Aviva Family Finances report 2012 says the typical UK family owes �7,944 in unsecured borrowing, as inflation takes its toll
The typical debt owed by a UK family has soared by 48% since January 2011, as rising inflation has taken its toll on household incomes, according to the latest Aviva Family Finances report.
Research by the insurance company found that the typical UK family owes �7,944 in unsecured borrowing on credit cards, loans, overdrafts and other forms of credit, compared with �5,360 in January 2011. The figure represents 32% of a typical net annual income and suggests families are falling further into debt as financial pressures grow.
Credit card debt was the biggest source of unsecured debt, with those questioned owing an average of �2,314 on plastic, followed by �1,739 on personal debts. The survey includes couples without children in its definition of families, and those who were planning to start a family admitted to the highest levels of debt, owing an average of more than �15,000.
Families are also saving slightly less than they were a year ago, with the typical amount put aside each month falling from �22 to �21. The report, which says 42% of families save nothing on a monthly basis compared to 40% in January 2011, reveals that the rising cost of living, the threat of redundancy and meeting the cost of unexpected expenses are the main areas of concern for families in the current economic climate.
The research, which is based on interviews with 10,000 people aged between 18 and 55, also reveals that despite pay freezes in many sectors the typical net income among those questioned has risen by 7% since January 2011.
However, while those without children reported an 11% increase in monthly income, earning an average of �2,433 after tax each month, single parents saw their income fall by 22% to just �1,075. This is likely to have been impacted by changes in benefit payments which have already come into force, and could be exacerbated as more cuts take effect.
Louise Colley, Aviva's head of protection sales and marketing, said: "While average incomes have increased over the past year, the prices of essential goods and services have also increased, meaning that families are struggling to keep up.
"Many appear to have acclimatised to this economic environment by shopping around and seeking to minimise their spending in certain areas. However, at the same time there are still a worrying number of families with insufficient savings or large debts."
Debt remains a problem for many even into old age, according to separate research by Prudential. It shows that 18% of people planning to retire this year will do so with outstanding debts, owing an average of �38,200, up �500 on 2011's figure of �33,100.
Outstanding mortgages and credit card bills make up the bulk of the money owed by debtor retirees who, on average, will be making monthly repayments of �260 ? a fifth of their expected �1,290 monthly income. It could take an average of nearly four years to pay off their debts, while 8% of those who will still owe money when they retire this year say they will never be able to pay it off. One in four say they will be making repayments of �500 or more a month.
Men are more likely than women to be retiring in debt, and they typically owe substantially more. The research shows that 20% of men expect to have debts when they retire, owing an average of �45,300, compared with 16% of women, owing an average of �29,400. Around the country, retirees in Wales are the most likely to have debts (21%), while those in the east Midlands are the least likely (11%).
The difficulty of dealing with debts in retirement is compounded by the fact that older people tend to be hit hardest by rising living costs.
"Inflation remains more than double the government's 2% target and older people are suffering worse than anyone," said Ros Altmann, director general of over-50s specialists Saga. "Over-50's inflation is still around 5.5% (RPI) ? well above the nation's average of 4.8%."
Source: http://www.guardian.co.uk/money/2012/jan/25/family-finances-debt
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