HC 271 Money Advice Service

Written evidence submitted by AgeUK

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Executive Summary

1. Age UK works to improve later life, today and tomorrow. The Money Advice Service (MAS) has two important roles in achieving a later life in which older people flourish: firstly, helping those approaching retirement and older people to make the most of their money and secondly to help younger people plan, manage and save so that they have the best possible later life.

2. We support the model of a single body with statutory footing to focus on money advice and coordinate debt advice with the ability to levy funding from industry. This approach has the potential to work in partnership with both industry and third sector bodies to deliver high quality independent services to the public. At present there are some concerns over implementation, but none that question the model.

3. The MAS is still a very new organisation and there is little evidence evaluating its impact – positive or negative. Further, although there is plenty of evidence of the problem that MAS is seeking to address, there is a lack of research or evaluation showing a proven path to fixing it. Therefore it is not possible for any commentator to make conclusive statements about the effectiveness of MAS.

4. The bullet points below set out Age UK’s key comments on the questions in this call for evidence.

· There is clear and significant need for an improvement in the ability of the UK public to manage their financial affairs as demonstrated by the Thoreson Review [1]

· There is a need for a single body whose primary purpose is to improve financial capability with oversight over the whole of the UK to co-ordinate nationwide service provision and provide a focus on money matters

· Although there has been much debate around the success of MAS to date, it is too early to reach firm conclusions about its effectiveness. Third sector, financial services firms and others should focus on constructive input to help shape the service so that it can be successful

· MAS must be open and transparent, share business plans and evaluation

· MAS must demonstrate that it learns from both its own evaluation and from the input of stakeholders working in the field

· In particular, MAS should critically evaluate its attitudinal segmentation

· In order to evaluate its service effectively, MAS will need to set meaningful targets e.g. providing advice at a face to face session must mean more than just handing out a leaflet

· MAS must ensure that it provides the tools and advice that people need, as well as seeking behaviour change – even people who are motivated to manage their money well will need information and advice

· MAS must continue to work to understand the needs of the whole of the UK population, not just those who are confident internet users

· We support the current funding model


5. Age UK has closely followed the work of the Money Advice Service and its predecessor bodies. Age UK has three main roles in relation to Money advice: (i) service provider of financial capability and money management services; (ii) delivering MAS funded money guidance through a sub-contract with A4E; and (iii) research and policy advocates in advice and financial services. However, in this response we are commenting as research and policy advocates.

6. Age UK provides information and advice to older people through a range of channels including printed information guides, online information, face to face delivery through 177 local Age UKs and telephone advice offered locally and through a national advice line. More than one third of the advice delivered through local Age UKs relates to welfare benefits queries and in the last financial year local Age UKs helped older people to claim over £140 million of additional benefits.  In addition to advice on welfare benefits Age UK offers information and advice in relation to a wide range of areas including housing and social care.

Q1: To what extent is the Money Advice Service (MAS) meeting its core statutory objectives:

7. It is too early to answer this question conclusively. The objectives are wide-ranging and long term. Not only is MAS a relatively new organisation, but it has also evolved significantly in the short time that it has been in existence. There is very little evidence available on which to evaluate the impact of MAS and given the long term nature of the aims we would not expect there to be much at this stage. In summary, we think that the activities being undertaken by MAS are consistent with their core objectives, however we need time and evidence to assess how well these activities are being delivered.

8. We see MAS undertaking three main strands of activity to meet its objectives: (i) behavioural change work; (ii) generic advice; and (iii) information.

9. It is too early to comment on the success of behaviour change initiatives, however we do think that this work stream is a useful function of MAS, especially as it is the only body equipped to take this on. However the MAS appears to have moved completely away from the financial capability/education approach, for example through ceasing funding to financial education projects. The question of how best to increase the financial capability of the UK is still very open to debate, and therefore we would like to see the MAS keeping an open mind on the possible value of financial education for people of all ages, alongside behaviour change work. The work on mapping existing financial capability interventions in schools, expected to be completed by June 2012, provides MAS with an opportunity to demonstrate its ability to listen, learn and work effectively in partnership.

10. The MAS offers generic advice by internet, telephone and face to face. We support the aim of providing advice which is as detailed as is possible without becoming regulated financial advice. Consumers are expected to engage more and more with financial products and services. These are often extremely complex and many consumers will struggle to interpret information and will need detailed advice. Age UK signposts to these services and feedback received from MAS suggests that clients who have called MAS have been helped to manage their own financial affairs. Feedback from the local Age UKs delivering face to face money guidance is that the guidance helps people to plan ahead and know what ‘next steps’ they should be taking. This is reported to be helpful, especially around times of redundancy and retirement, as clients tend not to think about money until they have a problem.

11. MAS also provides a range of guides and tools to help people manage their own affairs well. We see this as a key part of the MAS service. Even consumers who are highly motivated to manage their financial affairs and are able to make decisions without advice need good quality, accessible, independent information. The recent Age UK report, "Living on a Low Income in Later Life" illustrates how older people on tight budgets manage by highly complex shopping around for daily goods [1] . It is important that people in this situation are able to shop around effectively for financial services. Age UK has helped to disseminate the Retirement Planning Guide and advisers have reported that the guide is both useful for them and well received by clients.

12. Although it is useful to analyse the different activities separately, for consumers they need to be coordinated and cover a spectrum of needs. In our experience, people who need money advice may also have a range of other advice needs. For example, someone with an interest only mortgage and an insufficient re-payment plan will need money advice but may also need housing help. Following bereavement a wide range of advice, including money advice, will often be needed. MAS must make sure that it understands the context in which individuals seek money advice, not just as opportunities to deliver money messages but also to ensure advice is useful and as holistic as possible. This will also be important as MAS starts to coordinate debt advice.

Q2: Are these the right objectives for MAS to have?

13. The objectives are broad, we do not see an urgent need for change but do have some comments on the way the objectives have been interpreted. Firstly, we would like to see clearer emphasis on tools and practical information as well as on behaviour change work. Secondly, we would like to see MAS explore when financial education and capability training might be effective. We would also like to see greater consultation and transparency in how MAS prioritises work in relation to its objectives.

14. MAS might benefit from a clear research and policy development objective. The Financial Services Bill currently before Parliament includes a new requirement for the Financial Conduct Authority to take into account information provided to it by MAS in determining the appropriate level of protection for consumers. This is in recognition of the fact that MAS should, through the exercise of its functions, have unique access to evidence on consumer behaviour in financial services markets. MAS should therefore ensure that its evidence collection, research and policy functions are effectively resourced and able to provide the Financial Conduct Authority and other interested stakeholders with accurate, useful and meaningful data.

Q3: How effective is the MAS’s internal administration and expenditure on staff and other resources?

15. We are not well placed to answer this question.

Q4: What accountability mechanisms are in place for the MAS? Are they sufficient? How can the effectiveness of the MAS be assessed?

16. Age UK is a member of the Consumer Forum and the Debt Advisory Forum. These are useful forums, but limited by the level of information provided and have no formal role. They contribute to accountability, but alone are not sufficient.

17. MAS should consult on its business plan well in advance of publication. Given the significant restructuring going on at the time of the last business plan it is perhaps understandable that it was not shared, however in future we expect to see meaningful consultation on MAS plans.

18. MAS should make more use of consultation processes. These can form a useful accountability mechanism as they require the consulting body to demonstrate that it has considered a range of views and to explain how it has reached its conclusions. This provides a basis on which decisions can be discussed and where appropriate challenged.

19. We would like to see MAS publish more evaluation of its work, on an ongoing basis. For example, earlier this year we saw a press release containing some figures on how well the Financial Healthcheck was working. However, the full figures were not released. [2] We would usually expect that where a press release announcing success of a service is published the data used is released as well, to facilitate accountability.

20. MAS is working hard to extend reach and to set measurable targets, eg in debt advice/reporting of ‘action plans’ for the Financial Healthcheck. However it is important that the targets are meaningful and connected to real outcomes. We have some concerns that targets prioritise reach over impact. MAS must seek to measure and publish evaluations demonstrating both.

21. The Financial Services Authority (FSA) also has an important role in ensuring MAS is held to account. We would like to see the FSA requesting feedback on MAS as part of its ongoing consumer engagement work.

Q5: To what extent are the services provided by the MAS also provided by other organisations? How does the MAS compare to these organisations?

22. MAS is unique in its scale and focus on money advice and debt. It is the only organisation involved in financial behaviour change on a large scale, national level. It is also distinguished from other organisations by the level and stability of its funding and its statutory footing.

23. There are a number of other providers engaged in delivering both information and to a certain extent money advice.

24. In terms of advice, the experience of local Age UKs delivering MAS face to face money guidance sessions is that this has filled an advice gap, rather than replacing or competing with existing services. Local Age UKs report that they see clients who do not have enough wealth to use an independent financial adviser and that under the MAS project they can deliver useful generic financial advice.

25. The MAS programme is also notable for the level of training and oversight it provides for advisers. This has had an important role in building capacity.

26. However, we note that MAS could learn from experienced advice providers, especially those working with vulnerable or hard to reach groups. We have yet to see detailed evaluation of face to face money guidance sessions and so are unaware of how success is being measured and how this drives service delivery. However as with debt advice, we have some concerns that emphasis on reach and consistency could be compromising ability to best target hard to reach groups and maximise impact.

27. There is a wealth of information on financial matters available from a range of organisations. MAS has a unique position in that it is able to build a brand focused on providing impartial, good quality information and advice about financial matters. However a challenge for MAS is that its target market is extremely broad, which makes it difficult for MAS to tailor information to specific groups. Compared to some other providers it is difficult to get access to MAS information guides in hard copy. It is helpful that, rather than going down a ‘one-size fits all’ approach, there is a range of material in the market.

28. MAS’s unique position makes it ideally suited to act as a bridge between the different groups engaged in financial capability and debt advice work. We would like to see MAS make full use of this potential and promote sharing of knowledge and ideas so that work is leveraged, rather than focus solely on service delivery.

Q6: Is the MAS reaching its target audience? Are any groups unable to access the MAS’s services? Who is worst affected by a lack of knowledge of financial matters? Should the MAS have a greater role in financial education in schools?

29. Older people tend to have relatively good levels of money management skills, but may have more difficulty making good decisions about financial products than the population as a whole. The table below compares levels of financial capability across different competencies by age [3] . Later life can also bring with it a number of life stages which involve key financial decisions. For example retirement and choosing an annuity, coping with separation and bereavement, planning and paying for care. Financial well-being in later life will also be greatly affected by habits formed and decisions taken earlier in life, especially around savings.

30. We therefore see a need for money advice throughout life. Levels of financial capability in the UK are so low that we consider a broad approach is justified.

31. The MAS business plan describes its target audience as ‘those people who are not well positioned to withstand unexpected life events, in particular those who do not have adequate savings or insurance.’ We would add that MAS has an important role in helping people manage change and life transitions, for example retirement. At these times people may need extra help to make the most of the financial resources they do have.

32. This is an extremely broad target and MAS has undertaken large amounts of work to segment the markets for money and debt advice, predominantly based on attitude. We agree that attitude is an important factor in determining money management skills, however we have concerns that the emphasis on attitude in segmentation may be driving services that exclude certain demographic groups.

33. Attitude must be used carefully with other demographic data. For example, people with the same attitude will need different advice depending on their life stage. Wealth levels will to a certain extent affect the types of financial services and products that people need to consider. It is also important to decide what the segmentation is being used for.

34. MAS should publish a detailed report of the segmentation being used and evidence and methodology deployed to create it. It should include a summary of how the segmentation is informing the MAS business plan. This would support partnership working as it would enable stakeholders to contribute their expertise constructively.

35. In particular, we are concerned that people who do not have access to the internet will struggle to use MAS services. Older people are still more likely than others to be digitally excluded, 55% of 65-74 year olds and just 26% of people aged 75 or over have home internet access [4] . Even those who can access face to face or telephone advice will encounter significant additional barriers in completing follow up plans without internet access.

Q7: How appropriate is the model, using fees raised from financial services firms regulated by the FSA, by which the MAS is funded?

36. We support the current funding model for MAS.

37. As noted earlier in this evidence, there is a real need to increase the ability of the UK population to manage their financial matters effectively.

38. Compounding the lack of basic understanding is the complex nature of many financial product contracts, despite years of effort by regulators to improve disclosure. Research shows it can take 55 minutes to read a standard consumer credit agreement, let alone understand it [5] .

39. At the same time as we face a huge savings gap individuals are increasingly expected to engage more and more with the financial services market to provide protection and income for the future.

40. Financial services firms should benefit from a more financially literate population and therefore a financial contribution from regulated firms is appropriate. As noted earlier, MAS is not the only body contributing to this effort and funding is also provided by local authorities, charities and other funders.

June 2012

[1] Thoresen Review of Generic Financial Advice, 2008

[1] Living on a Low Income In Later Life, Age UK , 2012

[2] http://www.moneyadviceservice.org.uk/_assets/downloads/pdfs/press_releases/20120201_freeonlinehealthcheck.pdf

[3] Beyond Financial Inclusion: involving older people, Age Concern, 2008

[4] Communications Market Report: UK . Ofcom, 2011

[5] Warning: Too Much Information Can Harm ; Better Regulation Executive/NCC, available at http://bit.ly/oUP3lj

Prepared 15th June 2012