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Middle classes forced to dig into their savings

Middle Britain has a financial fight on its hands and seems to be tightening its belt collectively, as the economy worsens and the credit crunch continues to play out.

According to a new study by insurer AXA, seven in 10 households with an income in excess of £30,000 are now looking to cut their spending. But more alarmingly for their long-term financial health, many respondents to the survey said they were going to eat into their life savings or reduce their pension contributions in order to meet increasing household bills.

What's more, one in seven of the 6,000 households surveyed said a previously non-working family member had decided to get a job so they could contribute.

Meanwhile, one in 10 of those respondents who had insurance in place – such as critical illness or life cover – said they were considering letting their policies lapse so they could redirect the savings to the family budget.

On a more day-to-day basis, almost half said they would be eating out on fewer occasions and one in five reported that they would socialise less with friends – all in a bid to save cash.

"It's no wonder that these households are struggling to cope," said Steve Folkard from AXA. "A typical family in Middle Britain may have a higher-than- average income but millions are weighed down by high lifestyle costs and face tough choices as the financial strain takes its toll.

"One of the biggest issues, however, is that many seemingly well-off households lack the motivation to tackle their problems," he added. "We've had it easy for so long – and been happily spending without thinking of the consequences – that now people aren't sure what to do."