A growing number of UK households are at risk of financial collapse, according to new research from Royal London, which reveals a stark divide between those managing to weather the cost of living crisis and those pushed to breaking point.

The mutual insurer’s annual Financial Resilience Report found that nearly one in 10 adults — around 9% — are on the brink of a financial crisis, with a further 2% already in one.

The situation is especially acute among adults aged 30 to 49, with 16% of this group either already in crisis or dangerously close to it. Less than half of mid-lifers — just 41% — expressed satisfaction with their current standard of living.

One of the most concerning findings is the persistence of minimal financial buffers. One in five adults continue to have less than £100 in savings — a figure that has remained unchanged since 2023 — leaving them vulnerable to rising prices and unforeseen expenses.

While there are signs of tentative recovery, with 59% of adults now reporting a financial surplus at the end of the month compared to 49% last year, any improvement remains uneven. The average amount held in cash savings has also risen marginally, from £15,549 in 2024 to £15,864.

For families with children under the age of 18, however, the pressure is mounting. Nearly half — 47% — say they are either close to financial crisis or already feeling significant strain. Many are being forced to make difficult decisions, with 36% reducing their heating, 33% cutting back on social and leisure activities, and 11% admitting to trimming their meal budgets.

Housing costs are a key driver of financial vulnerability, particularly among single-person households. Almost three-quarters — 72% — of single renters said their housing costs had increased in the 12 months to February 2025, with an average monthly rise of £218.

The steepest increases were felt in the private rental sector, where average costs climbed by £304 per month. Social housing tenants reported a more modest, though still significant, rise of £159.

Those with mortgages have not been spared. More than half — 53% — of mortgage holders said their monthly housing costs had gone up in the past year, with average increases of £327. For single mortgage borrowers, the figure was slightly lower at £252, but for those living alone, it reached £298.

The ongoing squeeze has also cast a shadow over long-term financial resilience, particularly retirement planning. While only 5% of adults reduced or halted pension contributions in the past year, 43% acknowledged that their retirement plans had been affected by the cost of living crisis.

Engagement with pension saving remains low. Nearly seven in ten adults do not know how much they have in their defined contribution pension pots, and more than half have not considered how much money they might need for retirement in the past year.

Sarah Pennells, consumer finance specialist at Royal London, acknowledged some improvement in household finances over the past 12 months but stressed that many continue to face tough choices.

“We’re seeing a big divide between those who can absorb higher costs and those making daily sacrifices — cutting back on essentials, dipping into their savings, or going overdrawn at the end of the month,” she said.

Pennells also raised concern about the persistently high number of people with no meaningful savings, a figure that has remained static despite inflation easing.

“While it’s encouraging that some people have been able to start to build up their savings, it’s very concerning that one in five have less than £100 in savings — exactly the same percentage as in March 2023.”

She urged those in difficulty to explore potential support through state benefits, council grants or independent advice services such as MoneyHelper, Turn2us and Citizens Advice.