12th August 2015
Rising incomes and savings pots among UK families are masking a widening wealth gap between the ‘haves’ and ‘have nots’, new research has revealed.
The latest Aviva Family Finance Report found that over the past six months the typical family’s income hit its highest point since March 2012.
In addition better savings habits also mean the typical family is saving a record £113 each month.
But despite this seemingly better backdrop, the income gap between family types has widened and many are not managing to save at all, leaving them vulnerable to financial shocks, especially as debt levels have also increased.
The insurer’s analysis found that the average family’s monthly income after tax reached a three-year high of £2,126 in May, the highest figure recorded since March 2012, when the tally was at £2,139.
Couples with plans to have children have made the greatest gains since November 2014 and have seen their monthly incomes rise by £339 from £2,122 to £2,461, more than twice the boost enjoyed by any other family type.
In contrast, parents who are raising children alone – either as single parents or as a result of being divorced, separated or widowed – have seen their monthly incomes drop from £1,176 to £1,077 over the same period. This loss of £99 a month adds up to £1,188 annually, the equivalent of one month’s salary.
This group has also seen the gap widen between their income and that of the typical family from £866 to £1,049, over the last six months.
Income gap for family types compared to the average family income
|Winter 2014||Summer 2015|
|Median family net income (monthly)||£2,043||£2,126|
|Couples with no plans to have children||+£107||+£95|
|Couples with plans to have children||+£79||+£334|
|Couples with one child||-£27||-£24|
|Couples with two or more children||+£130||+£67|
|Parents raising children alone*||-£866||-£1,049|
Aviva’s data also showed that while the proportion of families taking home at least £2,500 a month has risen from 39% to 43% in the last six months, the percentage taking home £1,000 or less has stayed static at 10%, meaning at least 10% are still surviving on less than half of the typical family’s income.
Savings trends also highlighted the differences between UK family finances. Rising incomes mean the typical family is saving more and putting aside a record £113 a month, compared with £99 in November 2014. The typical savings pot is now £3,116.
However, more than a quarter of families, at 26%, are saving nothing each month, and the percentage with no savings cushion has remained static at 17% over the last six months.
It appears therefore while those families who can afford to save are making efforts to put more money away, the situation has shown little sign of improving for those who were already struggling or failing to do so.
Those who can, are saving more; but many are still not saving
|Winter 2014||Summer 2015|
|Typical monthly savings across all families||£99||£113|
|Percentage saving nothing each month||27%||26%|
|Percentage with no savings put away||17%||17%|
The typical family has used its income gains to increase monthly debt repayments over the last six months, from £197 in November to £225. But the average balance owed has also risen by 5% from £9,050 to £9,520, suggesting that some families are relying more heavily on borrowing to supplement their incomes.
Commenting on the research Louise Colley, managing director, protection at Aviva, said: “This summer’s Family Finances Report brings great news for some British families, but also rings alarm bells for others. Overall, the typical family has got more money in its budget and is using it to save more and reduce their financial vulnerability. However, we must not overlook the growing number of families in danger of being left behind by this resurgence. In particular, single parents face a challenge to maintain their standards of living on lower incomes and it is no wonder that many families are still finding it a struggle to put money away each month.
“It is also a concern to see rising levels of debt that are requiring families to make ever-increasing monthly repayments. With this in mind, it’s important to highlight and address the fragile footing of some British families so they are not left exposed if their circumstances should change.”