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Peer2Peer Finance News | August 23, 2019

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Millions of Brits face debt and savings crises during unexpected illness

Millions of Brits face debt and savings crises during unexpected illness
Kathryn Gaw

MORE THAN 12 million UK adults could find themselves facing a debt crisis or draining their savings in the event of an unexpected illness or sudden death.

According to new research from Aviva, millions of families are not prepared for a sudden loss of income, and will end up draining their savings or accumulating debt to plug the gap.

The Protecting Our Families report found that almost one in three (31 per cent) of Brits have been forced to take a leave from work due to unexpected ill health, a cancer diagnosis or even a death in the family. Of these, 77 per cent – or 12.3 million people – have seen their finances suffer as a consequence. More than one fifth (22 per cent) were forced to use their savings as a result, 13 per cent had to stop saving for their retirement, while 1.9 million admitted that they didn’t think they’d ever financially recover.

Aviva has calculated that on the whole, UK adults who have suffered a health crisis saw their average monthly net income drop by 24 per cent, while their typical savings and investments were 40 per cent less than those who had not experienced a health crisis. They are also likely to have 47 per cent more in average debt than others.

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“Millions of people have seen their finances damaged by poor health: without any plans in place, a loss of income caused by ill-health can have a long-lasting effect on people’s finances,” said Paul Brencher, Aviva UK’s health and protection director.

“This can be particularly difficult for those with a family to support, who often have a range of financial obligations – such as mortgage payments and bills – and also the added concern of how they will provide for their children.

“Illness can strike at any moment, and not having a plan in place for this could be a dangerous risk to take. Our research shows that many people who have experienced a health crisis have resorted to a number of unpleasant measures, like using nearly half of their savings, selling their personal possessions or even their home.”

The report follows a slew of data which suggests that UK households are savings less than ever before. Earlier this year, RateSetter research found that four in 10 Brits saved nothing in the first quarter of 2017.

Aviva added that in the event of a health crisis or sudden death, most Brits would be forced apply for government funding, dip into their rainy day funds, downsize, or sell their possessions.