Millions dip into their savings or take on debt amid coronavirus crisis

Millions of Britons are either dipping into their savings or getting into debt as their incomes are being dented by the coronavirus pandemic, a new survey has showed.

Nearly a third of people in the UK have had to dip into their savings while a fifth have taken on debt, with the younger generations the worst hit – and things are likely to get worse in the coming months.

Some 30 per cent, which equates to about 15million people, have used their savings to pay bills, rent, mortgage and other essentials during the crisis as many have lost their jobs or have been furloughed during the lockdown.

But younger generations, who are more likely to be freelance or in some of the worst hit sectors like retail, hospitality and the arts, are feeling a bigger hit than older people.

A survey of  more than 2,000 people carried out by investment platform AJ Bell has found that 44 per cent of those aged 18 to 34 are having to use their savings compared to just 18 per cent of those over the age of 55.

But dipping into savings is not an option for a large number of people, meaning that 20 per cent of those surveyed, or around 11million people, said they have already taken on debt in order to pay for essentials.

Some 10 per cent of people have put debt on their credit cards, while 8 per cent have taken a loan from family or friends and 7 per cent have taken on more overdraft debt.

‘These figures are likely to soar in the coming months as people get their first reduced pay-checks since being furloughed and more people lose their job or see their incomes cut,’ says Laura Suter at AJ Bell.

‘Two-fifths of the population have already seen their income hit as a result of Coronavirus, with most due to being furloughed at work or having to take a pay cut.

‘As the furlough scheme comes to a close we’re likely to see some of these people laid off, and so take an even bigger hit to their income.’

It comes as levels of anxiety are rising among Britons, with almost half the population reporting high levels of anxiety in March, according to official figures released today.

Money and work worries are mostly responsible, with those who think they will be unable to save money in the next year reporting anxiety 33 per cent higher on average compared to those who think they will.

Those who have seen their incomes fall have 16 per cent more anxiety than those who haven’t, while those struggling to pay bills have the highest levels of anxiety at 20 per cent more than the general population, according to the Office for National Statistics. 

The worst affected are people who are renting, women and the self-employed as they are more likely to have seen a fall in income and be unable to save money, and so feel unhappy and anxious. 

Meanwhile, the survey by AJ Bell shows that the falls in stock markets have also hit people’s incomes, with over a quarter of those who’ve seen their income hit saying it’s due to investment or pension income falling, while 8 per cent have had to cut their pension withdrawals.

Jeanette Makings, head of financial education asset manager Close Brothers said: ‘The Covid-19 pandemic is affecting people’s physical, mental, and social wellbeing. It’s also putting stress on people’s financial health. 

‘Some employees have already suffered a reduction in income, or may be worried that such a situation is on the horizon as companies continue to adapt to the difficulties of this environment. Those that have invested their hard earned savings may also have seen them eroded by market volatility.’

Meanwhile, more than half the population say they are concerned about getting into financial difficulties in the current crisis.

Again, younger people are more likely to be worried, as they tend to have lower savings to fall back on and are in more precarious job roles, with two-thirds of 18 to 34-year-olds saying they are worried about future financial difficulties compared to 35 per cent of over-55s.