THE UK’s NATIONAL STRATEGY ON FINANCIAL CAPABILITY NOVEMBER 2007

1. THE UK’s NATIONAL STRATEGY ON FINANCIAL CAPABILITYNOVEMBER 2007 Shaun Mundy (shaunmundy@hotmail.com) Former Head of Financial Capability Department, Financial Services Authority, UK

2. FSA statutory objectives • Secure an appropriate degree of protection for consumers • Promote public understanding of the financial system • Key Aims of Strategy: • Consumers who individually • - are financially capable • - are able to take responsibility for their own actions • Consumers who, as a group, can influence the market • Steering Group: senior representatives from broad range of partners

3. National Financial Capability Survey • Rigorous large-scale study in 2005, to set a baseline against which can measure progress • Over 5,300 in-depth interviews • Representative of the UK population • Covering people’s understanding, attitudes and behaviour • Will repeat every 4 to 5 years • In March 2006, FSA published results of survey together with action plan to improve current levels of financial capability

4. Main themes emerging from the survey People are increasingly being asked to make provision for their future ............ but many are not equipped to do so Many people are failing to plan ahead adequately for retirement or an unexpected drop in income Unless action is taken, the UK population will store up problems for the future Only a small proportion of people have debt problems. But, given the failure to plan ahead, many more could be tipped into over-indebtedness Many people could be tipped into financial difficulties by a small change in their circumstances People do not take adequate steps to choose products that meet their needs Many people are not shopping around for good deals and are taking on risks of which they are unaware The greatest demands are placed on those least equipped to deal with them (particularly the under-40s) The under-40s are less capable, on average, than their elders

5. Improving Financial Capability will significantly benefit individuals • Reviewing and setting spending patterns which are in line with income Managing money more effectively • Taking on the right kind of debt when appropriate and having plans to get out of debt Understanding financial issues • Setting appropriate aspirations for the future and saving accordingly Individuals experience greater financial well-being Planning ahead better • Identifying risks and choosing which to take and which to protect against Making the right financial choices Seeking advice when required Getting help when required Turning to the right places for advice

6. There are clear benefits for the Savings/Protection Industry Consumers have more discretionary spending money Consumers buy more savings and protection products that suit their needs Consumers understand the benefits of savings and protection Consumers are more likely to seek high quality advice The savings/protection industry will benefit from improved financial capability Consumers buy fewer inappropriate savings and protection products Consumers are better able to judge what is good advice Consumers are more likely to identify for themselves when they should buy a product Distribution costs are lower Consumer - facing staff can spend less time on educating customers about products etc

7. And there are clear benefits for the lending industry Consumers understand when and what type of debt to take on Consumers take on more appropriate levels of debt Consumers proactively approach lenders rather than waiting to be sold to The lending industry will experience greater profitability from improved financial capability Consumers avoid taking on too much debt Consumers budget for repayment Consumers are more likely to pay back their debt Consumers seek advice before their debts become unmanageable

8. The FSA’s programme of action is being delivered Schools Workplace Online Tools Young Adults New parents Consumer Communications Money Advice

9. Two approaches • Direct to consumers • Money Made Clear – consumer website • On-line tools • Financial Healthcheck • Debt Test • Comparative Tables • Calculators • Make the Most of Your Money - workplace seminars • Parent’s Guide to Money - aimed at new parents and distributed through health service • Supporting intermediaries • Schools – teachers • Colleges and universities – student support services • Young adults who are not in education, employment or training – voluntary and community workers • Support Groups – e.g. those who support offenders, people living in social housing, cancer patients, the elderly

10. There are ambitious targets: • The FSA intends to reach more than 10 million people over 5 years • 1.8m children in 4,000 of the 6,000 schools in England • Around 2 million young students in higher education • Around 1 million young people not in training, education or employment • 4m employees in the workplace • 1.5m new and prospective parents • 4m annual visits to the FSA website

11. Schools: Learning Money Matters • FSA has worked with the Government to raise profile and status of personal finance education in the school curriculum in each of England, Scotland, Wales and Northern Ireland • Financial education will be included in a new Economic Wellbeing • and Financial Education programme of study, from • September 2008. • Teachers need to be capable and confident in • teaching about money matters. In England, • the FSA is funding the Personal Finance • Education Group (pfeg) to provide a one-stop • shop of materials and consultancy support. • Since launching this in September 2006, • pfeg have delivered, or arranged to deliver, support • to c20% secondary schools • Comparable picture in Scotland, Wales and Northern Ireland

12. Helping Young Adults Make Sense of Money • Three strands: • Higher Education (ie universities): in 2006/07, 20 universities helped develop the pastoral support toolkit (Money Doctors), successfully piloted at Roehampton University in 2005/06. This will be proactively rolled out to further 30 universities in 2007/08 and made available to all UK universities. • Financial Education: FSA will work with 10 Further Education colleges in 2007/08 academic year to adapt the Money Doctors toolkit and to embed personal finance as a context for learning. • Not in Employment, Education or Training (NEET): • over the next three years, FSA aims to secure training • of 20,000 intermediaries who work with • NEET Young Adults

13. Workplace: Make the Most of Your Money • The Model: • - All staff receive financial education and are invited to attend seminars • - Trained presenters visit workplace to deliver one hour seminars, open • to all staff • - All of this is provided free of charge • A CD-Rom has been developed for employees (e.g. in dispersed workforces or with small employers) for whom seminars are not practicable • Over 80% of seminar attendees say they will be doing • something about their finances. Of those telephoned • 3 months later, over 60% had turned intention into action • Partners include main employers organisation (CBI), main trade union body (TUC), Chartered Institute of Personal and Development, Business in the Community

14. Parent’s Guide toMoney • For new and prospective parents. • Comprehensive and accessible information in one place, budget calculators, signposts to other information and where to get help, etc • In recent pilot, 68% took ‘hard’ action (e.g. opened a savings account, wrote a will or reduced debts) and 85% of those credited the guide with a role in doing so • Larger trial in 3 Primary Care Trusts from Autumn 2007. • The Royal College of Midwives fully supports the strategy of distributing the guide via midwives.

15. New consumer website - moneymadeclear – launched inDecember 2006 • www.moneymadeclear.fsa.gov.uk impartial information from the FSA, the • UK’s financial watchdog – no selling, no jargon, just the facts • Plain Language Society has awarded Moneymadeclear its first gold standard • for a website • FSA is developing a Young Adults website • Online survey: 85% found content useful and 70% are more likely to make an informed decision • New suite of publications available by end of September 2007. Piloting distribution via banks, building societies, credit unions and Citizens Advice Bureaux • Aim to double traffic to FSA website from 2 to 4 million over next 3 years

16. Online Tools • Financial Healthcheck (launched June 2005) and Debt Test (launched January 2006) – over 2 million users • Over 1 million visits annually to the comparative tables • 600,000 visits annually to various calculators (loan, mortgage, budget and pension) • Syndicating tools and information via a wide range of channels (taking materials to the traffic)

17. Delivering Money Advice via Support Groups (Innovation Fund and Development) • The Model • - FSA provides seedcorn funding for groups to develop tailored programmes for their clients • - FSA works with these groups, and with national umbrella groups, on sustainability and replicability • Client groups (many of whom are vulnerable or excluded) supported in this way include: • Ex-offenders Older People • Single parents People with Autism • Disabled Carers • Domestic violence victims Cancer patients

18. Thoresen Review of Generic Advice • The Treasury commissioned Otto Thoresen (CEO of Aegon plc) to lead a feasibility study – not whether, but how. • Public/private partnership? • Devolved model, making use of existing providers?

19. The seven projects are designed to promote financial inclusion • Project • Contribution to financial inclusion • Learning Money Matters – Schools • Make the Most of Your Money – the Workplace • Young Adults • Financial Healthcheck and the Debt Test • Parent’s Guide to Money • MoneyMadeClear • Money Advice • All children will be reached and this should help to prevent children from all backgrounds becoming financially excluded in later life • Targeting large employers will capture many low paid employees • Broaden participation in higher education and further education and enhance completion rates • NEET project: many are likely to be financially excluded • Already available to all. Broadening distribution further, including via groups who help the more vulnerable • To be available to all • Considered needs of financially excluded in developing website. • Looking to work with various agencies, including those whose focus is on more vulnerable groups

20. The Government’s long-term approach document, published 15 January 2007 • “The Government’s approach will complement, and be coordinated with, the FSA’s National Strategy” • “The FSA has developed a leading edge programme” • Gap in the market for affordable generic financial advice. “A more preventative approach is needed, and the Government considers that a national approach to the provision of generic advice is required” • “Raising consumers’ financial capability .......... will have lasting benefits to individuals, the financial services industry and the wider UK economy”

21. Concluding thoughts • Lack of financial capability a huge issue for society and individuals • FSA’s programme to improve financial capability is in place and is being rapidly scaled up • You can make a real difference – but it will take time • Working through trusted intermediaries is key • Keep it simple and engaging • Win/win • - government/citizens • - financial service industry/consumers • - teachers/pupils • - universities/students • - employers/employees