SINGAPORE - The nascent economic recovery that started in the later half of 2020 has improved the financial health of most Singapore residents, but some segments of the population are still struggling, a DBS Bank report found.

The path to recovery from the coronavirus-induced recession is likely to be uneven and may require more sustained and targeted support for the vulnerable lower-income group and middle-aged workers, said DBS in the second edition of its NAV Financial Health Series report released on Tuesday (March 2).

DBS, which aggregated data insights from 1.2 million retail customers, said the lower-income group was worst hit - accounting for about 49 per cent of customers who experienced income loss.

Overall, the share of customers who experienced a significant fall in income fell to 19 per cent in December 2020 - down from 26 per cent in May - reflecting an improvement in the financial wellness of Singapore residents amid the economy recovery.

The percentage of low-income earners who experienced severe income loss also improved significantly, falling to 42 per cent from 51 per cent previously.

DBS said that targeted policy aid beyond employment support, such as mortgage deferment schemes, played a crucial role in helping this group of customers reduce their monthly financial stress.

However, there are signs that those in the low-income group will continue to dip into their savings to meet their monthly financial obligations, making crucial the policy efforts to support this group, especially in terms of employment prospects, the bank said.

Within the workforce, middle-aged workers also still account for the majority of those who experienced income deterioration.

The report estimates that almost half of those in this age group saw their incomes decline by more than 30 per cent - though compared with the other age groups, they made the most significant progress during the economic recovery. A persistent increase was also observed in the unemployment rate of middle-aged workers.

These findings suggest that middle-aged workers will continue to face challenges, and therefore require sustained policy support, DBS said.

In terms of sectors, the financial health of workers in the food and beverage, hospitality and aviation industries also improved, helped by the restoration of earlier wage cuts and payment of year-end bonuses.

A slew of policy measures specifically aimed at supporting businesses in the hardest-hit sectors also helped.

That said, these workers will continue to face higher impact to their income as compared with those in other sectors and may continue to require additional policy support, such as the extension of the Jobs Support Scheme as announced during Budget 2021.

The report also found that the pandemic prompted customers to save more.

Emergency savings of all income groups rose amid the crisis and reached peak levels in June 2020, before tapering off gradually as economic conditions improved.

For example, the emergency funds of customers who earn more than $10,000 peaked at an amount equivalent to four months' worth of salary.

However, the savings situation of those who suffered income decline appeared to have worsened. As of December 2020, almost half of customers (47 per cent) who experienced a significant fall in income had less than a month of emergency funds, up from 42 per cent in May 2020.

The lack of sufficient savings appeared to be more pronounced in the lower-income group, as they are most likely to have dipped into their savings to weather the crisis.

DBS senior economist Irvin Seah said the bank's analysis over the past year has shown that while some segments of society have made concerted efforts in financial planning, there were many who have not been able to do so.

"For the less prepared, though policy support will be helpful in closing the gaps in times of crisis, it should never be a cure-all or a permanent solution," he said.

"The experience gained in this crisis pertaining to financial planning is important, particularly for those who have suffered from income deterioration. To better prepare for a sustainable financial future, rigorous and prudent financial planning should be a way of life for everyone going forward."