SOME one in seven Scottish households have been granted a bill 'payment holiday' and more than half of those will struggle to pay their debt with no savings leading to new concerns over the financial well-being of the nation.

A new report warns of a further financial storm for millions as payment holidays will cease on October 31, 2020 – the same date the government’s job retention schemes end, leaving many facing job losses and crippling financial strain.

And it warns that on a UK-wide view, Scotland had an "above average" proportion of households being completely supported by government schemes with 11% compared with the UK average of 8%.

Payment holidays and the government’s income protection schemes have facilitated a period of relative stability, helping many to retain jobs and stay afloat financially.

But a study by the Standard Life Foundation warns that of the 325,000 Scottish households who are on 'payment holiday' six in ten are already in financial difficulties and will struggle to repay their debts when these arrangements end.

It warns that an estimated one in four Scottish households (550,000) are still living on reduced incomes, through furlough, or a reduction in hours or salary during lockdown, with a "heightened risk" of financial difficulties.

Half (46 per cent) of those granted a payment holiday have no money in savings at all, and future financial prospects are bleak for 7 in 10.

A YouGov survey of over 536 Scots at the end of July also shows that those with a payment arrangement think it very likely (26 per cent) or quite likely (20 per cent) they will experience a loss of earnings as a result of COVID-19 in the next three months.

More than four in ten of people with payment arrangements (43 per cent) had used a credit card, overdraft or had borrowed money to buy food or to pay expenses because they had run out of money.

Three in ten (28 per cent) had drawn on savings to make ends meet, while 43 per cent had had no savings to draw on.

Researchers found only a quarter of those who had a bill payment holiday had sought debt advice.

And it found around 137,000 Scottish households could need debt advice when payment holiday arrangements end.

The charity said that should the level of demand materialise, debt advice charities will face a "very difficult situation" after the current payment holidays end this autumn.

It comes as debt advice centres across Glasgow faced crippling cuts due to city council cutbacks.

The report authors suggest that creditors of all kinds and their regulators need to be proactive in contacting their customers with payment arrangements coming to an end and ensure that they have "sympathetic forbearance measures in place".

The Financial Conduct Authority has recently published draft guidance advising firms on how to help people with mortgages beyond the end of payment breaks.

But the report says there is little to no guidance on what customers with a payment arrangement on other commitments should do when it ends.

It says measures should include income and expenditure checks to assess ability of borrowers to repay, flexible and lower payment arrangements, extending the lending period for unsecured credit and mortgages, and where appropriate writing off debts.

The report says that under the current circumstances enforcement action should be a last resort, used when these measures have failed.

The survey authors headed by Professor Elaine Kempson said: "Our survey data showed that the future financial outlook was not good for many of the households with a payment arrangement.

"Given the extent to which these households were also experiencing current financial difficulties, this has important implications for creditors and their regulators, who should be working together to find a suite of creative and sympathetic forbearance measures. Both to ensure that current payments can be met, and that the amounts owed in missed payments can be repaid or – in certain circumstances – written off."

At the end of June at least 843,240 Scots were either claiming unemployment benefits or were furloughed under the government's job retention scheme - nearly a third of the population who are available for work.

The new study found that around a third of households currently supported by the schemes (31 per cent) were experiencing financial difficulties at the end of July – between four and five times the level among working households whose earnings had been unaffected by the pandemic.

The report authors also recommend extending government support for workers in the hardest hit sectors, including those who have fallen through the safety net provisions.

Professor Kempson added: “Creditors, including lenders, landlords and utility suppliers, need to be proactive as payment holidays come to an end and have a suite of forbearance and debt collection measures which match their customers’ ability to pay.

"One size will not fit all. But it is important to recognise that this is only part of the story. Like Germany and Norway, the UK Government should extend the job retention schemes, particularly for less skilled workers in hard-hit sectors of the economy.”