A “pandemic paradox” is at the heart of personal finances in the UK, according to AJ Bell.

The investment platform was responding to data released by the Office for National Statistics (ONS) that showed by December, more than 9 million people in the UK had to “borrow more than usual” as a result of the COVID-19 pandemic.

However, figures published by UK Finance on Tuesday showed that credit card balances had fallen by 14.7% in a year.

The ONS also stated that at the end of March last year, 31.6% of people had said they would be unable to save for the year ahead, which increased to 38.4% by December – yet AJ Bell data has indicated that more than £150bn was saved into cash accounts last year.
 
“There’s a pandemic paradox at the heart of personal finances in the UK with signs of both financial distress and excess savings at the same time,” said AJ Bell financial analyst, Laith Khalaf.
 
“It’s clear that the young, the self-employed, and those on lower incomes have borne the brunt of the financial damage inflicted by the pandemic. But more affluent households with steady, undisturbed income streams have found themselves awash with cash, as spending options have been severely curtailed by ongoing lockdowns.
 
“It’s particularly telling that those on higher incomes who were furloughed were much more likely to be paid in full than those at the bottom end of the spectrum.”

Khalef suggested that this “paints a picture of financial pressure” falling on those least able to afford it, and added that at the end of the pandemic, the country will be left with a “wider divide between the have and have-nots.”
 
“The government will likely seek to address exacerbated inequalities while also balancing the books, which probably spells higher taxes for wealthier households,” Khalef added.
 
“However, with the virus still in full flow, tax rises have probably been pushed back. It’s six weeks until the March budget, and while a lot can still happen in that time, the Chancellor will probably still be in spend and support mode until later in the year.”

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