It paints a worrying picture of a population borrowing more to fund a less restrictive lifestyle than in the previous quarter, with fewer attempting to pay off debts or save. It also reveals a slight rise in confidence in the economy among the under-50s, particularly among Young Professionals, while optimism among those nearing or in retirement has plummeted.
AXA's quarterly report presents a snapshot of financial confidence, behaviour and attitudes as well as views on topical money issues among eight distinct demographic groups.
Financial optimism in the UK is increasing among the under-50s, although this is still notably far off the levels at the beginning of 2010. However, for those nearing retirement, confidence in their financial future remains bleak, especially for the Under-funded Seniors, whose optimism is nearing rock bottom. Even the wealthier groups - the Exclusive Lifestyles and especially the Prosperous Later Years - are feeling the gloom despite clearly having the most disposable income, and more than a third (35%) of all respondents say that they do not have enough money to save for retirement.
The post-Christmas frugality seen in the first quarter of the year is however, showing signs of easing, with a five percentage point fall in the four in 10 consumers who cut back on luxuries such as going out (40% down to 35%) and purchasing alcohol and takeaways (35% down to 30%). Notably, there was a far greater drop in frugality among Young Professionals and the more affluent groups.
However, of great concern is that this more relaxed lifestyle appears to have been funded by borrowing. More than eight in 10 (84%) have a credit card, and while just over one in 10 (11%) borrowed on their overdraft and 9% borrowed more on their credit cards or loans, this increased borrowing was markedly higher among those finding it hard to make ends meet, especially among the Modest Middle Years group. For Nest Builders, "borrowing more" was at 13% in Q2, a drop of 3% since Q1 but still higher than average.
A further concern is that, in addition to this increase in borrowing, debt repayments and savings fell. Young Professionals paying more off their overdraft fell from 10% in Q1 to just 6% in Q2 and young professionals paying more off their credit card and loan repayments fell from 30% in Q1 to 17% in Q2. The situation was again bleakest for the more disadvantaged groups, with almost a third (30%) of Under-funded Seniors continuing to be forced to dip into their savings and only 5% managing to contribute more to any savings compared to highs of 19% and 16% "saving more" among the affluent groups, Exclusive Lifestyles and Successful Security.
A further indication of consumers taking more risks is that ownership of almost all types of financial product dropped in Q2, with those areas that received a boost from risk-averse consumers in Q1 (life insurance, motor, and travel insurance) joining all other areas of cover in experiencing a drop in purchasing.
When buying insurance cover almost a third (31%) say they are more concerned with cost than the level of cover: this is highest among The Stretched (47%) and Young Professionals (43%).
AXA UK's director of customer partnerships, Nick Turner, said: "Although it seems heartening that confidence and optimism exists among the younger population, caution must be urged against borrowing to make life more comfortable.
“We're also seeing an enormous drop in confidence from those in retirement, for whom life seems to have become ever harsher as the country continues to face the task of tackling the enormous deficit. The result is that savings are being depleted or ignored, debts are mounting, and risks are being taken with assets as financial products are being scrimped on."
