UK works 31 days solid just to clear interest on credit card and loan debt (Consumer)

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• Thursday 1^st February 2007 declared Debt Freedom Day
• January earnings are just enough to service the interest on our debt – without actually reducing it

As many employees open a long awaited January pay slip, experts warn that interest on personal debt has swallowed up the entire month’s earnings. Latest figures* from Unbiased.co.uk, the organisation promoting the benefits of independent financial advice, show that as a nation, we have worked 31 days solid to earn enough money just to service the interest on the our credit card and loan debt, and thus Thursday 1^st February 2007 is hailed as Debt Freedom Day. 

Independent analysis of official figures** shows that in order to clear the £2,012 interest on an average person’s credit card and loan debt, it would take someone earning the UK average of £23,556, all of January (31 days of the year) to earn enough just to service the outstanding interest on their debt, let alone re-paying the actual debt itself, emphasising the nation’s continued reluctance to rein in spending and take control of their financial situations.

Whilst levels of personal debt have been reduced by 7% over the last three years and average levels of interest payable on this debt has come down by 59%, Debt Freedom Day signifies just how much debt people still have to their name, and most importantly, the proportion of income needed to service this financial burden.  Recent Savings Brake figures*** from Unbiased.co.uk also show that we are continuing to rely on borrowed money, and for every pound saved are borrowing 49 pence.

David Elms, Chief Executive of Unbiased.co.uk said: “Although Debt Freedom Day is of course a hypothetical point in the financial calendar, it does serve a real purpose and should be seen as a wake up call to those who carry personal debt.  Debt Freedom Day does fall slightly earlier this year****, which is undoubtedly good news, as it means average levels of personal debt continue to fall year on year, but the real headline will come when official figures show people controlling their spending behaviour and increasing their saving power, and this date becomes a non entity.

“Why spend an entire month slaving away to earn just enough money to service the interest on this financial burden? Surely people would rather see this money work hard for them in return, and deliver them a healthy savings pot or a nest egg to enjoy in the future. An independent financial adviser (IFA) can help you sit down and assess your financial situation and help you identify where your monthly budgeting could be improved and help you embark on the path to saving.”

To help consumers take control of their spending habits, reduce their debt burden and convert some of their outgoings to savings for the future, Unbiased.co.uk offers an online guide full of information on how to budget better and reduce your financial burden.  Consumers can also benefit from using the online budget calculator, as well as a series of handy tips to help rein in spending.  For online information and details of local IFAs who can help you make your money go further visit www.unbiased.co.uk/getsaving or alternatively call free on 0800 085 3250

-ends-

* According to independent analysis of the most recent official figures conducted by independent agency, RAKM, on behalf of IFA Promotion.  Data sources are Bank of England, British Bankers Association (unsecured borrowing + equity release, no mortgages), ABI, AITC and IMA.  With detailed queries on this analysis call Paul Hersey on 01737 342863.

** Levels of personal debt have fallen from £62bn in 2004 to £58bn in 2006 and average levels of interest payable on this debt have fallen from £3,200 in 2003 compared to £2012 in 2007

*** Savings Brake figure refers to the ratio of how much we are borrowing, not including mortgage debt, contrasted with how much we are saving.  See table 1

Table 1

**** Debt Freedom Day 2006 fell on Monday 6^th February. 

For further information please contact:

For expert comment or case studies from over 200 media-friendly IFAs, journalists should call unbiased.co.uk’s Media Services hotline on 020 7294 3682 or search online at www.unbiased.co.uk/media

1.      Independent Financial Adviser Promotion

Unbiased.co.uk is the consumer brand of IFA Promotion, the organisation established in 1989 to promote the value and accessibility of independent financial advice to the public. It represents around 9,000 firms of independent financial advisers across the UK, incorporating over 17,000 registered individuals. These individuals hold over 20,000 incremental qualifications which are each individually verified by the awarding body. IFA Promotion welcomes the prominent display of incremental qualifications and further developments into the credentials of independent financial advice.  

IFA Promotion is sponsored by 31 leading financial institutions, and in the past 12 months, over 600,000 consumers and businesses used unbiased.co.uk to find local independent financial advice.

IFA Promotion believes Independent financial advice should be:

• Affordable. The option to take independent financial advice should be available, by right, to all- not just the wealthiest in society.
• Convenient. IFAs should be available in the location of the consumer’s choice, wherever they live in the UK.
• Transparent. It must be clearly transparent to consumers who is able to offer independent financial advice and who is not.

  2.      Independent Financial Adviser Promotion’s sponsors

  Aberdeen Asset Management	Lincoln Financial Group
  Abbey	Mortgage Express
  AEGON Scottish Equitable Plc	National Savings & Investments
  Alliance Trust	NatWest Business Banking
  AXA Life	New Star Investment Funds
  Bright Grey	Norwich Union Life
  BUPA Health Services	Prudential
  Canada Life Ltd	Scottish Life
  The Children’s Mutual	Scottish Life International
  Clerical Medical Investment	Scottish Widows Plc
  Defaqto	Skandia UK Group
  Friends Provident	Standard Life Assurance Company
  GE Life	UnumProvident
  Invesco Perpetual	Webline Limited
  Legal & General	Zurich Intermediary Group
  London Mortgage Company

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