The boost to financial wellbeing that people enjoyed after the pandemic restrictions relaxed dipped during the third quarter, according to Scottish Widows.
Scottish Widows’ Household Finance Index showed that financial wellbeing dipped from 44.7% in the second quarter to 44% in the third quarter.
However, the pace of decline remained slower than at any other time since the onset of the pandemic, particularly the spring of 2020, partly due to improved trends around job security and income.
Scottish Widows said households also recorded renewed pessimism in their financial outlook over the next 12 months, down from 50.3 in the second quarter to 49.2 in the third quarter.
It comes as the amount of cash UK households have available to spend suffered a further fall. The rate of decrease quickened slightly on the quarter, suggesting that rising living costs had impacted households. As a result, household savings declined at the fastest rate since the end of 2020, with only the highest earners recording a rise over the third quarter.
Scottish Widows said positive news during the third quarter came from the labour market as UK households experienced improved trends within both job security and income. For the first time since the first quarter of 2020, households’ income from employment rose. At the same time, business activity rose steeply.
This has led to some households taking a more optimistic view about job security, with the lowest level of pessimism recorded since the second quarter of 2019.
Scottish Widows said the pandemic had also prompted a more positive approach to financial planning with around one in ten (9%) having increased the scope of their long-term financial planning to include more generations.
Almost three quarters (73%) of UK households considered preparing for the future financial wellbeing of loved ones to be important, with young people aged 18-24 of this view more than any other age group.
Jackie Leiper, pensions, stockbrocking and distribution director at Scottish Widows, said: “UK households recorded slightly weaker trends as the post-lockdown recovery began to subside and living costs surged. Overall financial wellbeing and cash available to spend fell at slightly quicker rates than in the second quarter.
“However, our long-term financial planning trackers highlighted a wave of positive developments in Q3. Around 10% of households are now considering intergenerational planning, which suggests that COVID-19 has made more families think about how important it is to consider being financially prepared for the unexpected.
“A spark of good news also came with the reopening of the UK economy continuing to drive workplace activity too, while incomes from employment rose for the first time since the start of the pandemic.”
