| Link(s): https://www.fca.org.uk/publications/research/financial-lives-2020-survey-impact-coronavirus |
Context
Financial Lives, the FCA’s flagship survey of UK consumers, provides a wealth of information about consumers’ attitudes towards managing their money, the financial products they have and their experiences of engaging with financial services firms. It is unique in the combination of its design, its breadth (over 1,300 questions covering all the retail sectors which the FCA regulates) and its size (over 16,000 respondents in the latest wave). As a tracking survey, it provides evidence of how things are improving, worsening or staying the same, from the point of view of the consumer.
The second Financial Lives survey ended in February 2020, before the pandemic. It therefore gives an understanding of consumers’ financial positions before the coronavirus (Covid-19) pandemic and means that the survey acts as a baseline against which to understand changes in people’s financial situations during and after the pandemic.
To test how the pandemic had already affected UK consumers, the FCA ran a Covid-19 panel survey in October 2020 with over 22,000 respondents. It is intended that the FCA will use this alongside future research and analysis to understand the changing shape of consumers’ financial lives after the pandemic.
Key points to note
- The key headline findings on how the market has evolved since the first Financial Lives survey in 2017 include:
- Before Covid-19, while the number of consumers with characteristics of vulnerability was falling, many faced issues with their finances or struggled to interact with financial services
- In February 2020, 10.7 million UK adults had low financial resilience, down from 11.6 million in 2017
- In February 2020, there were warning signs many more adults might find it difficult to cope with a systemic financial shock
- There has been a slight improvement in levels of trust and confidence in the industry since 2017, but levels remain low
- There has been little change in product holdings since 2017 – in February 2020, many UK adults lacked savings, had debts, and had no income protection
- Technology is changing how consumers interact with financial services
- The key headline findings on the impacts of Covid-19 from the Covid-19 focused survey in October 2020 include:
- Covid-19 has reversed the positive trend in vulnerability. There are now 27.7 million adults with characteristics of vulnerability, and so at greater risk of harm
- Covid-19 has had a profound impact on adults’ financial situations but has not affected the finances of all groups in society equally
- An additional 3.5 million adults now have low financial resilience
- Without mortgage and credit payment deferrals, many would have found it even more difficult to cope
- There is limited take-up of debt advice during the pandemic, so far, among those who need it most, but the service is valued by those who have used it
- Most people have not changed their opinion of financial service providers because of Covid-19
- Unsolicited approaches have increased during the pandemic, increasing the risk of fraud and scams
- Covid-19 has acted as a catalyst to speed up digital trends, but not all consumers have been able to cope without access to cash
- Covid-19 has also led to more people shopping around and switching