What the Financial Lives survey tells us about money and mental health during the pandemic

This week the Financial Conduct Authority (FCA), which regulates financial services, published the latest instalment of its Financial Lives survey. This is a nationally representative survey looking at people’s attitudes towards managing their money, and their experiences of engaging with financial services firms.

It offers a valuable insight into people’s experiences of financial difficulty at the start of and during the pandemic – and the particular challenges people with mental health problems are facing. Read on for our key takeaways from the research:

The FCA’s analysis confirms what has long been one of our key concerns at Money and Mental Health: that many people with mental health problems face significant barriers to using financial services. 42% of people with mental health problems, low mental capacity or cognitive difficulties said they found dealing with customer services on the phone confusing or difficult. Around a third said they were anxious when shopping around for financial products and services, and that they put off dealing with financial matters, such as ignoring warning letters. These problems have serious consequences — with 29% saying they had fallen into debt because they had not wanted to deal with difficult financial situations.

Through our Mental Health Accessible programme, we’re working with firms to address these problems by making their services more accessible for people with mental health problems — find out more here.

The survey reveals a worrying picture of how the pandemic has affected people’s finances. It shows that the financial circumstances of 20m people have worsened during the pandemic; 9.8m say they have cut back on essentials like food clothing, and a similar number say their unsecured debt (e.g. through credit cards, overdrafts and payday loans) has increased.

With so many people facing higher levels of debt and financial difficulty, it’s critical that banks (and other essential service firms) do what they can to minimise the distress customers are experiencing. In particular, we want to see firms taking steps to make their communications to customers in debt more supportive and less intimidating. Through Mental Health Accessible, we are working with companies to help them improve their debt communications, from that very first missed payment notification to text messages, website content and telephone scripts.

Another important insight from the FCA’s survey is that many people in serious debt are not getting the help they need to deal with it. The analysis suggests that 6.8m people who might benefit from debt advice during the pandemic were not receiving it. People told the FCA that the biggest barriers to accessing such services are embarrassment about discussing their debts or not wanting to face dealing with the problem, and lack of awareness about free debt advice services or how to contact them. 

This echoes the findings of our report Help Along the Way, which highlighted the particular difficulties that many people with mental health problems face in accessing debt advice. These include not knowing where to turn for help in the first place, to challenges in getting help which understands their mental health problems. 

We want debt advice providers to make it easier for people with mental health problems to access the support they offer. That means making information about their services clearer, offering a greater range of communication channels, and equipping advisers with training to better support people with poor mental health. Find out more in our best practice checklist for debt advice providers.

The FCA’s survey also features some stark findings on the prevalence and impact of online scams during the pandemic. Over a third of people (36%) said they had encountered phishing scams, for example claiming to be from the government offering Covid-19 financial support, or from the NHS Test and Trace service. 1.4m adults say they paid out money as a result of a Covid-19 possible scam. Moreover, the FCA says that people with ‘characteristics of vulnerability’ – such as mental health problems – are more susceptible to these approaches: 12% paid out money, compared with just 1% of those with no such characteristics. 

These findings echo our recent report Caught in the Web, which highlighted the worrying scale of online scams during the first six months of the pandemic — and how that people with mental health problems are three times more likely to fall victim. We’re calling on the government to tackle these problems by including online scams in its upcoming Online Harms Bill, and to charge its new online harms regulator with cracking down on scams online.