aviva family finances report 4 - november 2011

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    The Aviva FamilyFinances ReportAutumn - 2011

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    The typical UK family

    While 84% of the UK population lives as part of a family, theconcept of the traditional family is now outmoded. In its

    Family Finances Report, Aviva recognises there are various

    different types of modern families (see page two for groups

    tracked) and looks at their individual approaches to finances

    including wealth, debt and expenditure.

    The Aviva Family Finances Report 2

    In addition, this report looks at how families often find themselves supporting

    members of their own extended family or friends, both financially and practically.

    This generosity can have a negative impact on their finances, with just under half

    saying it hampered their ability to save, and almost a quarter suggesting that it

    made repaying debts more difficult. Pensions also suffer and Aviva has calculated

    that over 40 years, each family could be giving away more than 70,000, almost

    three times the typical pension pot at retirement.

    Overview:

    Income Incomes continue to fall as unemployment increases (pg 4).

    Spending trends Families cut spending on luxuries as inflation bites (pg 7).

    Wealth

    Savings pots fall to 967 (982 - Aug 2011) as monthly savings hit lowest level

    in 2011 (19 Nov) (pg 8).

    Product mix Number of families with mortgages rises from 45% (Jan 2011) to 49%

    (Nov 2011) as availability increases (pg 9).

    Debt Typical family owes 10,604 or just under half of annual household income

    (23,796 Nov 2011) (pg 11).

    Look to the future Worries around the rising cost of living (61%) fall as consumers

    acclimatise (pg 13).

    Families pull together Almost a third (31%) provide financial support to their family

    and friends (pg 14).

    Families give away 2% of income Typical financial support to family and friends

    amounts to 442 annually (pg 16).

    Finances take a knock 46% said supporting family and friends meant they are less

    able to save, 24% struggle to repay debts and 11% put less into their pension (pg 16).

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    1. Living in a committed

    relationship* with no plans

    to have children

    2. Living in a committed

    relationship with plans

    to have children

    3. Living in a committed

    relationship with one child

    4. Living in a committed

    relationship with two

    or more children

    5. Divorced/separated/widowed

    with one or more child

    6. Single parent raising one

    or more child alone

    * For the purposes of this report, a committed relationship is defined as either one where two people are married or living together.

    The UK modern family

    Thirty years ago, it was relatively safe to assume that a nuclear familyconsisted of two parents and one or more children. However, as society has

    changed, this is no longer the case. In this report, Aviva looks to recognise

    the most common types of modern family based on customer profiles and

    Government data.

    The Aviva Family Finances Report 3

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    Average income continues to fall

    The typical monthly net income of a UK family (i.e. the median family in the middle of the sample) is now 1,983 (Aug 2011

    2,018) revealing a slight drop (two percent) on the figures recorded in the previous quarter.

    The main driver behind this fall appears to be the six percent drop recorded among those living in a committed relationship with

    one child. Their income fell from 2,327 (Aug 2011) to 2,196 (Nov 2011).

    The summer Family Finances Report explored the impact that children especially young children can have on family incomes and

    parents earning capacities - so this may well be a contributing factor to this drop.

    % of people on different income levels over four quarters (2011)

    All other groups also recorded lower incomes than the last quarter except for those in a committed relationship with no plans to

    have children. These families actually saw an eight percent increase from 2,180 (Aug 2011) to 2,347 (Nov 2011). However, their

    income is still lower than those in a committed relationship with plans to have children (2,402 Nov 2011).

    It is interesting to note that these two groups have the highest number of people deriving income from a primary job i.e. full-

    time employment held by the main breadwinner so any salary increases would be felt most prominently here. Indeed, 85% of

    those in a committed relationship with plans to have children and 77% of those in a committed relationship with no plans to have

    children have this type of income.

    At the other end of the scale, the number of families who survive on less than 1,250 per month has increased slightly to 30% (Nov

    2011) from 29% (Aug 2011) a worrying trend in the current high inflation environment.

    Income

    The Aviva Family Finances Report 4

    750 or less 751-1,250 1,251-2,500 2,501-5,000 More than 5,001

    Income level

    Q1

    Q2

    Q3

    Q4

    0%

    5%

    10%

    15%

    20%

    25%

    30%

    35%

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    Income sources second / part-time jobs are significant as employment decreases

    The most common source of income for the typical UK family is the primary income earners salary (70% - Nov 2011) although

    this has dropped slightly since August 2011 (72%) as the UK experiences a 17-year high in unemployment.

    While the number of families who derive income from the primary income earners job has fallen, those who see financial

    contributions from part-time or second jobs has r isen from 16% (Aug 2011) to 18% (Nov 2011). Those who are married with two

    or more children are most likely to have part-time or second jobs (22% - Nov 2011) which suggests that employment which fits

    around family commitments continues to be in high demand.

    Benefits contribute to the monthly income of more than one in five families and there has been a slight increase in the dependence

    on this type of funding 21% (Aug 2011) to 23% (Nov 2011). This appears to support the theory that unemployment is affecting

    some families, making them more reliant on the state.

    Single parents (51% - Nov 2011) are most reliant on benefits for some or all of their familys income but this figure has dropped

    from 56% (Aug 2011) potentially indicating that some of the Governments benefit reforms are having an impact.

    Despite the low interest rate environment, six percent (Nov 2011) of families derive part of their income from savings or investments.

    However, whether this is using the income or the capital itself is not clear. In addition to this, two percent of families say rental

    income contributes to their familys finances a slight decrease from August 2011 (3%) but in keeping with the general trend seen

    throughout 2011.

    The Aviva Family Finances Report 5

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    Average expenditure families maintain spending as inflation soars

    At a glance, family expenditure appears to have remained relatively stable over the last quarter with housing (mortgage or rent)

    remaining the largest single expenditure for most families (20% - Nov 2011).

    There has been a very slight decrease in the amount spent on housing, quarter on quarter (21% - Aug 2011) but this may be due to

    the increasing availability of good mortgage deals rather than any other factors.

    Typical family expenditure:

    Type of expenditure Average amount spent as % of monthly income

    Jan 2011 May 2011 Aug 2011 Nov 2011

    Housing (mortgage or rent) 20% 22% 21% 20%

    Food 10% 11% 10% 10%

    Debt repayment 8% 10% 9% 9%

    Nursery care / out of school care 9% 10% 10% 9%

    Fuel and light (e.g. gas and electricity bills) 6% 6% 5% 6%

    Motoring 5% 6% 5% 5%

    Entertainment, recreation and holidays 4% 5% 4% 3%

    Public transport fares and other travel costs 4% 4% 4% 4%

    Fees for childrens activities 4% 4% 3% 3%

    Clothing and footwear 2% 3% 2% 2%

    After housing, food (10% - Nov 2011) is the next largest expenditure for the average UK family and the percentage of income spent

    on this has remained steady for much of 2011. Debt repayments (9% - Nov 2011) and nursery care / out of school care (9% - Nov

    2011) also account for a significant percentage of many families outgoings.

    It is surprising that the percentage of income spent on some household expenses has remained stable, considering that inflation on

    some essential costs has risen significantly. Basics such as fuel and light (+18.8%), motoring (8.7%), public transport (8.5%) and

    food (6.9%) have all seen considerable increases.

    However, it appears that UK families are down-shifting their spending where at all possi

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