- Need for debt advice to rise when Covid-19 support measures end in coming months
Money guidance helplines are preparing for a rise in people needing debt advice in early 2021 with a call about debt expected at least every four minutes throughout January1 at the Money and Pensions Service (MaPS), who are anticipating that debt advice demand will grow this year due to the continued impact of the Covid-19 pandemic.
Last year, over 3,800 debt calls were made to the free Money Advice Service (MAS) helpline (on 0800 138 7777) in January, while there were 31,000 visits to the MAS debt advice locator, a tool that connects people with the most convenient debt advice providers over the phone or online.
MaPS, which is the largest single funder of free debt advice in England2, forecasts that January 2021 will see debt advice traffic increase to at least the high rate seen in January 2020, and peak the week commencing January 18th, as credit card bills from December arrive before people have received their first pay cheque of the year.
In 2020, MaPS forecasted that the need for debt advice is expected to increase by 60% due to the financial impact of the Covid-19 pandemic.3 So far, demand for debt advice has not increased, due to support measures like payment holidays and a pause on other credit collection activity. However, MaPS expects that demand for debt advice will increase over the next 12 to 18 months, particularly when support measures come to an end.
While challenging times lie ahead for many people in 2021, steps have been taken to ensure that support is available to people in financial difficulty. An extra £37.8 million in funding from HM Treasury was secured by MaPS to ensure an additional 1 million people in England get debt advice over the next 12 to 18 months, while enhanced money guidance is available to a further 2 million.4 MaPS has also supported the recruitment of an additional 550 debt advisors into the sector to help increase capacity in the face of increased demand for debt advice.
Caroline Siarkiewicz, Chief Executive at the Money and Pensions Service said:
“January is often a difficult time of year for some people who are worried about bills piling up after Christmas. This year many are facing additional money pressures as they grapple with the ongoing financial impact of the Covid-19 pandemic.
“Although it’s tempting to avoid dealing with money worries we know the sooner you act, the easier it will be. Our research shows three quarters of people who seek help feel more in control after getting debt advice5. I would urge anyone who is worried or struggling to keep up with bills or financial commitments to speak to the Money Advice Service for free, confidential support. You can also use the debt advice locator tool on our website.
“We know many people have been helped by the furlough scheme and special flexibility on products such as mortgages and loans, but there are likely to be challenges when these come to an end.
“If you are worried about the impact of Covid-19 you can also use the Money Navigator tool on the Money Advice Service website which will provide tailored guidance based on your circumstances, to find a way forward with your finances. The New Year is a good time to take stock of your finances and review your household budget to see if there are areas where you could make adjustments.”
MaPS offer the following top tips for tackling your money worries:
- Open up to someone. Talking about money can be challenging because of feelings of shame, embarrassment or not wanting to burden others. However, opening up to someone can be an important first step to help you regain control of your finances. Research has also shown that people who talk about money feel less stressed or anxious and more in control.
- Work out your debts. Write down everything that you owe. This might seem overwhelming but facing up to what you owe will help in the long run.
- Pay debts in the right order. Make sure to pay priority bills and debts such as mortgage, rent and energy payments before secondary debts like overdrafts, personal loans, credit cards and Buy Now Pay Later (BNPL) arrangements. You should pay back BNPL agreements only after paying off any priority debts first.
- Avoid high-cost credit. While it can be tempting to use high-cost credit options like payday loans, if you do need to borrow, then shop around and consider more affordable options like credit unions.
- Set a budget. A good way to understand how much you can afford to pay back each month is to write down what your income is and list all your expenditure. The budget planner on the Money Advice Service website can help you calculate this.
- Seek professional help quickly if you are struggling with debt as the sooner you act, the easier it will be to manage. You can use the debt advice locator tool to find a free debt adviser in your local area. MaPS data shows 63% of customers with debts are reducing or clearing them within 3-6 months after receiving debt advice6.
-ENDS-
For media enquiries contact:
- MaPS Press Office 020 8132 5284 / media@maps.org.uk
- Mia Cochrane, senior press officer 020 8132 4937 / mia.cochrane@maps.org.uk
Notes to editors:
- Based on rounded average number of 3,856 debt-related calls in January with the Money Advice Service helpline open for 230 hours. 3856/ 230 = 16.7 calls an hour or one call every 4 minutes 60 / 16.7 = 3.59
- MaPS funds debt advice delivered by organisations such as Citizens Advice, StepChange and National DebtLine.
- The forecast of Covid-19 impact on debt advice need was modelled in early April 2020, with assumptions based on policy at that time.
Debt advice need was modelled using macro-economic variable (unemployment, personal insolvencies) trends based on the period 2007-2011 along with MaPS-held insight into historic debt advice need. Before the crisis, MaPS estimated that just over 5 million people in the UK needed debt advice due to regularly missing payments. Our modelling suggested that, factoring in the impact of Covid-19, this would increase to around 8 million people over the next 18 months, peaking around the end of 2021. - The extra money is in addition to the existing MaPS budget for debt advice in 2020/21 of £64.6 million and will come from a combination of government funds, reallocated MaPS budget and an industry levy. MaPS is also working with the FCA to establish a fairer and more sustainable debt advice funding approach for the future. In addition to the £37.8 million for England, £5.9 million was also allocated to Northern Ireland, Scotland and Wales because debt advice is a devolved matter
- 2018-19 outcome evaluation of debt advice funded by Money and Pensions Service (2019)
- 2018-19 outcome evaluation of debt advice funded by Money and Pensions Service (2019)
About the Money and Pensions Service
The Money and Pensions Service (MaPS) is here to ensure every person feels more in control of their finances throughout their lives: from pocket money to pensions. When they are, communities are healthier, businesses are more prosperous, the economy benefits and individuals feel better off. MaPS delivers free and impartial money and pensions guidance to the public through the Money Advice Service, The Pensions Advisory Service and Pension Wise.
MaPS is working to make sure the whole of the UK understands that financial, physical and mental health are all deeply connected. MaPS’ role is to connect organisations with the shared purpose of achieving the five goals set out in the UK Strategy for Financial Wellbeing.
MaPS supports innovation so that everyone can use the most effective methods to help people feel more in control of their money, targeted to those most in need and inclusive of people from all backgrounds. MaPS is an arm’s-length body sponsored by the Department for Work and Pensions (DWP).
For further information visit www.maps.org.uk. Members of the public can get free guidance about their money and pensions via:
www.moneyadviceservice.org.uk / 0800 138 7777