One interesting campaign point during the recent Conservative leadership contest is protecting the right for people to use cash. Whilst it is unlikely that physical currency will die out any time soon, many have argued that the UK is moving towards a “cashless society”. In this future, coins and notes are no longer used for financial transactions. Instead, people would rely on digitally-based payment methods such as apps, credit cards and debit cards. There is a concern, however, over how this change would affect British society - and pensioners in particular, who typically rely on cash to a greater degree. Below, we explore how far the UK is in heading towards a cashless society, how this could affect pensioners and some implications for your financial plan.
How “cashless” is the UK in 2022?
Cash is clearly still a crucial part of the UK economy. At present, there is £70bn worth of notes in circulation. This is almost double the volume from a decade ago, and roughly equates to £1,000 per person. The vast majority of these notes are held in our wallets, ATMs, banks, shop tills and in the “shadow” economy (e.g. kept overseas and intended for illegal use).
Despite this, digitally-based payments are becoming more widely used. In 2017, there were 13.2bn card payments in the UK, overtaking cash payments for the first time (13.1bn). Digital transactions became even more widespread in 2020 when the government imposed national lockdown measures to fight COVID-19. Stuck in their homes, people were forced to buy items online rather than entering a business’s premises and handing over cash.
The impact of a cashless society on pensioners
Whilst the Bank of England (BoE) reassures everyone that cash is not disappearing anytime soon, some studies suggest that cash payments could comprise just 10% of all transactions in the UK by 2037. This possibility has raised concern from Liz Truss and others, particularly since around 21% of over-65s (2.4m people) rely on cash everyday spending.
Indeed, one survey by YouGov in January 2021 found that nearly half of people in this age group (6.3m people) used cash in the last week. This was despite the UK being in national lockdown at the time, and older people were required to “shield” in their homes. Clearly, many people are unwilling - or not ready - to give up cash just yet; especially those aged over 65.
Pensioners have not always found it easy to adapt to the rapidly changing technology used for digital payments. In England and Wales, 13 councils have been found to operate car parks that are completely cashless - requiring locals to use a smartphone app instead. Although nearly 20% of Britons aged over-75s now own and use a smartphone regularly, many are still reluctant or unable to use one (e.g. due to health reasons or fears about online scams).
Another concern of a digitally-based payment economy is that it might lead to some pensioners running out of money. For instance, many people like to set a weekly budget and withdraw cash each week - helping them manage their discretionary spending (e.g. meals out). However, many businesses now simply do not accept cash, which can derail healthy money habits like these.
One survey found that 25% of adult respondents tried to spend notes/cash in a shop recently, but the establishment would not accept physical payment - forcing the customers to use a card. At the present time, with the cost of living rising rapidly, such developments should not be regarded lightly. Around 10% of shoppers now state that they plan to ditch contactless payments and use cash instead, so they can better control their spending.
What can pensioners do to prepare for a possible “cashless” UK?
It is important to reiterate that a cashless society is not imminent. However, it is certainly getting harder to rely on it to make payments. Car parks, restaurants, shops and garden centres are increasingly only accepting cards - not cash. ATMs are also facing an existential threat: nearly 25% of machines have disappeared since 2018. Moreover, since 2015 almost half of UK bank branches have been earmarked for closure.
One option, of course, is to raise the matter with your MP and local council if you feel strongly about keeping cash as a payment option - not just across the UK, but in your community. It may be comforting to know that the Financial Conduct Authority (FCA) will be given powers to make sure that withdrawal and deposit facilities (as well as a Post Office) are available across the country within a “reasonable distance”. However, this may not guarantee that you have a bank branch nearby as many lenders are rushing to close less profitable branches before new laws come into force.
If you are finding it difficult to make cash payments on a regular basis (e.g. when shopping in town), then you may want to invest time into learning how these digitally-based payment technologies work. You do not need to ditch cash to do this. However, it may be useful to have a smartphone-based way of paying an establishment, as a backup, if faced with a situation where you cannot pay in cash. Another idea is to request that businesses clearly sign post outside the premises if they do not accept cash, so you are not left in an uncomfortable position at payment.
Contact your PS Aspire adviser if you’d like more information on digital payments and how to plan.