Published at 14:07, Friday, 22 June 2012

According to research from Aviva, one of Britain’s biggest insurers, in spite of the recession families in the UK have seen their monthly incomes edge ahead of inflation as the typical monthly household income hits £2,150, a four per cent increase over the past 12 months.

The study shows that as unemployment slows and working hours creep upwards, families are taking advantage. Nearly three quarters (72 per cent) of families now receive income from a full-time ‘primary’ income compared to 69 per cent in January, while 36 per cent also benefit from a secondary income earner, up from 33 per cent over the same period. The primary earner has a second job in 12 per cent of families.

However, single parent families are feeling the pinch after seeing an eight per cent drop in their average monthly incomes. While income from state benefits has decreased across the board following government reforms the picture is harsher for single parents with just 42 per cent now reporting income from benefits, compared to 61 per cent a year ago.

The typical amount held in savings by UK families has risen slightly over the last year from £1,163 to £1,228, an increase of six per cent. In line with this, the number of families with no savings at all has fallen to a record low at just 24 per cent.

More encouraging still, the typical amount saved on a monthly basis has also increased significantly to £45, the highest level yet seen in the research report series and a year-on-year rise of 41 per cent.

Average debt levels have swelled over the past 12 months, with the typical UK family owing £9,314 compared to £5,878 in March 2011 – an annual increase of 58 per cent. However, debts have fallen back 11 per cent since the start of the year, suggesting families are beginning to tackle their borrowings head on.

Credit cards (£2,266) loans (£1,895) and overdrafts (£1,650) account for the majority of debt, but both credit cards and loans saw borrowings fall since January 2012. In fact, since the start of the year, the only place family debts have grown is through overdrafts, increasing from £1,325 in January.

Families are becoming more concerned about their financial responsibilities, and for the first time since this research report began, protection products held by families have taken a small upward turn. Now 42 per cent of families say that they hold life insurance, up from 36 per cent last year, while 14 per cent have critical illness cover compared with 13 per cent a year ago. However, the number with private health insurance is static at 13 per cent, and the proportion of families with income protection insurance is down from 11 per cent to nine.

The average monthly expenditure of UK families has remained remarkably steady over the last 12 months and stands at £1,680 in May 2012. However, the impact of rising inflation (annual CPI inflation 3.0 per cent – April 2012) on the cost of essential goods and services means the typical shopping basket has become more expensive. This suggests that to maintain the same level of spending, families are economising and shopping around.

The biggest single year-on-year change is the average amount spent on housing (mortgage or rent), which has fallen steadily over the last year from 22 per cent to 19 per cent.

This is probably as a result of historically low mortgage rates and a subdued housing market. Spending on food remains the second largest single monthly expense, rising slightly on the past three quarters from 10 per cent to 11 per cent.

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Published by http://www.cumberlandnews.co.uk