2023 round-up

A message from our Research Co-Directors

This year the Personal Finance Research Centre published 12 new research reports and 5 policy briefings. At the same time, our team have found time to respond to consultations and calls for evidence, write peer-reviewed journal articles, speak at conferences and on radio shows, and lead some of the projects that we’ll be reporting on in 2024.

All of this activity has the common goal of sharing our research as widely as possible and promoting our recommendations for changes to policy and practice that can improve situations for individuals and households.

In 2023, the cost-of-living crisis remained at the top of the policy agenda, and we spent the year researching its impact. Our Financial Fairness Tracker (in partnership with abrdn Financial Fairness Trust) has documented how UK households are coping. The 8th and 9th waves of the Tracker in May and October found ‘a new normal’ where some households are beginning to adjust to higher costs, but their overall financial wellbeing remains significantly worse than in 2020 and 2021. We also investigated the financial wellbeing of disabled people; considered the role that housing tenure plays in household finances; and collected first-hand testimonies from people who struggled with high energy costs last winter. In all our reports, we highlight the real-world implications of our findings and make evidence-based recommendations about how best to support those who need it.

As ever, collaboration has been a fundamental part of our research in 2023 – with other academics and research organisations, policymakers and practitioners, charities and civil society organisations, and – crucially – the lived experience experts and research participants whose views and experiences we seek to accurately represent through our work. Our thanks to everyone we’ve worked with this year.

If you haven’t already done so, we hope you find the time to engage with at least some of our research. And please do get in touch if you have any questions or reflections to share.

Wishing you all the best for the new year.

Sharon Collard and Sara Davies, Research Co-Directors


Research and policy

In 2023 we explored:

All of these outputs are available on our website.


🎉PFRC at 25🎉: UK Household Finance and Poverty Conference

Photo collage of peakers and delegates at the UK Household Finance and Poverty Conference in November 2023.
Speakers and delegates at the UK Household Finance and Poverty Conference in November 2023.

In November we hosted a one-day in-person conference to celebrate 25 years of PFRC, which was founded in 1998 by Professor Elaine Kempson. The conference agenda centred around three themes:

  • Reflections on the past, present and future of household finances through the lens of 25 years of impactful research.
  • The seen and unseen dimensions of poverty, with a focus on housing and energy.
  • Research into policy and practice.

Attended by over 80 delegates, it was a day of excellent keynote speeches, lively panel discussions and stimulating conversations. It was also a fantastic opportunity to catch up with old friends and colleagues and make new connections. Our thanks to everyone who joined us and helped make it such a great day.


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The financial wellbeing of disabled households in October 2023

By Jamie Evans, Katie Cross and Sharon Collard

Foodbanks and benefit inadequacy

The October 2023 edition of the abrdn Financial Financial Fairness Tracker shows an increase in the number of UK households that are facing real hardship, with 9% of all households having used a foodbank in the past six months (compared with 6% in October 2022). Worryingly, this rises to 20% among those receiving disability-related benefits (up from 12% in October 2022), suggesting that the level of benefit support for disabled people has become increasingly insufficient against a backdrop of rising costs. Even more concerningly, recent Trussell Trust research shows that 62% of people in disabled households referred to foodbanks were not receiving any benefits specifically related to their disability.

Figure – Proportion of those receiving disability benefits who have used a foodbank in the past six months


Notes: We define ‘disability-related benefits’ as those receiving any of: Personal Independence Payment (PIP), Disability Living Allowance (DLA), Adult Disability Payment, Employment and Support Allowance, and Carer’s Allowance. October 2023 sample sizes:; disability-related benefits = 912.

Cost of Living payments

During the cost of living crisis the UK Government has provided certain groups of people with Cost of Living (CoL) payments. These do alleviate some of the most severe forms of hardship faced by households. Citizens Advice, for example, reports decreases in foodbank referrals in the weeks following CoL payments being made; but impacts tend to be short-lived, with referrals ticking upwards in the following months.

A third (32%) of Tracker households told us that they had received a CoL Payment in the past 12 months, with 27% of these being ‘in serious financial difficulty’. Households receiving the low-income CoL payment were most likely to be experiencing serious financial difficulties (35%), compared with 31% of those receiving the disability payment and just 15% of those receiving the pensioner payment.

Extra energy costs

Disabled households in the Tracker – many of whom are likely to have comparatively high energy needs – were among those struggling most with energy costs and anxious about future costs. Indeed, the most common extra cost faced by disabled people in our recent study with disabled people was energy or other utility bills (incurred by 78% of respondents), as one participant described:

“On any given day, it’s mandatory that I have power for: an electric bed (all night), an electric toilet (several times a day), an electric bath (once a day), an electric wheelchair (charged daily at nights), an electric hoist (used several times a day and permanently on charge), a lift (used frequently daily)… and that’s not including any ‘normal’ devices that folks use like kettle, internet, TV, heating and oven!” (Evans et al, 2023).

According to the Tracker, 6% of all households were behind with electricity bills and 5% with gas/other energy bills in October 2023. These rates were, however, double for disabled households (13% for electricity; 11% gas/other energy). Disabled households were also more likely to be paying for energy using a pre-payment meter (28% compared with 18% of all households).

Finally, Tracker data shows signs of increasing credit stress for disabled households, who were much more likely to have fallen behind on consumer credit than others (25% compared with 16% of all households).

Conclusion

Given the latest Tracker figures, it is unsurprising that three-in-five disabled households (59%) are worried about their financial situation in the next three months. Many disabled people will be further concerned by the rhetoric rising from the Chancellor’s Autumn Statement. The disability charity Scope said that the Chancellor had “doubled down on a plan that will ramp up sanctions and demonises disabled people”. This tallies with our earlier research, which found that seven-in-ten (71%) disabled benefit recipients had been made to feel guilty about applying for benefits, predominantly caused by societal stigma about doing so.

Our findings show that to help disabled people improve their financial situations requires four main things:

  • Better access to employment for those who can work
  • A benefits system that provides a proper safety net
  • Targeted support to reduce the costs of disability
  • Access to essential services and advice.

Read more:

 

Disabled people are already cutting back on costs more than others – for many, the £150 cost of living payment won’t do much to help

NDAB Creativity / Shutterstock

Sharon Collard, University of Bristol and Jamie Evans, University of Bristol

Even before the current cost of living crisis, disabled people were much more likely than non-disabled people to be in poverty and living on inadequate incomes. Now, spiralling living costs are adding to years of financial disadvantage. Our new analysis of YouGov survey data starkly illustrates the situation, showing that three in ten disabled households are in serious financial difficulty.

The UK government has announced several measures that will provide some relief for many, including an energy price freeze and payments totalling £650 for people on means-tested benefits. All households will also receive a £400 reduction in energy bills via instalments spread over six months, and 8 million pensioner households are receiving a separate one-off payment of £300.

Disabled people who receive benefits that aren’t based on income (non-means-tested) will also get a one-off cost of living payment of £150. But while these measures are welcome, this amount is a fraction compared to the additional costs disabled people typically have to cover.

Disabled households often need to spend more on essentials like heating and insurance, as well as necessary equipment, therapies and support. In 2019, disability charity Scope estimated that disabled people in the UK face extra costs of £583 per month, on average. For one fifth of disabled people, this “disability price tag” was over £1,000.

Rising energy costs are particularly impacting households that need to run vital equipment. Wheelchairs, feeding and suction pumps, or ceiling hoists all need to be constantly charged. Some people may also need additional heating to stay warm to prevent pain or seizures.

Considering these already higher costs, it should not come as a surprise that disabled households are disproportionately cutting back or doing without compared with other households. We found that four in ten have cut back on overall spending in 2022, and half have already struggled to keep their home warm this year. Similar proportions have reported reducing their use of the cooker and shower.

Around one in ten non-disabled households report that rising costs mean they are eating fewer meals. This rises to three in ten among disabled households. A survey conducted by the charity Family Fund found that half of carers looking after disabled children have skipped meals in the last year. We increasingly hear about “choosing between heating and eating”, but there are concerning reports of some being forced to choose between heating and medication.

Many disabled households are already at a breaking point, even before we enter a more costly winter. There is nothing else these families can cut back on. The situation is so dire for some that for the first time in its history, the deaf-blind and complex impairments charity Sense is giving cost of living grants of £500 directly to families.

When work and benefits aren’t enough

Soaring inflation means that disabled people in employment are experiencing the same real terms fall in wages as the rest of the working-age population. Around half of working-age disabled people are in work, but many others are excluded from participating in the labour market.

There is a large gap between the rate of disabled and non-disabled people in employment, for many reasons including structural and discriminatory barriers. Disabled people are also underemployed due to the quality of jobs on offer to them, forced to take lower-skilled or lower-paid roles offering fewer or infrequent hours.

Across all UK households in serious financial difficulty, disabled households are much more likely to have no earners than their non-disabled counterparts. But with a quarter of disabled households who have two full-time workers currently in serious financial difficulty, work is by no means a guarantee of avoiding hardship. In-work poverty disproportionately affects disabled people.

Close up photo of a woman's hands against an old-fashioned radiator
Rising energy costs are particularly harmful to disabled households.
Zvone / Shutterstock

Disabled people are more likely to engage with the social security system. This is partly due to their lower employment rate, but also because there are benefits available to assist with the higher cost of living with a disability. State benefits for disabled people rose by 3.1% in April.

But, as is the case with earned income, rising inflation means that benefits are shrinking in real terms. For disabled households, this means substantial monthly financial losses.

Families with a disabled adult were among the hardest hit groups from changes to the social security system in the 2010s, with the inadequacy of provision for disabled people attracting widespread criticism. The process of applying for disability benefits has been described by disability campaigners and charities as complicated and inhumane.

For lower-income disabled households, these new cost of living payments will be insufficient or at best, a short-term solution to longstanding financial inequalities. These disadvantages are more widely corrosive, driving social exclusion, limiting agency and choice, and ultimately impacting people’s mental health and wellbeing.

To meet the scale of the crisis faced by disabled households, longer-term solutions – such as proposals for a decent social security system – are certainly needed if we are to avoid a further decline in living standards.The Conversation


Sharon Collard, Professor of Personal Finance, University of Bristol and Jamie Evans, Senior Research Associate in personal finance, University of Bristol

This article is republished from The Conversation under a Creative Commons license. Read the original article.

“Now is literally the worst time in decades to be entering the work force”: the impact of COVID-19 on university students’ finances

By Katie Cross and Sara Davies

As students return to University campuses, the discussion has largely focused on worries over increased COVID-19 rates. But our survey of University of Bristol students suggests their approaching financial position should also be cause for concern. 

The economic impact of COVID-19 has been both rapid and widespread. By June, the economy was around 17% smaller than it had been in February. The sharp increase in Universal Credit claims after lockdown was unprecedented, with almost 2.5 million household claiming between mid-March and late June. And the Office for Budget Responsibility is projecting an unemployment rate of 11.9 per cent in Q4 of 2020. It is a very uncertain time for all.

But one group whose financial position we have heard less about during this time is that of university students. Each year we conduct a survey for the University of Bristol’s Widening Participation team to look at the impact bursaries have on students, comparing the financial experiences of those from low- and middle-income backgrounds who receive financial support from the University, with those from higher-income backgrounds[1], who do not. This year the timing of the survey allowed us to ask students about their financial experiences both pre- and post-COVID, and to look at how they may have fared during the crisis.

Financial impacts so far

As with the wider UK population, COVID-19 and the subsequent lockdown has had an unparalleled impact on student employment. Prior to the pandemic half of students surveyed (51 per cent) were employed in some form. Since the outbreak however, over two thirds of those previously working were no longer doing so, with a further 12 per cent working fewer hours than before. Of those no longer working, two thirds said this was due to their employer being closed (either temporarily or permanently). Although the majority of students receiving some form of maintenance loan, earned income is still important to students in order to manage financially, particularly among those who are not in receipt of a bursary, where this loss of income could be worryingly detrimental.

My maintenance loan does not even cover my rent which means I have to borrow money from family and work in order to cover my rent and food.”  – Year two, unfunded

Overall, the impact of coronavirus on the students we spoke to had been fairly evenly split across those finding it easier to manage financially (30 per cent), much the same (40 per cent) and harder to manage (30 per cent).

This means that, for the majority of students, COVID-19 had not had any major negative impact on their financial situation. Indeed, nearly half said they had been able to save money as their costs had generally reduced – a finding which is perhaps unsurprising as lockdown prevented social spending. A third also reported not having to pay for their final term of accommodation, representing a further considerable saving. This does, however, still leave 65 per cent of students paying for at least part, if not all, of their accommodation for the summer term, despite no physical teaching and (for the majority) returning home. Unsurprisingly the majority (95 per cent) of those who weren’t required to pay for their final term of accommodation were first year students (typically living in University owned halls), as opposed to second and third year students who were more likely to rent privately.

“No change at all despite the fact that our bills are included in rent so we are paying more for water, electricity etc that none of us are using (no one living there at the moment). When we contacted to ask for some reduction in rent, we were told that the property is the landlord’s primary source of income (seems an irrelevant argument) so we wouldn’t get any reduction.” – Year two, funded

Overall, 3 in 10 reported their costs and outgoings being harder to manage due to the outbreak. This rises to over half for mature students (who were more likely to have financial dependents) and around two-fifths for those who had lost income from employment.

Support from family

Many students rely on financial support from their families and friends to manage. Indeed, eligibility for bursaries and maintenance loans is based on parental household income from the previous tax year, and there is an expectation that those from higher-income households will receive support from their family. Almost two thirds of Bristol students who were ineligible for bursaries relied on support from family and friends, with 19 per cent having their accommodation paid for and 57 per cent receiving a set amount of money each week or month. Since the outbreak, a small number of (mainly non-bursary) students had received additional support from family or friends. Mature students were also more likely than younger students to have turned to family and friends for financial support since the lockdown, whereas beforehand they were significantly less likely to have done so.

However, the ongoing impact of COVID-19 – particularly once the furlough scheme comes to an end – may have dramatic impacts on family household income, and the worry is that students may fall through a gap, without university funding or family support.

“[I have] concern over lack of employment for my parents, who I rely on financially to pay for my living and accommodation in Bristol, as my maintenance loan was significantly lower than my accommodation cost.” – Year one, unfunded

Prospects

While almost a third of students were currently finding it harder to manage financially, even more were worried about the coming academic year. Half were concerned over their lack of paid employment/income during the holidays or coming year and 41 per cent were worried about how they would manage financially in the Autumn term. Those who usually rely on paid work may run into financial difficulties, particularly if they are unable to return to work or find alternative employment. In our survey, over a third who worked considered employment income ‘very important’ to financially continuing at the University.

It is also important to consider the longer-term financial impact and job prospects for students. The unemployment rate is expected to rise to almost 12 per cent by the end of the year, and those who have recently left education are likely to be disproportionately affected. We are already seeing a reduction in job vacancies and in our survey 69 per cent reported being generally worried about their future, with nearly four in ten third-year students concerned over their post-graduate prospects since COVID-19.

Now is literally the worst time in decades to be entering the work force.” – Year three, funded

Given the general worry about the future, concern over personal and familial health, uncertainty around teaching in the coming year and reduced socialising with friends, it is unsurprising that some students also commented on the negative impacts on their mental health.

“Due to some of my family members being high at risk to corona, I am increasingly anxious as to what is going to happen to them. My mental health has suffered a lot from being very isolated over the Easter term. I am worried that the global economy is about to collapse and the whole world is going to go into recession. So all in all, quite a lot to be stressed about.” – Year one, funded

“My depression has got much worse, my father is at risk, I am struggling to focus at all so I am behind in all of my work and I don’t know how I will cope financially if I cannot work in the summer” – Year two, funded  

Overall, the student community has faced an unprecedented situation with remarkable resilience, but it is apparent that the challenges brought by COVID-19 will impact students for a long time to come. It is crucial that universities understand that, for some students at least, it will be much harder to manage financially than in previous years, and institutions therefore need to provide an appropriate level of practical and pastoral support to help them.

Firstly, we need greater recognition of how important earned income is to students’ financial position and participation at university. Secondly, the increased likelihood of financial difficulty among families of students should be considered, and the impact of this on students – both financially and emotionally – given the role that family support plays in getting by while at university. This suggests that there will be a need for a well-funded and accessible hardship fund in the coming years, because increased financial difficulties may well effect likelihood of withdrawal from studies.

Some students will need more help than others; previous surveys have found that bursaries appear to have some protective effect, therefore attention should also be given to those from higher-income households, particularly those just outside of eligibility, as they are more likely to rely on income from employment. Mature students, who we have previously found struggle financially more than their younger peers, are already turning to their families for support in greater numbers, but what about those who do not have people to turn to?

Finally, the ongoing emotional toil of dealing with a global crisis should not be underestimated. It is worrying enough leaving university in normal times, let alone doing so during a time of recession and increasing unemployment. Giving students as much support and guidance as possible, both to manage during their studies, and to help them to prosper as they leave, is going to be vital over the next few years.


[1] Low income = Residual Household Income (RHI)  > £25k; Mid income = RHI £25-44k; Higher income =RHI £43-80k

Does borrowing behaviour influence wellbeing?

by Sara Davies

Standard Life Foundation recently commissioned us to conduct a rapid evidence review to understand people’s borrowing behaviour and how it impacts their financial wellbeing. This involved a structured, critical analysis of around 150 relevant items and an assessment of their methodological strengths and weaknesses. We found:

  • Income strongly influences borrowing behaviour. Low-income households are less likely to use consumer credit than those on higher incomes, but more likely to use high-cost lenders when they do borrow, often to make ends meet.
  • Owning assets has some relation to borrowing behaviour. Homeowners have higher levels of borrowing than non-homeowners; their borrowing is linked to their level of housing assets. However, we lack evidence on the effects of savings on borrowing.
  • Psychological factors shape borrowing behaviour, but not as much as socio-demographics. There are complex interactions between different psychological factors; and one can mediate (and moderate or amplify) the effects of another. Psychological effects seem less powerful in explaining borrowing behaviour than other personal factors, such as income.
  • Macro-economic conditions play a major role in shaping people’s financial situations, their access to borrowing and the cost of borrowing. Aggregate consumer borrowing rises when macro-economic conditions are good and falls when they deteriorate. At firm level, credit card design and marketing (such as credit limit increases and zero-interest offers) encourage borrowing. Speed, convenience and easy access attract borrowers to use high-cost credit, particularly where they have few other credit choices.
  • Lower financial literacy is linked to poor borrowing behaviours and over-indebtedness. There are concerns young people, with lower financial capability overall, are particularly at risk from poor borrowing decisions. The evidence is weak regarding the impact of financial literacy programmes (which tend to focus on financial knowledge) upon financial behaviour

Read more about this research

Report | Key Findings