Furlough warning: Many savers to face ‘financial disaster’ as scheme ends – how to prepare | Personal Finance | Finance
Furlough payments have kept many employees afloat over the last several months as the government stepped in to cover wages in light of the economic effects of coronavirus. The furlough scheme will end on October 31 and a new support scheme will replace it but state support overall will reduce in the coming months and new research shows savers are ill-prepared to handle their finances on their own.
OpenMoney have conducted research on saver’s wellbeing over the last few months and they have combines this with data from YouGov with a sample size of 2,081 adults which were weighted by and representative of all British adults.
The research found that millions of households in the UK were struggling financially before the pandemic even emerged.
With the added effects of coronavirus, families across the UK are now at risk of financial disaster according to OpenMoney, which has been exacerbated by the prospect of a second wave.
On top of this, many may also struggle if unemployment figures are to rise, despite the government’s best intensions to halt mass unemployment.
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Specifically, OpenMoney’s research found the following:
- Households in the North East are least likely to have access to cash, with one in four people (25 percent) in the region having no immediately accessible savings. The North East was also identified as the region with the highest unemployment rate in the latest Office for National Statistics figures at 6.6 percent, compared to a rate of 4.5 percent across the UK.
- Those living in the Yorkshire & Humber region, which has seen a recent surge in Covid-19 infections, are least likely to have enough saved money to cover important payments, like mortgage and rent, utility bills and food, for more than three months if they had no income coming in, with just a quarter (26 percent) able to do so, compared to over a third (36 percent) across Britain as a whole.
- Those aged 35-44 are most likely to have no immediately accessible savings, with almost one in three (29 percent) not having an emergency cash buffer.
- Young people aged 18-24 are least likely to have enough cash savings to cover their essential outgoings for more than three months if they had no income coming in, with just a fifth (20%) able to fund crucial bills for that long. This age group also experienced the largest increase in unemployment in the most recent ONS statistics
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Anthony Morrow, the co-founder of OpenMoney, commented on these findings and noted what people stuck in these predicaments should do: “With the rising unemployment and the end to the government’s furlough scheme looming, an increasing number of people are at risk of losing their some or all of their main source of income.
“With no cash funds to fall back on, many face financial disaster.
“For those struggling to pay essential bills, speak to your mortgage provider, landlord or utility supplier as soon as possible to discuss delaying or reducing payments.
“New rules covering debt repayments mean lenders must do more to support customers in financial difficulty, including suspending or waiving further interest or charges to stop debts spiralling out of control.
“For people currently in work, now is good time to review your finances to make sure you are not spending more than you need to.
“The economic uncertainty created by Covid-19 makes it more important than ever to ensure that you have a cash buffer to cover unexpected emergencies or a period without income.
“As always, if you are concerned, we’d recommend contacting the Money Advice Service for guidance.”
The Money Advice Service offers impartial guidance on a number of financial concerns which can include savings, mortgages, pensions and more.
From November, the Job Support Scheme will be introduced to replace the furlough scheme and it has been designed to protect viable jobs in businesses who are facing lower demand over the winter months due to coronavirus.
The government detailed it should keep employees attached to the workforce throughout the winter months but the level of support will be lower than what has been offered by the furlough scheme, meaning many employees may have to learn to survive with less in the coming weeks.
Currently, furlough rules allow employees to have the majority of their wages/salary paid up to a cap of £2,500 per month.
However, the Job Support Scheme grants will reduce what the government covers, as the official factsheet details: “For every hour not worked by the employee, both the Government and employer will pay a third each of the usual hourly wage for that employee. The government contribution will be capped at £697.92 a month.”