Depleting disposable income forces consumers to reassess lifestyle choices
Disposable income has fallen for the first time in 11 years, according to research from uSwitch. The comparison website revealed that average disposable income has declined in a year from 35% of the gross household income to 28% due to rises in the prices of household essentials such as gas and petrol.
In addition, as income tax rises 6% and social contributions rise 4.6% this year, net household income as a proportion of gross household income has fallen 0.5% since 2007. Tax and National Insurance now account for the highest proportion (21%) of gross household income since 1991.
Ann Robinson, director of consumer policy at uSwitch, said: "It's been a year since the start of the credit crunch and these figures reveal the exact price being paid by British consumers. Consumers are in a lose-lose situation where everything is shooting up except their income."
The survey highlighted that while some households in towns and cities spent 30% of their gross household income on essential bills, in others, notably Newcastle, this was nearly 80%.
Rajni Padia, an adviser with Niche Finance, said, in terms of protection sales, it was easy to establish what clients could afford through adjusting their habits. He said: "Disposable income is dropping but it's a fact of life that if you want to save, you will."
He added: "I had a client last week who claimed his disposable income was nothing. He said he drank two pints a day which is £5, or £30 a week. Would one pint instead of two make any difference? It's £900 a year. I think it's a question of looking at expenditure in detail and I think a bit of time spent on personal habits, for some, would be valuable."
