The financial resilience gap between higher and lower earners has widened by 4.5 points since 2019.
The Hargreaves Lansdown Savings & Resilience Barometer found there has been a rise in debt arrears with the lowest earners seeing their arrears increase by four times more than the average rate.
It also found 19 per cent of people have debt worries, rising to 37 per cent for the lowest earners.
Sarah Coles head of finance at Hargreaves Lansdown, said: “Relentlessly rising prices for well over a year have taken a toll. It can be difficult to see the overall impact of rising prices when we look at today’s inflation figure. However, the Barometer shows the cost of living has increased 18.4 per cent in the past two years.
“This hasn’t been felt evenly across the income spectrum, so the resilience gap between higher and lower earners is widening.”
Hargreaves Lansdown expects later life planning to worsen in 2024.
It warned that, if no more cost-of-living payments are made, retirees and lower earners are likely to suffer as these payments made a ‘significant difference’ in boosting resilience.
Although chancellor Jeremey Hunt had introduced National Insurance cuts this is being offset by frozen tax thresholds.
Meaning average earners are only £13 better off a week with lower earners being worse off, according to the UK investment platform.
This may cause people to turn to debt causing more people to fall into arrears.
In October 2023 IFA firm Continuum spoke with FT Adviser warning Brits to build their financial resilience.
After the firm experienced more clients than ever asking for support on how to support loved ones who are struggling with rising prices and inflation.
Speaking at the time, Richard Watkins financial planner at Continuum said: “We live in an unpredictable world, and one where financial resilience has become an essential component of our wellbeing.
“Financial resilience is not just about surviving tough times; it is about maintaining a sense of control over your financial destiny and knowing that even if things go awry you have a way to get them back on track.”
Hargreaves Lansdown said people who are worried about debt can go to charities like Stepchange or National Debtline for support.
alina.khan@ft.com
