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Far more households are less likely to cope with income shocks this year due to the cost of living squeeze, with those on lower incomes at a higher risk of getting into debt, new research has found.

Rising inflation and taxes, falling real wages and interest rate hikes are set to reverse half of the financial resilience people built during the pandemic, when those who still had a job had a chance to save more for a rainy day. 

Britons’ overall financial resilience, as measured by a new barometer by Oxford Economics and Hargreaves Lansdown, rose to 57.7 out of 100 last year, from 54.5 in 2019. 

However, it is expected to fall back to 56.2 as households succumb to the big squeeze, according to the research. 

The largest contributor to the forecast decline is a reduction in the level of surplus income, as spending continues to return to pre-pandemic levels and living costs rise. 

Meanwhile, higher interest rates – the Bank of England is expected to gradually increase interest rates to 0.5 per cent by the end of 2022 – will reduce the affordability of debt repayments.

But some parts of society are at biggest financial risk than others.

Those who already struggled to keep their heads above water during the pandemic – those on lower incomes, younger people, and renters – are in for another tough year.

For example, already 15 per cent of those on lower incomes have fallen behind on bills or debt repayments – a proportion more than four times bigger than the national average.

‘With [energy] bills rocketing and interest on their debt rising, the Big Squeeze could pull them under,’ said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown. 

When it comes to cash set aside for a rainy day, a third of Britons overall do not have have access to savings that would cover at least three months’ worth of essential expenditure.  

But again, households who are employed are much more likely to have enough savings than than households who are self-employed.

Looking at the specific ‘save a penny for a rainy day’ barometer, the average score of employees is 64.6 – much higher than 48.1 of the self-employed, the report shows. 

When it comes to pension savings – another pillar of financial resilience – fewer than 40 per cent of working age households are on track for an annual pension income of £26,000, the current average.

And again, some parts of society have significantly lower pensions than others: only 22 per cent of self-employed people have saved enough towards retirement, compared to double that for employees. 

Even among high income families, a significant number are not putting aside enough for retirement, given their time of life.

Almost half don’t have enough life cover to protect their families, with single-parents the worst hit as only 17 per cent having purchased a life cover. 

‘Our barometer revealed that while our overall resilience increased during the pandemic, there was a world of difference in the experiences of those whose outgoings fell, who were able to save, pts terbaik sumatera and those who lost income,’ Coles said.

Those on high incomes had the highest financial resilience score of 69.2, followed by baby boomers at 60.8, while Generation Z along with those on low incomes scored the lowest, both at 47.1. 

There were also stark regional differences, with the South East being most financially resilient region, with a score of 60.8, and the North East the least, with a score of 54.4.

<div class="art-ins mol-factbox money" data-version="2" id="mol-6fa6af70-7214-11ec-b120-7159b099dcbf" website financial resilience to take a hit in 2022