Select Committee on Treasury Written Evidence

Memorandum submitted by the Financial Services Authority

  1. This memorandum is submitted by the Financial Services Authority in the context of the Committee's Inquiry into Unclaimed Assets within the Financial System. We are responding specifically on:

    —  Whether the use of unclaimed assets should be limited to certain aims, bodies or localities; and

    —  How the use of unclaimed assets might promote financial inclusion.

  2. We welcomed the Government's statement in the Pre-Budget Report (PBR) in November 2005 that unclaimed assets should be reinvested in the community, focusing on youth services, financial education and financial inclusion. The National Strategy for Financial Capability ("the National Strategy"), led by the FSA, targets those areas, among others, as part of an overall programme designed to raise the financial capability of millions of UK citizens. We believe that there is a strong case for directing some of the funds from unclaimed assets towards the extension of financial capability work.

  3. The National Strategy is a partnership between the FSA, the Government, the financial services industry, consumer groups, community and voluntary organisations and trades unions. Together, we must achieve a step change in financial capability if we are to prevent serious consequences in the future. Financial capability is an increasingly important life skill, with consumers needing to take much greater personal responsibility for managing their financial affairs. The ability of consumers to do so has thus become essential in enabling people to participate in society.

   4. The programme to deliver this involves a sustained and wide-ranging set of initiatives, the result of extensive piloting and ongoing evaluation. Based on the outcome of the largest study into financial capability undertaken anywhere in the world, it targets areas of most need and where there is an opportunity to improve people's financial skills over the long-term. The programme, which will reach over 10 million people in the period to 2011, targets, among others, schools, young adults, employees in the workplace and new parents. We also have initiatives aimed at harder to reach groups, such as young adults not in education, employment or training and people with particular needs, such as cancer sufferers, residents in social housing and prisoners and ex-offenders.

  5. A key element of our approach is working with intermediaries, often at local level, who are able to reach people in their community and who understand the best ways to meet their clients" money and other needs. We intend to expand both the number of intermediaries who are currently involved in improving the financial capability of their clients and the scope of their work.

  6. Much has been achieved so far and we expect demand for support to help people manage their finances to increase as more people become aware of the positive impact which this work is achieving. Additional funding would enable the scale and reach of delivery through intermediaries to be extended further and help many more people to improve their ability to manage their personal finances. Funds from unclaimed assets could be used to increase capacity with intermediaries—for example, further staff numbers or training to help them work with clients—and could also potentially be used to help finance the provision of generic financial advice (there is a potential link here with the Government's recently-announced project to examine how generic financial advice could be delivered to more people).

  7. We accordingly invite the Committee to consider recommending that part of the funds from unclaimed assets should be used to help improve the financial capability of UK citizens. The FSA stands ready to help advise on how any such funds should be allocated.

February 2007

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