From 1st October, rising energy bills, food inflation and the Universal Credit cut will mean millions of families could be £107 worse off every month, according to new research from Royal London.1
From October, the £20 weekly uplift to Universal Credit which equates to £86.66 a month, is due to be withdrawn. According to the Government, 5.9m people are on Universal Credit, increasing from 3m before the pandemic in March 2020.2 Furlough schemes will also end in October which could mean job losses or fewer working hours, further reducing income for some households.
Against a backdrop of rising gas prices, energy costs are also likely to increase from 1st October for 15m households.3 Those on a default dual fuel tariff, paying by direct debit will see an average annual increase of £139 from £1,138 to £1,277. This equates to an increase from £95 to £104 a month. More than 4m prepayment customers will see an even larger annual increase of £153 from £1,156 to £1,309; a rise of nearly £13 a month. In addition, with rising gas prices, failing energy suppliers and higher usage in winter, all UK households could see a surge in the price of their energy over the next few months.
Last year, the average household spent £277 a month on food expenses,3 but latest inflation figures of 3% from the Consumer Price Index suggest this could increase to £285 a month this year.4
Sarah Pennells, Consumer Finance Specialist at Royal London, said:
“The Covid-19 pandemic is perhaps the biggest life shock our society has experienced. As we continue to feel its effects, there’s never been a more urgent need to help those who are financially vulnerable.”
Royal London has a partnership with national charity Turn2us, to help more people prevent a life shock from becoming a crisis. Recent research found that 15.9m UK adults are more financially vulnerable as a result of the Covid-19 pandemic.6
Sarah continued: “From October, many families are going to be hit by significant changes to their monthly outgoings and many will have less money to pay their bills due to the cut in Universal Credit. But there are organisations that can offer support, such as our charity partner Turn2us, who can help people work out what benefits or grants they may be eligible for.
“For those suffering from a financial shock or worried about making ends meet, there are steps you can take. For example, if you’re finding it hard to pay your energy bills, contact your provider as they should help you with ways to pay and don’t be afraid to ask for help from a debt advice charity if you’re struggling.”
Thomas Lawson, Chief Executive at Turn2us, comments:
“The coming months will undoubtedly be very hard for individuals and families across the UK. The £20 per week cut to Universal Credit was already going to leave many families struggling to keep up with the cost of living. This, now combined with a sudden surge in energy prices, could spell disaster and plunge thousands more people into financial insecurity or even poverty; especially those of us whose financial resilience has been worn away by the pandemic.
“Our own research tells us that over half (52%) of people on Universal Credit will struggle to pay their bills when the cut comes into effect, with a further one in four people (25%) unable to afford their rent or mortgage payments. This means a very bleak winter for the most financially insecure among us and urgent action is certainly needed from the government to safeguard people against financial crisis. We also urge everyone to check what support they are eligible for and contact their utility suppliers if they know they are going to struggle to pay upcoming bills.”
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About Royal London
Royal London is the largest mutual life insurance, pensions and investment company in the UK, with assets under management of £153 billion, 8.8 million policies in force and 4,075 employees. Figures quoted are as at 30 June 2021.
Notes to Editors
- £107 a month is based on total on average food bill with inflation, average dual fuel medium usage energy price and withdrawal of universal credit increase.
- Number of people on Universal Credit as of August 2021.
- Energy bill prices and numbers according to Ofgem.
- Household food expenditure based on ONS: Family spending workbook 1: detailed expenditure and trends.
- Consumer Price Index.
- Royal London surveyed 2,000 nationally representative UK adults aged over 18. Research was carried out by Opinium between 13/08/2021 - 17/08/2021.