Understanding financial volatility
Our entire financial system is built around the idea of regularity. Monthly regular incomes are expected to pay regular monthly bills and fund regular deductions. The assumption of a steady earning rhythm forms the basis of regular monthly assessments and monthly views of affordability. But for millions of low and moderate income households, irregular pay is the norm. And that number is growing.
The challenges for those facing this new normal are acute, and don’t just emerge on a monthly basis. Volatility takes many shapes and there are many drivers of variable pay, but overall we estimate that income volatility impacts more than 25 million people on low and moderate incomes in the UK. According to research from the Resolution Foundation, four out of five low income earners in the UK have volatile pay, and so do two thirds of those on more moderate incomes. People’s experiences of volatility are a result of a wide range of circumstances, and reflect work and life contexts that can be found in all parts of the economy. These range from zero-hours contracts and self employment to weekly pay, variable pay rates at different times, changing shift patterns, as well as multiple jobs, job changes, time out of work and the interaction of earnings and benefits.
So while variable and unpredictable pay is incredibly common, the financial products, services and policies that are part of our daily lives, will often assume that people have a regular, salaried income. Engaging with a system that fundamentally misunderstands their circumstances is a source of many of the challenges people face. A clear understanding of volatility is therefore crucial. For those on low incomes, it makes the already challenging task of making ends meet even more fraught and burdensome. And for those on moderate incomes, volatility introduces an instability and insecurity that is deceptively difficult to earn your way out of.
Our final report – Fluctuation Nation – identifies the ‘volatility premium’ experienced by these millions of households, and encourages policy-makers, product designers and employers to consider the opportunities to meet the needs of people whose incomes are volatile.
We have also published three Impact Briefs during this project – linked to the right. These include a report on the methodology we used – what worked, and what learnings could be taken into other research. Finally, we have produced a Toolkit which gives practical ways to replicate this research if you would like to explore.
The Money and Pensions Service (MaPS) vision is ‘everyone making the most of their money and pensions’. MaPS is an arm’s-length body committed to providing access to the information and guidance people across the UK need to make effective financial decisions over their lifetimes. For more information, visit 
