Helping the under-protected back-up their income

Helping the underprotected back-up their income

Jennifer Gilchrist Protection Specialist

The UK has certainly been through its share of ups and downs recently - arguably more downs than ups – but fingers crossed, things are finally starting to turn around.

Now that we’re emerging from the Covid-19 crisis, we can reflect on what this period of uncertainty has taught us. One of the things the past 18 months has highlighted is the financial vulnerabilities of certain groups within our society.

In the grip of the first UK lockdown, many people were concerned about meeting the cost of keeping a roof over their heads as businesses closed or they became too ill to work. In March 2020, the Government announced that homeowners would be able to apply for up to three months mortgage holiday – this was later extended to up to six months1.

However, tenants in the UK who were struggling to make rent payments had to rely on their landlord firstly applying for a mortgage holiday, and then passing the relief onto them. It wasn’t until five months into the pandemic, in August 2020, that the Government legislation was passed protecting tenants from forced eviction for six months if they fell into rent arrears due to the crisis.

I know this was an unprecedented time in all our lives, but as a company focused on helping people build their financial resilience, the disparity in the different levels of support available to these two groups - homeowners and tenants - got us thinking.

And it turns out things aren’t much different when it comes to protection.

A lack of signposting to advice

As advisers, you’ll no doubt have noticed that there’s a lack of routes to advised protection for people who rent in the UK. Typically, the reason most people will initially seek out and speak to an adviser is to arrange a mortgage, and the protection conversation naturally follows on from this. However, as tenants aren’t seeking this type of professional advice, they’re often unaware of their protection needs – leaving them in a vulnerable position.

Changes in the rental market

The same report also showed that there’s a growing rental market in the UK. Since 2007 the number of households privately renting has increased by 61%. And this trend is expected to continue.3 For many people, renting is no longer seen as a stepping-stone to buying their first home. It’s a lifestyle choice, especially in large cities, such as London, where buying is just not seen as a viable option, even for older professionals. In fact, Hymans Robertson found that the average renter has been renting for over 10 years, and the number of middle-aged renters doubled between 2007 and 2017. Furthermore, 50% of all children born in 2018, were born into rented accommodation3 .

Plus, tenants tend to spend a higher proportion of their salary on housing costs. For example, in London rent accounts for, on average, 65% of a tenant’s income – 20% more than a homeowner in London spends on a mortgage. With rent costs higher than mortgage costs in many areas in the UK, it may also be more difficult for renters to save enough to cover emergencies.3

So, can we, as an industry, afford to let this growing group of tenants remain under-protected and more at risk of losing their home if they can’t pay their rent and essential bills if they’re too ill to work due to illness and injury?