The research comes from LV=, an investment, protection and retirement specialist, and highlights the clear disconnect between the UK working population’s perceptions of their financial resilience and how ready they are to handle a protection event.
In the research, which was published in LV’s latest Reaching Resilience Report, 68% of workers claimed to be fairly financially resilient – however, just over 40% of workers believe they have no form of protection in place, either cover paid for by themselves or their employer.
Workers were asked what they would rely on if they were unable to work for two months or longer due to illness or injury, and the most common answers included savings, employer sick pay and support from a partner. While these are viable options, the findings in the report suggest that for many workers, this would be difficult to rely on long term, with 10% of workers holding no savings at all, 25% having less than £1,000, and almost half holding less than £10,000.
The research also showed that there is a lack of understanding among employees regarding the support offered through employer sick pay schemes, with around one in five employees not knowing what sick pay they are entitled to and only a third of workers confident they are eligible.
Households are also becoming increasingly dependent on multiple incomes, with 41% of working couples requiring both incomes to meet the current monthly cost of living – with this increasing to 52% of working couples among first-time buyers. It shows that even a short-term loss in income could have a large impact on financial security.
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Mike Farrell, LV=’s protection sales and marketing director, said: “The research highlights a clear protection gap between how financially resilient many workers feel and how prepared they actually are for an interruption to earnings. While many describe themselves as very or somewhat financially resilient, far fewer have any form of protection in place.
“For households managing ongoing debt and increasingly reliant on continuous income, the loss of earnings can quickly have serious financial consequences, particularly where savings or employer support are limited. As a result, it’s important for people to seek guidance from a financial adviser.”
LV’s Reaching Resilience research has shown a large gap between financial confidence and the ability to withstand a period of time without a consistent source of income, and having income protection can be a solution to address this risk in the case of an injury or an illness.
Jo Miller, managing director of the Income Protection Task Force, added: “This data reinforces that income protection is a core component of effective financial planning, particularly in today’s uncertain environment. LV’s research shows a significant gap remains between financial confidence and real preparedness.”
