Insolvency rates up among women and young people

Last year saw individual insolvency rates in the UK increase for the first time since 2009, with insolvencies amongst women and younger age groups showing the biggest rate of growth, according to figures from the Insolvency Service

Its annual breakdown shows the total insolvency rate increased in all regions of England and Wales between 2015 and 2016. The North East continued to have the highest insolvency rates, while London had the lowest.

Insolvency rates were highest in the 35-44 age group for both males and females, and increased for all age groups except 55 and over, with those aged between 18-44 showing the biggest rises. The insolvency rate for females was higher than the male rate for the third successive year, and the gap has continued to widen, the Insolvency Service says. 

There were 20.6 insolvencies per 10,000 women in 2016 compared to 18.7 insolvencies per 10,000 men. There were 19.7 insolvencies per 10,000 for all adults. Women were involved in 65% of debt relief orders (DROs), 52% of individual voluntary arrangements (IVAs), and 39% of bankruptcies.

Mark Sands, chair of R3’s personal insolvency committee, said: ‘The gap in insolvencies between men and women is becoming entrenched, with women consistently more likely than men to enter an insolvency procedure.’

Sands challenged categorisation of women as more ‘profligate’ as wide of the mark, and said that an analysis of the different categories insolvency procedures suggested other factors are at play.

‘The big differences come when you look at DROs and bankruptcies. Women are much more likely than men to use a DRO, which is designed to help people with assets under £1,000 unable to pay even low value debts.

‘It’s very easy to “over-spend” if you don’t have much money available to you in the first place. Penalties like unauthorised overdraft charges or missed payment fees can become a problem and can keep people in a debt spiral.

‘Lower incomes and employment levels mean women are more likely to be vulnerable to financial shocks and have less room for financial manoeuvre than men. As women make up the majority of the public sector workforce, they will also have been disproportionately affected by the public sector pay cap.’

In contrast, R3 analysis suggests men are more likely than women to be affected by bankruptcy, the least common type of insolvency procedure, accounting for 61% of the total. Bankruptcies can be used to deal with larger value assets or debts, and Insolvency Service statistics link them to events like an individual’s company failing or the loss of their job.

Sands said: ‘With a growing economy, bankruptcy numbers have been dropping steadily since 2009-10, which has helped insolvency rates fall faster in the medium-term for men than women.

‘A key factor behind the fact that women were involved in under a third of insolvencies in 2000 but over half now is that, over the last decade or so, the insolvency framework has become more accessible and effective at dealing with different types of problem debt. This has made insolvency numbers more accurately reflect existing financial inequality between men and women.’

As regards the age profile of insolvencies, the figures show that in the 18-24 age bracket, the number of cases per 10,000 people grew from 6.4 in 2015 to 9.1 in 2016, while in the 25-34 age group, there was an increase from 23.4 to 29.9.

Alec Pillmoor, personal insolvency partner at RSM, said: ‘Worryingly, these latest figures indicate that the 18-34 age group has shown the largest increase in personal insolvencies. For this new generation of borrowers who have never experienced a rate rise, the concern is that many are not budgeting for the potential increased costs of repayments on loans, mortgages and car finance deals. With the prospect of a rise as early as this year, this could spell trouble.’

The Insolvency Service report, Individual Insolvencies by Location, Age and Gender, England and Wales, 2016 is here.

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