Supplementary memorandum submitted by
the Financial Services Authority
1. Since we submitted our initial memorandum
to the Committee, there have been further developments in our
work, particularly in relation to the National Strategy for Financial
Capability. We hope the Committee will find it helpful to have
this supplementary memorandum ahead of our oral evidence session
on 16 May.
2. This supplementary note provides an update
on:
— the National Strategy for Financial
Capability; and
— the Financial Capability Survey.
A. THE NATIONAL
STRATEGY FOR
FINANCIAL CAPABILITY
3. As set out in our earlier memorandum,
since November 2003 we have been leading and co-ordinating the
National Strategy for Financial Capability, working with a range
of partners from across Government and the commercial and voluntary
sectors. In January, the National Strategy's Steering Group, chaired
by John Tiner, agreed a programme of seven priority projects.
This is designed to: improve financial capability among children
and young adults, to lay strong foundations for the future; provide
employees with ready access to information in their place of work;
target resources to people at crucial life stages, for example
starting a family; and provide more generally relevant, user-friendly
and accessible information and money advice, to help with planning
and choosing products.
4. The programme represents a move from
the planning and piloting stage to implementation of the Strategy,
so that we can begin to deliver the required step change in financial
capability in the UK. Throughout the development of this work,
we and our partners have considered financial inclusion as integral
to the National Strategy. We consider both the need and our responsibility
for financial capability as being for financial services more
broadly, and not restricted to the boundaries of our regulatory
remit.
5. We formally launched this implementation
stage of the Strategy on 28 March in our publication Financial
Capability in the UK: Delivering Change. This seven-point
programme will, over time, raise financial capability across the
UK population, and is outlined below with reference to the impact
these initiatives will have on financial exclusion.
(i) Learning Money Matters
This involves embedding Personal Finance Education
in the revised National Curriculum that will be implemented in
2008. Work has already begun to maximise the effectiveness of
these curriculum changes through the provision of support for
teachers by offering a range of materials, tools and training.
On 28 June, Ministers and the FSA will host a seminar at 11 Downing
Street to raise the profile of this workstream among those in
industry and the education sector.
Through this work in schools, all pupils will
benefit from Personal Finance Education in the revised National
Curriculum. This will further our aim of helping to reduce the
number of children from all backgrounds who become financially
excluded in later life.
(ii) Helping Young Adults Make Sense
of Money
For young adults, we have launched initiatives
both for those in higher education and for those who are Not in
Education, Employment or Training (NEET). We are working with
universities, government agencies and voluntary organisations
to provide the training and tools to deliver targeted and appropriate
information to this group. On 8 March, we held a Young Adults
Showcase Event to publish findings and recommendations of the
pilots in this area and to set out our future strategy for this
workstream (summarised in our publication Helping Young Adults
Make Sense of Money: findings and recommendations on financial
capability from the Young Adults Working Group).
The Young Adults workstream aims to enhance
the ability of students, and prospective students, to manage their
finances. This should be of particular benefit to the less well-off.
This work aims to engage students in money matters as well as
develop supporting infrastructure such as training capacity, local
networks including the financial sector and, potentially, a national
telephone and web service to help young people manage their money.
The work with those Not in Education, Employment or Training is
specifically targeted at a group many of whom are likely to be
financially excluded.
(iii) Financial education in the workplace
Our Making the Most of Your Money programme
involves delivering seminars to employees on issues of general
concern, such as managing debt and pensions, and makes available
opportunities for a regulated consultation with a financial adviser.
Employees will also receive a financial information pack covering
the same ground as the seminars. This programme will expand during
2006-07 to deliver materials to 200,000 employees, with 15,000
subsequently attending seminars. Over the next five years we aim
to deliver information packs to four million employees, with half
a million of them then attending a seminar. The workplace initiative
will include many low-paid workers who are unlikely to have received
any form of financial capability assistance in the past.
(iv) Consumer communications
We are developing a new consumer communications
strategy with the aim of positioning the FSA as the place to turn
for impartial, general information on financial planning and products.
We will build on the success of our recent campaigns, including
"Mortgages Laid Bare", "Money Laid Bare" and
"Pensions Made Clear". In developing this strategy,
we will consider the needs of the financially excluded, including
working with relevant groups to get the right materials in the
right hands at the right time.
(v) Online tools
There is a clear need for simple, accessible
online tools to help consumers and those who advise them. The
Financial Healthcheck and Debt Test are available to all through
the FSA and BBC websites, and we are currently exploring plans
to broaden distribution further, including via groups who help
the more vulnerable in society. This includes targeted content
and signposts to organisations that support the financially excluded.
For example, we are talking to Citizens Advice about the possibility
of making FSA toolkits available to their clients.
(vi) Money Box
For new and prospective parents, we are developing
a Money Box to provide a single, comprehensive and accessible
source of information on a range of subjects, such as Child Trust
Funds, tax credit entitlements and other forms of assistance.
We intend to reach 1.5 million new parents over the next five
years. The distribution channels for new and prospective parents,
such as through employers to their staff or through maternity-related
health services, will include those likely to reach the financially
excluded.
(vii) Money advice
We are working with our partners to consider
how best to provide general financial advice to more vulnerable
groups, which tend to include disproportionate numbers of the
financially excluded. One of our areas of focus is making more
effective use of existing resources, including many specifically
aimed at, and used by, the financially excluded, such as specialist
debt advisory agencies.
B. THE FINANCIAL
CAPABILITY SURVEY
6. To support and guide our priorities on
financial capability we have carried out a comprehensive survey
of financial capability in the UK. This Survey, the largest of
its kind ever carried out, provides greater insight than ever
previously available into where action might be targeted. We published
the results on 28 March in Financial Capability in the UK:
Establishing a Baseline. The survey gives us an accurate assessment
of where the population stands today so that we can ensure the
steps we are taking are targeted at the right audiences, and so
that we are able to measure the difference these initiatives are
making. We plan to repeat the survey every 4-5 years.
7. The survey measured financial capability
in terms of how well people: make ends meet; keep track of their
finances; plan ahead; choose financial products; and stay informed
about financial matters. It found that:
— Large numbers of people, from all
sections of society, are not taking basic steps to plan ahead.
— Over-indebtedness does not affect
a large proportion of the population—however, when it does
occur it is often severe.
— People do not take adequate steps
to choose products to meet their needs.
— The under-40s are typically much
less financially capable that their elders.
— Unless steps are taken to improve
levels of financial capability, we are storing up problems for
the future.
8. As part of taking forward the seven point
programme, we will be working with the relevant agencies to help
improve the capability of groups which the survey suggests are
particularly vulnerable. This includes agencies working with people
over 70, lone parents and people living in social housing.
9. As well as influencing the priorities
of the strategy, the survey results will help inform our wider
regulatory work to help retail consumers achieve a fair deal.
They will be especially useful in our work to develop more capable
and confident consumers and to produce clear, simple and understandable
information for consumers to use.
C. CONCLUDING
REMARKS
10. In addition to our work on financial
capability, we believe that our day-to-day regulatory activity
will continue to address existing barriers to accessing financial
services for those who may be excluded. Our earlier memorandum
to the Committee set out, in detail, our work on this. This includes
work with the credit union movement and Community Development
Finance Institutions, publicising basic bank accounts, developing
a more proportionate approach to identification requirements and
working to introduce Islamic banking and Sharia-compliant products.
We strongly believe that by working with others, such as the Financial
Inclusion Taskforce, Government departments and agencies, voluntary
organisations and the financial services industry, we can make
a positive contribution to addressing financial exclusion in the
UK.
May 2006
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