Our latest cost of living research

Price rises are having a dramatic effect on household budgets, with our research¹ showing around a third (31%) of UK adults simply unable to make ends meet at the end of every month once they'd paid their outgoings. A fifth also admit to being in or close to a financial crisis. It's no wonder then that concern about the cost of living is as high as it is, with only around one in ten saying they don't have any worries. Faced with such a widespread issue, many employers are asking themselves how they can support their workforce, albeit at a time when many are also facing difficult economic conditions too.

Rising costs

The household expense those surveyed are most concerned about when thinking about the cost of living is the potential rise in energy bills (89%), with almost a third (31%) being extremely worried about this. This is followed by food shopping (85%), and other household expenses (82%). We also found that double the amount of people are worried about their mortgage as were worried in August 2022 and that's due to the increase in mortgage interest rates. Although most people with mortgages in the UK are on fixed rate deals, for many these will come to an end this year.

Financial resilience

Of course, those on lower incomes will feel the impact of the cost of living more than those on higher incomes. 20% of those who have household income of £20,000 to £29,999 are at, or close to, financial crisis and unable to pay their basic bills. And although 5% of people told us they were already in financial crisis– that number increased to 10% of 25–34-year-olds. Although they aren't at or in financial crisis, those on higher incomes are feeling the pinch too. A third (32%) of middle-income households (where household income is between £50,000 and £59,999) are in this position and have had to make a few changes to cope with rising costs.

Wellbeing

Taking on additional jobs is common with 14% of the total group having done this already and 21% who will if costs continue to rise. Interestingly, this number increases when we look at household income over £150,000 when 55% have taken on an additional job. Taking on extra jobs and extra hours might have a detrimental impact on health, ability to deal with life in general and could have an impact on their main job.

Even without taking on an extra job, rising costs don't just impact finances but they can make people unwell. Our research showed that people are more anxious then usual (31%), more stressed then usual (31%) and feeling lower in mood then usual (28%). Worryingly, 5% mention the rising costs mean they are drinking more alcohol than usual and 6% have had thoughts of suicide as a result.

Pension contributions

Some positive news from the research is that only 5% of people have stopped or reduced their pension contributions. And for those who have stopped, that could be a necessary last resort. But saving for the future is crucial so if employees have reduced or stopping pension saving then it's important for them to start again at the right time.

We also asked the question about whether people had checked the impact that stopping or pausing pension contributions would have. 43% had checked, 47% hadn't checked and 10% were unsure. When we asked what would make people restart their contributions more than a quarter (26%) said that information on the effect that reducing your pension would have on the money in retirement would make them restart their contributions. 13% said a reminder from their employer would help and 15% said a reminder from their pension provider. 25% (up from 20% in our last round of research) said that the ability to make a one-off payment easily would help them restart contributions. When the crisis begins to ease then it might be appropriate to have conversations which explain the benefits of pensions again – fulfilling the retirement income need and the benefits of the employer contribution and tax relief. It might be useful to do this around the time of a pay increase before any additional income is absorbed into other non-essential spending. 

How can employers help?

Times are tough for employees and employers alike. But are there things which you could do to try and alleviate the pressure for employees. Promoting benefits that are offered through the pension scheme or other employee benefits such as employee assistance phone numbers can be very useful and will help with well-being. Do you have mental health first aiders?  Do you offer salary exchange? Although this won't benefit the very lowest earners, increasing take home pay but still having the same pension contribution could mean that an employee decides against stopping pension contributions which can help now but will certainly help in the future.

_{¹ The research took place between 27 February and 6 March 2023 through an online survey with 4,000 UK consumers.}