ONS data highlights need for coordinated approach to tackle savings crisis, according to industry leaders
26 June 2015 – The latest data from the ONS (Wealth and Assets Survey – Financial Capability) which reveals that just one in 100 Britons are financially astute1 is a stark reminder of the need for immediate action and a clear set of policies and initiatives to increase financial education, according to an influential group of industry leaders acting as The Savings and Investments Policy project2, (‘TSIP’, ‘the Project’).
TSIP, an unprecedented group of over 50 leading financial services companies, trade bodies and consumer groups, published a report (‘Saving Our Financial Future’) in March 2015 outlining six policy recommendations to rebuild a culture of savings in the UK and restore financial security for households.
One of the six polices recommended by TSIP is to explore ways for the financial services industry to increase financial capability. It has formed a cross-industry education working group which is looking at making the provision of financial education more effective.
TSIP believes that there must be better coordination between all the various industry, public sector and voluntary bodies currently providing financial education and that there should be greater pooling of the considerable investment to inform consumers of the benefits of saving.
Rupert Pybus, co-sponsor of TSIP’s education working group and Global Head of Marketing at Columbia Threadneedle Investments said, “This alarming statistic from the ONS study that only 1% of the British public is financially astute must motivate a more co-ordinated approach by government, voluntary and financial groups to encourage people to save for tomorrow. Financial education is at the heart of this and we believe that there is a real opportunity to rebuild confidence and trust in saving and investing.
“We believe creating a strong and accessible financial education system is critical to reversing attitudes and building a society where investing is something we all do naturally. Education must be supported by greater access to financial guidance to ensure the momentum of financial education is backed up by professional assistance.”
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Notes for Editors:
1. The ONS used 6 dimensions to determine an individual’s financial capability: making ends meet; planning ahead; organised money management; controlled spending; staying informed and choosing products. Only 1% of individuals scored highly on all 6 financial capability dimensions.
2. The Savings and Investments Policy project is working with a wide range of financial service companies, trade bodies and consumer groups to develop these pan-industry proposals. It is directed by an Executive Committee formed of 16 leading financial services companies including Aviva, AXA Wealth, BNY Mellon, BlackRock, Ernst Young, Henderson, J.P. Morgan Asset Management, L&G, Lloyds Banking, Nationwide, Northern Trust, Old Mutual, Pinsent Masons, RBS, Threadneedle Investments and TISA.
In its report – ‘Saving Our Financial Future’ (published on 28th April 2014) – TSIP highlighted how fifty years ago, the UK was a nation that saved for what it wanted and led the world in levels of pension savings. Since then, there has been a seismic shift in cultural attitudes where living for today has taken priority over providing for tomorrow.
Based on extensive analysis, research and consultation across the industry with policy-makers and consumer groups, TSIP has proposed six savings policies which it believes will play an important part in getting people on the path towards greater financial wellbeing. Three recommendations are focused at the wider financial services industry, whilst the remainder are aimed at the Government:
1. Digital passport: developing a secure digital identity that can be used to revolutionise and simplify how consumers manage their money, making it easier to save money in the first instance as well as managing their savings pots
2. Increasing financial capability: making the provision of financial education more effective by enhancing consumer engagement and understanding of the benefits of savings through greater co-operation across financial services education programmes and working with government
3. Financial guidance: developing a framework for financial guidance that can be adopted by financial service firms, greatly increasing access to guidance for the public and supporting them in making sound financial decisions
4. Pensions taxation: provide expertise to any government led initiative to reform pension tax relief with a view to making the benefits of pension saving clearer, improving incentives and increasing overall levels of pension saving without incurring additional costs for the Treasury
5. Automatic escalation of pension contributions: Save More Tomorrow – using ’nudge’ techniques to encourage and facilitate employees to automatically increase their pension contributions by small increments as their income increases to levels that will provide a meaningful income in retirement
6. Savings Minister: create a new position with accountability for promoting all forms of consumer saving within government, to be a champion of financial education and guidance, and to promote ’Invest in Britain’
The full policy recommendations are outlined in more detail here: http://www.tisa.uk.com/research-publications.html
3. TISA is a not-for-profit membership association operating within the financial services industry. We represent the interests of over 145 member firms involved in the supply and distribution of savings and investment products and services.
TISA has a highly successful track record in working cooperatively with government, regulators, HMT, DWP and HMRC to improve the performance of the industry and the outcomes for consumers. Policy and regulation continues to be the major focus for our members with regard to corporate responsibility.
TISA and its members’ remit is evolving into a clearer focus on pro-active consultation in the regulatory world in order to influence policy and associated regulation before its creation, rather than reacting to issued policy directives. This will help to ensure a more considered policy creation from the authorities.