Urgent reform of Universal Credit (UC) is needed to provide support to vulnerable households, according to responsible lender  Creditspring, as nearly a third (29%) of low earners are reliant on savings to pay bills – compared to the 21% average for the rest of the UK.

New research from Creditspring also indicates that almost a quarter (22%) of people across the UK will have to take out a loan to pay a bill when their savings run out.

Whilst the recent government support limiting the impact of the rising energy cap is welcome, this is a short-term fix and unlikely to go far enough to provide relief to the millions of people struggling with the day-to-day cost of living.

To provide much-needed support to households, Creditspring is calling for the government to bring forward the planned increase to Universal Credit. This echoes recommendations from StepChange, the national debt charity which Creditspring works alongside to offer members advice, for government plans to raise Universal Credit now rather than in April 2023.

Up-rating Universal Credit payments to bring them in line with inflation would increase payments by £33.16 a month to £368.07.

StepChange has also called for deductions on Universal Credit – such as outstanding costs such as energy bills arrears, council tax and child support maintenance – to be temporarily paused

Creditspring’s research also indicates the scale of the UK’s financial instability, with over a third (35%) of people - or 18.5 million - saying rising living costs are making them feel financially unstable.

A third (35%) of people are terrified of their financial future, and two in five (42%) say they feel stuck and that there is ‘nothing they can do’ to improve their financial situation.

Neil Kadagathur, Co-Founder and CEO of Creditspring, comments: “The recently announced support for energy bills provided a lifeline for millions of people. However, much more support is needed if the UK is going to avoid drowning in debt when we finally emerge from the cost-of-living crisis.

“Any future support must also focus on the most vulnerable households who are unlikely to be able to keep afloat under the current financial pressures. Overhauling the Universal Credit model, at least temporarily, will be one of the most effective tools to provide vital support to often marginalised communities that risk being left behind.

“StepChange’s policy recommendations for increased Universal Credit support could prove the difference for those most in need, at a time when we should be doing everything possible to support households.”

Improved approach to financial education vital to provide longer-term support

A quarter of people (23%) also say they need more support to manage their finances, but don’t know where to turn to get it. Creditspring’s research shows a desire for improved education about finances, with more than half of people (52%) saying it’s the responsibility of the government to ensure people receive better financial education and three-quarters (76%) saying financial education should be compulsory in schools.

Creditspring adds that government regulation ensuring financial services institutions offer greater financial education to customers will be vital to provide borrowers with the financial tools needed to withstand the cost of living crisis.

Neil Kadagathur: “There is clearly a longer-term need for enhanced financial education across the UK - whether that’s led by financial institutions, local authorities or central government. A more cohesive approach to empower people to make improved financial decisions is vital.”

Creditspring’s members benefit from the platform’s affordable, easy-to-use loans and education tools, including its Stability Hub service which offers members a financial health audit and personalised tips to improve their financial situation.

Creditspring has just launched its latest education tool - Spring Score – which provides insight into members’ eligibility for Creditspring products to improve access to financial support tools such as ‘Step’ credit builder which helps members gradually improve their credit score without running the risk of incurring further debt.