Selling endowments could help those households from falling further in the red

During the third quarter of 2009 Britons borrowed an average 32 pence for every pound saved, the highest level of borrowing for the year, a new study has revealed.
Chris Radford, chief executive officer of aap, the UK's biggest buyer of endowment policies, said some of its customers had decided to sell their underperforming endowment policies and start clearing their debt, rather than turning to further credit to see them through the economic downturn.

Many households relying on credit during the recession

The poll by Unbiased.co.uk found that saving levels have also dropped. During the second quarter of the year £19 billion was saved by Britons, but this declined to £13 billion during the third quarter.

With less money put to one side, people could find that large expenditures are less able to be covered and, as such, personal loans and credit cards could be relied upon to cover the cost.

Debt levels have not reduced in order to accommodate this decline in saving. They are now almost double what they were at the start of the year.

This could mean that many households will have to tackle climbing debt repayments in 2010.

Chief executive of Unbiased.co.uk Karen Barrett said: "After the dramatic retreat from savings in favour of paying off personal debt in the first half of 2008, consumers are now slipping back into old habits, by borrowing around a third of what they save."

She added that with "savings levels currently billions lower than they were back in 2006 and 2007, this is creating a serious barrier to a sustained economic recovery".

Selling endowment policies could help get households back into the black

Mr Radford, from aap, said some of its customers who wanted to get their household coffers out of the red had decided to sell their unwanted endowment policies so they could make headway into clearing debt.

He added that should aap make an offer to purchase an endowment policy, it will always pay more than the surrender value offered by the insurance company.

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Could selling endowment policies offer financial security?

Households keen to start a family may want to make sure that they can provide their children with the financial security that they need in order to enjoy a comfortable upbringing.

A study conducted by National Savings & Investments (NS&I) reveals that 64 per cent of Britons think financial security is important to put in place before considering starting a family for the first time.

With the suggested annual cost of raising a child being around £25,000, many would-be parents could find this figure hard to save in order to give their child the kind of start in life they hope for.

Chris Radford, from aap, the UK's biggest buyer of endowment policies, said some of its customers with children, or who plan to start a family in the near future, had decided to sell their underperforming endowment policies so that they could raise the cash required to help with family costs.

The £25,000 figure is the annual income that many Britons believe is necessary to cover the cost of raising a child, according to the research, while the majority (78 per cent) list money as a deciding factor behind the number of offspring that they choose to have.

However, for 12 per cent of respondents, an annual household income of between £40,000 and £70,000 is suggested as being necessary before it becomes reasonable to have children.

NS&I savings spokesman Tim Mack says: "Starting a family is always going to be much more than a purely economic decision."

But he adds: "Britons are also considering their financial future when deciding on the number of children they will have."

On average, men were keen to put in place more of a "financial cushion", typically wanting a sum of £27,000 to pay for bringing up a baby, compared with women's general desire of £23,000 as a monetary safety net.

Mr Radford, from aap said some of its customers have decided to sell their underperforming endowment policies in order to address their current financial standing and make their family finances stronger for the future.

He added that should aap make an offer to purchase an endowment policy, it will always pay more than the surrender value offered by the insurance company.

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