The index found that people have paid off debts at the fastest rate in more than a decade, as consumers have been encouraged by the success of the COVID-19 vaccination roll-out and the planned road map out of lockdown.

The index, which measures families’ overall perceptions, rose from 41.1 to 42 in the first three months of the year. Although this was below the 50 mark that separates optimism from pessimism, it is the least weak performance since the start of the pandemic.

The survey, conducted with IHS Markit, the data company, found that confidence had improved throughout the lockdown, rising in both February and March as the end of the Covid restrictions approached.

Jackie Leiper, pensions, stockbroking & distribution director, Scottish Widows, said that families’ finances remained under pressure as lockdown continued, with shrinking income from employment, higher living costs and a continued squeeze on cash.

However, she added: “The glimmer of hope is that the latest dip in overall financial wellbeing was the slowest since the start of the pandemic, as people focused on paying down existing debt, which saw the quickest fall since the survey began in 2009.

“This was also supported by a desire to build financial resilience, as saving for an emergency or rainy day was the biggest priority for households in Q1 despite one in five saving less for retirement in the same period.”

She said that with a clearer roadmap towards the lifting of restrictions and opening up of sectors forced to pull the shutters down over the past 12 months, attitudes towards major purchases continued to lift from the record lows of last spring.

Ms Leiper continued: “While expected pent up demand as hospitality and travel sectors gear up for reopening and people look forward to doing things again, it’s important not to lose momentum on building financial resilience for the long term.”

The index highlighted a sustained squeeze on the longer-term drivers of financial wellbeing during the first quarter of the year. Around one in five (20%) of UK households saved less for retirement during Q1, while 18% would have withdrawn from their pension funds given the chance, down slightly from the previous quarter (19%).

Heightened economic uncertainty continues to highlight concerns around financial resilience among UK families, with, one in 10 households having no savings at all, and around a third (31%) only having enough savings to cover essentials for up to three months.

Despite this, only just over a third (36%) of households have life insurance, and a further 11% are planning to take out cover in the next two years. A much smaller proportion are currently protected financially for critical illness (17%), and just over one in 10 (12%) have mortgage protection.

Looking at sudden loss of income, just 18% have, or plan to take out income protection to sure up their spending.

Scottish Widows said that the index for job security had risen to 44.6 in the first quarter of the year, its highest reading since the same quarter last year. Debt concerns fell to 47.3, the lowest reading since the index began in 2009.