"Often in times of recession, personal protection products are the first thing people cancel when arguably they are more important than ever during tougher times."
The ONS has published a report showing that 18% of adults have no savings, 7% were unable to pay a bill in the past month and 8% had cancelled a financial product such as a pension or dental/life insurance.
PR platform, Newspage, sought the views of a selection of IFAs, mortgage brokers and money coaches.
Rhys Schofield, managing director at Peak Money: "1 in 12 adults cancelling a financial product is heartbreaking. An increased cost of living puts you in even more of a financial hole if something bad happens and you are uninsured, so insurance is more important than ever. Only this week a client of mine received a payout of nearly £6000 for breaking and dislocating his shoulder playing rugby. His wife reached out to me to say how it had really taken the pressure off with Christmas round the corner and a new baby imminent. Had they cancelled their premiums to save costs, it would have been a different story altogether. It worries me that some people will be tempted to cancel the actual essentials before Sky or Netflix but it's really saddening to see families in genuine dire straits. My advice would be, if you really are struggling, seek financial advice before cancelling anything."
Chris Sykes, technical director and senior mortgage adviser at Private Finance: "The fact that 1 in 12 people are cancelling a financial product is extremely concerning. Often in times of recession, personal protection products are the first thing people cancel when arguably they are more important than ever during tougher times. We find it astonishing how many clients we see who have pet insurance but not insurance for themselves and their families. One thing many people don't consider is the cost of replacing a policy, as if they were to apply for the same cover in five years it will almost certainly be more expensive, as the older you are the more expensive protection tends to be."
Craig Fish, founder and director at Lodestone Mortgages & Protection: "92% of adults reporting an increase in the cost of living is not a surprise, though I fear that the other statistics in this report are only going to get worse, and this is going to be a very difficult period for so many people and families. It is heartbreaking to see. Sadly, it's always the personal protection products that go first rather than the likes of Sky, Netflix or Spotify. People don't even cancel gym memberships that they never use. It is so important that people seek the advice of professionals if they are under financial pressure and not make rash and costly decisions. I don't know what financial reserves or powers the government has to help people, but at the very least I think they should be advertising on TV that it's difficult right now, and stress the importance of speaking to professionals who want to, and can, help."
Samuel Mather-Holgate, IFA at Mather and Murray Financial: "It's no surprise that a large number of adults have no savings and this figure will be going up, a lot, over the next 12 months as the cost of living bites. Whilst people are choosing to either heat their house or pay their rent it's also no surprise that items critical to life in the future, like pensions, are being discarded to survive today. What is less clear from these statistic is people's choices. If life insurance is being cancelled because energy bills need to be paid, it's unfortunate but an understandable choice. That is, of course, until you find out that Sky TV is still being maintained as a priority. It's really important that advisers educate clients to the value of the policies they hold and if they cannot afford the full amount, have a conversation about what is affordable."
Philip Dragoumis, director and owner at Thera Wealth Management: "The report makes for grim reading. The effect of falling real incomes is evident as the UK has very negative real wage growth and people are not borrowing more to cover the shortfall. The government needs to roll out legislation quickly to help the most vulnerable otherwise it will be too late. It's going to be a tough winter and we could see an increase in social unrest."
Amit Patel, adviser at Trinity Finance: "Sadly, these statistics do not surprise me as countless households are under serious financial pressure. Those in deprived areas will have less disposable income as they are either reliant on state benefits or the minimum wage. I have spoken to my local MP on several occasions to get a motion tabled in Parliament to discuss personal finance being incorporated into the school curriculum. Financial education enhances financial wellbeing and prepares students to understand and manage their incomes as adults."