STIP Event Met Life Thursday 9 February 2017 The need for Savings and/or Protection Insurance Inigo Churchill Financial Capability Manager The Money Advice Service www.fincap.org.uk MAS Reports Financial Capability in the UK 2015 Technical Report for the 2015 Financial Capability Survey Barriers and Building Blocks: An overview of the 2015 Adult Financial Capability Survey Measuring financial capability identifying the building blocks The Economic Impact of Improved Financial Capability The role of the survey A map Where is financially capable behaviour strong or weak? A
A diagnostic Why is capability weak? What capability factors might be driving this? What interventions might be appropriate? (These interventions then need to be robustly tested separately) high-level measure Tracking financial capability over the life of the Strategy BUT we know that improvements will be gradual, especially at the total population level Likely to be bi-annual Survey methodology Nationally representative survey of UK adults aged 18+ Fieldwork was conducted from April July 2015 by GfK Mixed mode : 74% online and 26% face-to-face Total of 5,603 interviews 3,461 nationally representative interviews 2,142 boost interviews in devolved nations and with 18-24 year olds Scotland : 1,101, Wales : 795 and Northern Ireland : 802
Questionnaire of 130 questions - Average 27 minute interview Data weighted by age, gender, region, working status, internet usage and housing tenure MANAGING MONEY WELL DAY TO DAY SCORES Take control Keep track : know current account balance +/-50 59% (2005 : 56%) Believe they have a budget approach that works (score 8+) 61% Keep up with commitments without difficulty 58% (2014 : 48%) Short-term buffer Save every/most months 56% Could pay an unexpected 300 bill from savings or cash 68% Use credit sensibly Dont revolve credit card or use high-cost short-term credit
77% Have unsecured debt less than one months income 70% Maximise income Check supplier tariffs (mobile phone, utilities etc) 78% PLANNING FOR & MANAGING LIFE EVENTS SCORES Have a plan Have financial goals Have specific plans to achieve those goals 51% 32% Build resilience Have savings equal to at least 3 months income Among working age group 28% Among retired group
57% Have life cover 41% Families (2 x adults and children) 56% 34% Prepare for retirement Pay in to pension or have previously Have a plan for long-term care (50+ only) 50% 28% DEALING WITH FINANCIAL DIFFICULTIES SCORES Just over half of the population are able to keep up with their bills and financial commitments Managing debt Debts are not a heavy burden 90% Not missed three months payments 89% Neither of the above
83% Over indebted population Proportion seeking advice 17% 17% 17.00% 24.00% 59.00% The scale of the problem What do we mean by financial capability Selected ability scores Ability Reading balance on bank statement Comprehension of inflation and buying power Calculate balance after interest added 78% (2005 : 91%) 60% (2005 : 79%)
64% (2010 : 61%) Selected mindset scores Attitudes to the future Dont prefer to just live for today Very important to save for a rainy day 49% (2005 : 60%) 40% Confidence and self-efficacy Confident managing money (eight or more out of 10) Disagree that financial situation makes them anxious Believe they can make a difference 48% 58% 46%
Take responsibility Very important to keep track of income and expenditure 53% But of these c.30% dont have an effective budgeting system Disagree they are too busy to sort out their finances 64% Like them to adjust non-essentials when life changes (score of 8+) 40% Selected connection scores Ease Confident making financial product decisions (score of 8+) 47% The individual components with the greatest influence on current and longer term financial wellbeing Current
Longer term Financial confidence Building resilience Managing credit Managing credit use Active saving Financial confidence Financial engagements Financial numeracy Considered spending Financial engagement 0 5
10 15 20 25 30 35 0 10 20 30 40 50 60
Other recent research CIPD & Close Brothers JAN 2017 JAN 2017 JAN 2017 JAN 2017 Employee financial well-being: why its important Employee financial well-being: the employee view Employee financial well-being: practical guidance Employee financial well-being: behavioural insights money worries affecting ability to do work face barriers to managing their finances feel less financially secure than at start 2016 lost sleep worrying about finances 1
2 3 4 1 2 3 4 5 6 7 8 9 10
1 2 3 4 5 6 7 8 9 10 1 2 3
4 5 6 7 8 9 10 money worries caused stress over past year 1 2 3 4
5 6 7 8 9 10 Other recent research Neyber MAY 2016 UK workers affected by money worries Struggling at work due to financial worries Missed time off work due to financial worries
The DNA of Financial Wellbeing 18-24 year olds 25-34 year olds 35-49 year olds 50 -64 year olds 70% (2015: 65%) 16% 8% 18% 12% 6% 3% Borrowed to meet basic financial needs Been refused credit 30% 64%
Other recent research CII NOV 2016 Building Resilient Households: The future of financial provision for those too ill to work Each year, a million people in the UK suffer a prolonged absence from work due to sickness A minority get sick pay from their employer, although most have to rely initially on Statutory Sick Pay (SSP) of 88 a week SSP is not available to the self-employed Up to half a million would find their savings run out after just a few weeks Insurance products exist to help, providing cash payouts, support and rehabilitation to get people back to work Rehabilitation and support reduce the length of sickness absences, bringing financial benefits for employers and the State as well as helping individuals Only around 1 person in 10 is covered by insurance Other recent research Money & Mental Health Policy Institute JAN 2017 Seeing through the fog: how mental health problems affect financial capability DEC 2016 The other one in four: how financial difficulty is neglected in mental health services Consumers with mental health problems believe their behaviour changes dramatically during periods of poor mental health
93% say they spend more when unwell 71% have put off dealing with creditors 59% have taken out a loan they wouldnt have taken out otherwise Conclusions Financially capable behaviour remains stubbornly low Around 6 in 10 manage their money well Only 4 in 10 prepare well for life events 8 million are over-indebted Some evidence of a decline in skills & knowledge Many still live for today Lack of confidence is an issue There are big differences across the population Income and household composition are key drivers www.fincap.org.uk [email protected] 18
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