old age at all.

Economic Context

Between the 2008 recession and 2013/14, household income growth was typically slow or negative across all income groups, with the period 2010 to 2012 seeing the largest falls in real terms. ONS’ Household Disposable Income now shows some evidence of recent improvement in 2014/15 with incomes almost returning to their 2009/10 peak. Average household incomes stood at £30,985 per year in 20014/15, with the most prosperous fifth of households bringing in £62,499 per year, while least well off fifth receiving £11,883 per year.

Inflation (CPI) was running at +2% to +5% year on year between 2008 and 2014 further squeezing those either stagnating or negative incomes. By contrast 2015 saw consistently low inflation for the entire year, helping household incomes to stretch a bit further.

2012 saw consumer spending per household start to grow year on year, after the better part of three previous years in either decline or flat-line.

When split into the Which? consumer spending classification categories (see Consumer Spending Report 2014, we can see that expenditures on groceries, goods and services have been highest, followed by housing, utilities and communications. Recreation follows some way behind, then transport and finally financial related expenditure. Each of these saw growth in Q3 2015 compared to Q3 2014, especially strong were recreation up 4.3% and Transport up 3.3%. (Note the graph above is based on annual change, and the official data only cover up to Q3 2015 at time of publication - Q4 2015 has been estimated from the previous quarter’s growth to complete the year).

Income growth has been slow in recent years, and for the majority of the post-recession period, inflation has outpaced it squeezing consumer spending power. Yet it would appear that consumers have been consistently increasing their spending from 2012 onwards. This means that for much of this time they have collectively either been spending greater proportions of earnings than before, borrowing more on credit, using savings/investment/assets, or a combination of all of these. Whichever way, consumer confidence would appear high, and indeed this is what the GFK’s poll based measure shows, with consumers currently riding a 10 year crest in confidence.

Consumer sentiment towards their finances

The Which? tracker gathers data on consumer sentiment every 2 months for core measures such as how worried they are about a suite of issues, and to what degree they trust/distrust different industry groups. Every 6 months our tracker dives deeper and asks about a wider set of issues. In November of 2015 its focus was on personal finances.

In general, despite an apparent increase in confidence and spending, Jan 2016 saw consumers displaying similar levels of worry about personal finance and spending issues as in the previous year. Modest increases in worry were seen for pension values (up 3ppts to 58%), level of savings and investments (up 5ppts to 54%) and mortgage rates (up 5 ppts to 50%).

Overall about the same proportion of people said they would find it easy to cope with an unexpected expense as those that would find it difficult (38% vs 37%), with households with children being particularly more likely to say they would find it difficult (51% compared to 32% for those without children).

The Financial Reality


The Which? tracker finds that 64% of working age households have some form of outstanding debt (not including mortgages), and that for those households the average total debt was around £4,400 (median). (This has increased by around 6 percentage points since the first time we asked the question in January 2013). By far the most frequent type of debt product were credit cards (43%), more than twice as common as the next – overdrafts (20%), student loans (19%), personal loans (18%). The average debt owed by those with student loans outstanding was by far the highest of these at around £12,600 (median).


The median value of savings held was around £1,800, with 18% of working age households saying they held no savings at all.

Having no savings varied across housing tenure type with 16% of home-owning households with mortgages claimed to have no savings at all, 25% of private rental households, and 34% of those in social housing.

The proportion of households without any savings varied less by age group, but 35-44s had the highest rate at 22% compared to the lowest 55-64s at 13%.

Having savings rarely seems to mean a household won’t also have debts - 64% of households with savings were also carrying some form of debt (not counting mortgages or student loans because the very long term nature of those products might means it’s not always preferable to pay down these in favour of holding savings), indeed even households with £50,000+ in savings held some debts of this type (43%).

Spending intentions

The Which? tracker asks people about their planned increases and decreases in spending over the coming months. Items predicted to show net increases (i.e. the proportion increasing outnumber those decreasing) were energy (possibly a seasonal effect), groceries, running a car, and housing. Areas where decreases could be expected were socialising, big ticket goods, clothing and footwear, alcohol & tobacco, and hobbies.

Items that would be expected to stay broadly the same were home improvements, public transport, savings/investments, TV and internet subscriptions, pension contributions, broadband, and mobile phones.

Private renters are the most likely to say they will be decreasing their spending, especially on non-essential goods and services such as socialising (36% compared to 24% for all households), and alcohol and tobacco (27% compared to 20% for all households).


In January 2016, pensions values were the third most worried about issue on the Which? consumer tracker, (58% of respondents). From the more detailed survey we ran in November 2015, we found that 43% of working age people were paying into some form of non-state pension (either workplace pension, private, or SIPP) with a further 14% planning on taking up auto enrolment (no significant change since March 2014). We also found 45% of working age adults were not currently saving for retirement. Over a quarter (27%) of adults were neither paying into a private pension, planning on auto-enrolling with their employer, or saving for retirement.

Of those preparing for retirement in some way, by far the most common form that took was via a workplace pension (52%), followed by private pensions or SIPPS (14%).

Workplace pensions were the most popular main source of retirement saving across all the UK regions, but it did vary quite substantially. In the Eastern region 40% said workplace pensions were their main retirement savings source, whereas in Northern Ireland 71% of households said this was their main source.

Of those without pension provision, the most common reason cited was affordability (39%), “I’ve not got around to it” (12%) “Don’t Know” (10%) and “I’d never thought about it” (10%) were the next most common reasons given.

Nearly half (46%) of working age adults say that they don’t know how much money they will need to live comfortably in retirement. Of those that have an opinion, most (73%) say they would need in excess of £200 per week. In order to achieve this, an annuity of around at least £100,000 would be required at current market rates, and for the 2 in 5 people who think they would need more than £300 per week, an annuity costing £350,000 would be required. By contrast according to the Association of British Insurers, the average pension pot size was £43,300.

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