Financial Wellness Group launches its first Impact Report

Financial Wellness Group has released its first Impact Report, reviewing the work undertaken to support customers during both 2020 and the previous year.

Debt trends

Customers continue to be squeezed by rising levels of indebtedness and falling disposable incomes. The average debt of new customers rose by 7% to £17,700 in 2019/20. By contrast, the average disposable income that customers have to put towards those debts fell by 9% from £216 to £197 per month.

One of the fastest growing debt types was Buy Now Pay Later (BNPL) and online shopping debt, which rose sharply – from 28% of customers having this type of debt in 2018/19 to 42% this year. Whilst the average value for BNPL debts is relatively low at £250 each, some customers have up to 10 individual BNPL loans.

By contrast, new customers with payday loan debts continued to decline – from 16% of new customers to 9% – and the average value of new payday debts fell by over 40%.

Customer Trends

People with problem debt are getting younger: in 2019/20 31% were under 30, compared to 23% of the group’s existing customers. Alongside this trend, customers are also more likely to be single now (60% of all new customers), and to have no dependants (64% of new customers). Four in five new customers are either renting their home or living with family.

The vast majority (97%) of Financial Wellness Group’s customers are employed or self-employed. Customers typically have good incomes: the average gross annual income was £25,875, but 22% of new customers earn over £40,700 gross p.a., and their debt problem is often triggered by a change in circumstances, such as a relationship breakdown, illness or a loss of overtime or hours at work.

How COVID-19 impacted customers

2020 has of course, been dominated by the impact of the pandemic on people’s health and the economy. The pandemic has left many households in financial crisis, with incomes squeezed and unemployment on the rise. However, the full impact of this on people’s over-indebtedness has been delayed by the widespread availability of payment holidays. As they start to fall away next year, and with rising unemployment, we expect to see more people hitting a financial crisis point. This will fuel what’s forecast to be record demand for debt advice.

In May Financial Wellness Group launched a new ‘Payment Break’ scheme to enable customers seeking advice to access a 90 day ‘breathing space’ period – with payments, interest and charges frozen on their debts – to give them time for their financial position to stabilise.

Since March, Financial Wellness Group’s focus has been on ensuring that all existing debt solutions customers who needed support were able to access it. In the period between the start of lockdown in March 2020 and September, the group answered 142,000 emails and calls from customers and arranged payment breaks or reduced payments for 5% of customers.

Deborah Ware, chief operating officer of Financial Wellness Group said: “This is Financial Wellness Group’s first impact report.

“The pandemic has left many families facing a financial crisis. As a result we, in common with others in the sector, are planning for a surge in demand in 2021. Financial Wellness Group has successfully applied for Money and Pensions Service funding and recruited new teams of advisers who will be ready to start advising customers from February next year. We look forward to playing our part in ensuring that people are able to access debt advice in their time of need.”