Age, gender and insolvency

11 February 2019

Personal insolvencies rose for the third successive year in 2018; there were over 115,000 insolvencies last year, up 16% on 2017, the highest annual total since 2011). However, if you look into the details of Insolvency Service’s various different datasets you can see that changes in insolvency numbers aren’t uniform: there are big differences in the number of men and women entering insolvency procedures, while age makes a big difference to a person’s risk of insolvency, too.

Gender

The latest year for which we have a full demographic breakdown is 2017 (the 2018 stats will be published in the summer). Women continued to have a higher insolvency rate than men in 2017, with 22.6 insolvencies per 10,000 women compared to 20.2 insolvencies per 10,000 men. This has been the case since 2014: previously, men had a higher personal insolvency rate, but the gap began to narrow after 2009.

The big factor behind the gender gap is the relative difference between the precariousness of men’s and women’s finances – it’s certainly not because of the outdated stereotype that women ‘spend more’. Essentially, women’s finances tend to be more vulnerable than men’s.

A number of factors contribute to women’s weaker financial position. For example, women are more likely to work part time than men, and dominate sectors and roles with lower pay. While unemployment remained relatively low throughout 2017, women made up a larger portion of those on zero hours contracts, which are often associated with insecure and low paid work. As a result, women are more vulnerable to financial shocks, such as a relationship breakdown. According to R3’s 2016 report, one of the leading causes of women entering bankruptcy is relationship breakdown, as opposed to business failure, which is one of the most commonly cited reasons for men entering bankruptcy. Women are also more likely to be single parents than men, which has a high correlation with financial difficulty; new analysis shows that single mothers make up over 85% of households that have had their benefits capped.

Research carried out by ComRes on behalf of R3 indicates that British women (32%) were significantly more likely than men (23%) to say it would be very difficult or impossible for them to immediately pay an unexpected bill of £100 without external assistance. This was also the case when asked about bills for any other amounts tested: £20 (7% women vs. 4% men); £50 (19% vs. 13%); £250 (47% vs. 36%), and £500 (60% vs. 45%).*

Differences in men’s and women’s finances show up in the gender splits of the different types of insolvency procedures. Individual Voluntary Arrangements (IVAs), which are often linked to consumer spending, are used relatively equally by men and women: 53% of those entering an IVA in 2017 were women while 47% were men (which is pretty close to the UK’s overall demographics: women account for 51% of the population). In contrast, men make up 61% of those entering bankruptcy, an insolvency procedure associated with higher debt and asset levels, often triggered by job loss or the failure of an individual’s business. Men typically earn more, or are more likely to run their own business, so it makes sense that men are the more likely candidates for bankruptcy. On the other hand women accounted for two thirds (65%) of Debt Relief Orders (DROs), a procedure designed for those with very low incomes, debts and assets.

The introduction of DROs in 2009 likely played a big part in the personal insolvency rate for women overtaking the men’s rate, as DROs have allowed people with low asset and debt levels (who are likelier to be women) to access an insolvency procedure for the first time – many previously may have been ‘locked out’ of bankruptcy because of the costs involved in the process. Entering a DRO costs just £90, while the government fees for entering bankruptcy voluntarily total £680, which must be paid up front, either in instalments or as a lump sum.

Age

The pattern of insolvency among different age groups remained broadly the same as previous years in 2017: insolvency rates remain low among young adults, and rise steadily until they peak in the 35-44 age groups, and decrease in older adulthood. Comparing 2017 and 2016, the insolvency rate rose most significantly among those aged 25-34, with an annual rate rise of 5.7, reaching 35.6 per 10,000 adults in that age group. In contrast, insolvency rates among older adults (the 55-64 and 64+ age range) fell year-on-year.

IVAs are the most widely used personal insolvency procedures among young adults (those aged 25-34), and could be linked to the rising cost of living and rent, which together with limited wage growth over recent years has put pressure on the budgets of young adults. Research shows that one in five 25-34 year olds had used their credit card to buy daily essentials, compared to 6% of over 55s. Bankruptcy, meanwhile, was the most common form of insolvency procedure for 35-44 year olds, which is perhaps not surprising as bankruptcy tends to be associated with higher debts and asset levels. Individuals in this age group are more likely to own assets such as homes and vehicles which would make bankruptcy the most suitable option for them.

Demographic trends alone will never tell the full picture of insolvency, and just being part of an age group or of a gender less likely to become insolvent is no guarantee of financial stability. Taking early action to deal with financial problems when they arise is always a good idea, as is ensuring that any source of advice on personal finance issues is impartial, professional, and trustworthy.

* ComRes interviewed 2,042 British adults online between the 17th and 18th October 2018. Data were weighted to be demographically representative of all British adults by age, gender and region. ComRes is a member of the British Polling Council and abides by its rules. Full data tables are available at www.comresglobal.com.

Age, gender and insolvency

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