"For advisers, the opportunity is to look beyond headline earnings and understand how financially resilient a client really is."
- Andy Philo - Vitality
According to new research from Vitality, 52% of six-figure earners say their lifestyle would be difficult to maintain if their income suddenly fell, while two in five, or 40%, would not feel financially prepared if they had to stop working due to illness.
Despite being among the UK’s highest paid, just 41% have income protection in place, and 24% hold no protection products. Nevertheless, 44% say they could not cover essential expenses for more than six months if their income stopped, including 14% who could not cover them beyond three months.
The findings highlight a potential gap between high earnings and financial resilience, and how people earning over £100,000 could be financially exposed if illness or injury prevented them from working, challenging the assumption that a high salary automatically provides financial security.
Vitality says that a six-figure salary can also mask significant financial pressures. Above £100,000 of adjusted net income, the personal allowance starts to reduce and eligibility for childcare support can be affected, limiting how far higher earnings stretch and the savings a person can commit to.
Meanwhile, mortgages and other long-term commitments are likely to have been taken out based on that higher income, creating greater financial exposure if illness or injury suddenly prevents someone from working.
The research found higher earners point to a range of pressures that affect their ability to save. Essential household bills were cited by 37%, followed by 31% who cited lifestyle spending such as eating out, entertainment and holidays, a quarter who said supporting dependants and 20% who said housing costs.
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"A high salary should not be mistaken for a strong financial safety net," Andy Philo, director of strategic partnerships at Vitality, said.
"As earnings rise, people can take on larger mortgages, higher childcare costs and other long-term commitments before they have built the savings or taken out the right protection needed to sustain them through a period without income.
"For advisers, the opportunity is to look beyond headline earnings and understand how financially resilient a client really is.
"That means exploring how long their savings would last, what support they could expect from their employer and whether their existing protection would be enough to maintain essential commitments if illness or injury prevented them from working.
"These conversations can help clients recognise risks they may not have considered because their salary makes them feel financially secure.
"By reviewing protection alongside income, expenditure and workplace benefits, advisers can identify potential gaps and demonstrate the value of planning for disruption before it happens."
