Aviva Family Finances Report July 2013 - Aviva plc

The Aviva Family Finances Report July – 2013

The typical UK family The diversity of modern society means there is no single model of the ‘traditional family’ in the UK. Instead, with 84% of the population living as part of a modern family group, their social and economic experiences are influenced by a range of variables which shape their attitudes towards family, work and financial planning. The Aviva Family Finances Report looks at the contrasting experiences of different family types (see page 3 for groups tracked). As well as examining data since 2011, this edition goes back to school and puts a price on school education in 2013. It looks at how parents’ bills for a host of related expenses have evolved since 2008 and also examines the wider role of finances in children’s education. How far would parents go to access their preferred school, for example? How willing are they to pay for educational technology compared with more traditional pursuits like sports activities and out-of-school clubs? All of these questions and the resulting answers paint a picture of a modern family striving to find room in its budget to provide children with the best educational opportunities. Overview l

Income – more families receiving income from jobs as the proportion in the lowest income brackets fall (pg 4).

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Expenditure – overall drop in monthly expenses masks the struggles of one-parent families despite cutting back on luxury items (pg 6).

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Family wealth – saving habits improve as families seek out the greatest returns from financial products (pg 8).

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Housing wealth – rising property prices benefit homeowners but overall homeownership falls (pg 12).

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Family borrowing – unsecured debts hit record levels with fewer families making monthly repayments (pg 14).

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Look to the future – fears grow as financial stability remains fragile and vulnerable to economic strains (pg 16).

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Spotlight – nearly a third of parents have bought an iPad or tablet computer to support a child’s education (pg 19)

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Spotlight – more than one in ten parents have moved house to live in a better school catchment area (pg 20)

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Spotlight – paying for school sports trips is more popular than funding foreign language exchanges (pg 21)

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Across the UK – Family income in London reaches its highest level while the South West overtakes the capital in terms of families living in rented accommodation (pg 24).

The Aviva Family Finances Report 2

The modern UK family Thirty years ago, the ‘nuclear family’ of two parents and one or more children was commonplace among the UK population. Social change in the intervening years means family arrangements are significantly more diverse in 2013. In this report, Aviva explores the contrasting fortunes among the most common types of modern family based on customer profiles and Government data.

1. Living in a committed relationship* with no plans to have children

2. Living in a committed relationship with plans to have children

3. Living in a committed relationship with one child

4. Living in a committed relationship with two or more children

5. Divorced/separated/widowed with one or more children

6. Single parent raising one or more children alone

* For the purposes of this report, a committed relationship is defined as one where two people are either married or co-habiting.


Income UK families’ typical monthly net income in July 2013 fell just short of the highest figure ever recorded by the Family Finances Report, which was £2,150 in April 2012. With £2,108 at their disposal each month – 5% more than a year ago – the typical family has £1,260 more spending power over twelve months than they did in August 2012 when the typical monthly income was £2,003. Couples with one child have gained the most in the last year (£241 per month) although those with no plans to have children remain the biggest earners (£2,303).

Trends in net monthly income since January 2011

£2,303

£2,291 £00

£209

£123

£2,196 £00

£27

£225

Couples without plans to have children

Couples with plans to have children

£2,264

£1,190 £00

£149

£18

Monthly income July 2013

£15

Divorced/separated/widowed and raising one or more children

Gain since August 2012

£131 Couples with one child

£1,050 £00

£27

Couples with two or more children

£241

£41

£55

Single and raising one or more children

Gain since August 2011

In line with the overall income growth, there has been a collective shift up the income scale in recent months. Just 20% of families currently survive on less than £1,250 a month, compared with 22% in January 2013. Low earners have made considerable progress since the first Family Finances Report at the beginning of 2011 when 30% fell into this category. Higher up the scale, more than one in three families now have a net monthly income above £2,500 (34%), up from 31% in January 2013. This marks a return to the same proportion of high earning families seen in January 2011.

Income sources Nearly three quarters of families (72%) now receive an income from a primary breadwinner’s main job, compared with 70% at the start of the year. The number of families earning a dual wage also appears to be on the rise as parents pursue more job opportunities to boost their family’s finances. A leap of seven percentage points means that 41% of families now receive income from a spouse’s full time job for income, compared with just 34% in January 2013.

Changing income sources 72% 70%

34%

13%

34% 72%

Income from primary job July 2013

14%

5%

6% 7%

14%

3% 3%

41%

13%

8%

5%

4%

Income from spouse’s job

Income from part-time/secondary job

Investments/savings

Income from spouse’s part-time/secondary job

Rental income

January 2013

August 2012


An increasing number of families receive an income from savings and investments in July 2013 compared with August last year (8% vs. 6%) which – given the low returns on savings in the current climate – may mean families are exploring alternative forms of investments. The percentage of couples with plans to have children who receive rental income has also doubled since January 2013 from 2% to 4%, suggesting that more may be renting out spare rooms or investing in buy-to-let properties to support their ambitions to raise a family.

The new welfare landscape Benefit cuts as part of the current austerity measures have gradually reduced the number of families receiving income through the welfare system. State benefits helped nearly one in four families back in November 2011 (23%), but this had fallen to 21% in January 2013 and now applies to fewer than one in five families (19%). Since November 2011, the greatest loss of access to benefits has been experienced by divorced, separated or widowed parents (down from 41% to 36% receiving benefits), followed by couples with one child (down from 19% to 15%) and couples with two or more children (down from 22% to 20%). Only couples with no plans to have children have been unaffected (10% received benefits both in November 2011 and July 2013).

Families receiving benefits 10%

10%

Couples with no plans to have children

7%

Couples with plans to have children

41%

22%

20%

Couples with two or more children

23%

19%

6%

19%

Couples with one child

51% 36%

Divorced / seperated / widowed parents raising one or more children

50%

Single parents raising one or more children

July 2013 November 2011

Overall

With more cuts on the horizon, it is likely these proportions will be further reduced in the months ahead. The Institute of Fiscal Studies recently suggested that having been protected by the benefits system, poorer households will be the hardest hit by additional cuts to be implemented up until 2015/16. This suggests the number of families receiving less than £1,250 each month may also start to climb again.


15%

Expenditure The typical monthly expenditure among UK families fell for the first time since November 2011, with the July 2013 average of £1,748 representing a fall of 4% from the peak of £1,819 in January 2013. The latest figure is also slightly down from August last year (£1,765) but still 16% more than the typical family was spending each month in August 2011 (£1,510). Couples with no plans to have children have been the most successful in reducing their outgoings since August 2012 from £1,767 to £1,478 (-16%). Couples with children have also tightened their belts ever so slightly, although this amounts to a change of -2% for those with one child and less than -1% for those with two or more children. Coupled with the overall fall in monthly expenses, these figures mask the contrasting fortunes of other family types. Expenses have soared by 22% since August 2012 among divorced, separated or widowed parents raising one or more child. Single parents raising one or more children are not far behind having seen their typical monthly spend increase by 16%.

Monthly expenditure by different family types

£1,767

£1,478

£1,716

£1,915

£1,872

£1,837

£1,841

£1,834

£1,426

£1,735

£1,231

£1,426

-16%

+12%

-2%