Dormant Assets Bill [HL]

Written evidence submitted by The Centre for Financial Capability to the House of Commons Public Bill Committee on the Dormant Assets Bill (DAB03)

1. Background

The Centre for Financial Capability (www.tcfc.org.uk) is a new charity, launched in July 2021 by the backers of KickStart Money, with a mission to ensure every child in the UK develops the skills and behaviours necessary to navigate critical financial decisions in their life, starting from primary school.

KickStart Money (www.kickstartmoney.co.uk) is an award-winning coalition of 20 savings and investment firms who have donated over £1 million to fund primary financial education to over 20,000 primary pupils across the UK, in partnership with the charity MyBnk.

The coalition was brought together by The Investing and Saving Alliance (TISA) in 2018, in response to research by Cambridge University published by the Money and Pensions Service (MaPs) which found habits and attitudes towards money are formed as early as age 7 [1] . By this age, children are able to recognise the value of money and are capable of complex functions such as planning for the future and understanding the irreversibility of some choices. [2] It is this understanding that is crucial to ensuring young people are able to build the financial capability skills which are essential to adult life.

As KickStart Money, the coalition primarily focused on the practical delivery of financial education in primary schools. The KickStart Money programmes cover crucial financial concepts such as delayed gratification, saving, tax, needs versus wants, and different forms of payments and bank accounts.

Independent evaluations of the KickStart Money programme have clearly demonstrated the value of financial education. The yearly evaluation reports show that the programme has a positive impact against all three outcomes measured:

1. Young people build capacity to defer gratification.

2. Young people can understand, discuss and articulate new knowledge of money habits.

3. Young people have an improved understanding of the concept of ‘future’, ‘plans’ and ‘ consequences’ .

The most recent Year 4 evaluation report showed that before completing the KickStart Money programme, only 59% of young people were able to understand, discuss, and articulate new knowledge of money habits. Following completion of the programme, this rose to 73%. The report also found that young people who had lower financial capabilities made large improvements by the time they completed their programme. 2 out of 3 primary-aged children who received KickStart Money funded financial education were working towards a savings goal after receiving lessons. This is nearly double the national average.

Thus, having seen the impact of early intervention first hand, the backers of Kickstart Money decided to expand their commitment to primary financial education by forming The Centre for Financial Capability (CFC). CFC’s key goal is to promote effective and high-quality financial education for primary-aged children. CFC was launched with a mission to ensure every child in the UK develops the skills and behaviours necessary to navigate critical financial decisions in their life, starting from primary school. We were delighted to have the support of the Government in launching the charity, with John Glen MP, Economic Secretary to the Treasury and City Minister , recording a supportive message for our launch video.

Current members of The Centre for Financial Capability include: ABI, Aviva, Axa, BlackRock, BMO, Columbia Threadneedle, CQS, Janus Henderson, Lazard, Legal and General, Legg Mason, Liontrust, M&G, Newton, Pool Re, Prudential, Quilter, Schroders, Standard Life Aberdeen and St James’s Place.

As part of our launch, CFC supported the All-Party Parliamentary Group (APPG) on Financial Education for Young People on their recent inquiry into the provision of financial education for young people in the UK. The APPG is chaired by Julian Knight MP, who as Chair expressed his interest in Dormant Assets during the Second Reading of the Bill in the Commons on 6 December 2021.

The report called on the Government to prioritise and invest in primary financial education to ensure every child receives a high-quality and effective financial education. The report made the key recommendation that the UK Government, in partnership with MaPs, must ensure all children in the UK have access to high-quality and effective financial education by 2030. CFC has identified the lack of necessary funding to enable sustainable implementation of financial education at scale as a key challenge to achieving the APPG’s recommendation.

CFC believes that the Dormant Assets Bill presents an opportune moment to ensure sustainable funding for the delivery of financial education across the UK. We welcome the new legislation that will enable unclaimed assets to be used to support causes relating to youth, financial inclusion and social investment, and believe that a proportion of these unlocked assets should be used directly to address the UK’s financial capability crisis.

The charity is therefore calling on the Government to use Dormant Assets set to be released from the savings and investment sector to ensure every primary - aged child receives a high-quality and effective financial education .

2. Proposed Amendment to the Dormant Assets Bill

The Centre for Financial Capability was delighted to receive widespread cross-party support during the Second Reading of the Bill in the House of Lords in May 2021 . Multiple interventions were made in favour of using part of the unlocked assets to fund high - quality financial education at primary level and an amendment was tabled by Lord Blunkett, which

was supported by both Conservative and Labour peers, which called for the creation of a provision to fund such programmes.

During the Second Reading Lord Blunkett, Baroness Wheatcroft and Lord Polak all spoke in support of Kickstart Money and the initiative’s calls for Do rmant A ssets from the expanded scheme to be used for this purpose. Lord Polak stated that the opportunity must not be "missed to use the assets of financial mismanagement to create a society where young people can be given tools and skills at an early stage to prevent people falling into debt or financial vulnerability by focusing these dormant assets to ensure that primary school children develop a positive money mindset as early as possible. "

The following amendment was tabled by Lord Blunkett: Page 21, line 19, at end insert- "(1A) An order under this section must create provision to fund access to high quality and effective primary financial education." The amendment was also sponsored by Lord Knight and Lord Polak.

While the amendment was not moved, the backers of CFC believe that funding financial education for every child in the UK is exactly the kind of initiative that should be supported by the Dormant Assets Bill and should be considered as the Bill moves into Committee Stage in the House of Commons.

In May 2021, a group of 38 MPs made a joint statement calling for the Dormant Assets scheme to be used to teach primary school children about finance in order to build more resilience in the next generation. This statement received coverage in The Telegraph. In this article Julian Knight MP, Chair of the Financial Education APPG and DCMS Select Committee, said that "the economic shocks associated with Covid-19 have clearly demonstrated the need for a financially resilient nation and, with money habits forming by age seven, it is imperative that we start teaching our children about money when they are at primary school."

Considering this and the significant support our campaign has received in both Houses, CFC feels that a similar amendment, calling for assets to be in part used to fund the sustainable delivery of financial education for every UK child, should be tabled.

3. Why Dormant Assets should be used to fund primary financial education

There have already been some amendments to the Dormant Assets Bill, which specify the funds being used for wellbeing of communities in high levels of deprivation. Financial education is a crucial tool that can be used alongside other levers to reach children in poverty to help them build the skills needed to ensure stronger financial resilience in later life.

As outlined above, one of the key recommendations from the APPG on Financial Education for Young People’s inquiry report was to ensure that all primary-aged children receive a high-quality, effective and sustainable financial education by 2030. Using unclaimed assets from

the savings and investment sector would support a funding mechanism to ensure this recommendation can be met and tackle the ‘postcode lottery’ of which children have access to high-quality financial education.

Millions of primary-aged children do not receive any financial education at all. By utilising unclaimed monies specifically for financial education, this would provide an opportunity to prevent millions of children from falling into debt or financial vulnerability in later life by teaching them positive saving habits at the age that money mindsets form.

Furthermore, the Covid-19 pandemic has demonstrated the importance of having a savings buffer and being resilient to economic shocks. Prior to the impacts of the pandemic, 11.5 million people already had less than £100 in savings. [3] Between March and October 2020, the number of adults with low financial resilience increased by 3.5 million and 8.1 million expect to take on debt in the near future. [4] It is crucial that a high-quality and effective financial education delivery model is funded to ensure that the next generation can build strong financial capability and look after their money.

It is our view that financial education can close the gap in financial capability and provide levelling up opportunities for those who do not currently receive any form of financial education at home from their parents or carers. Our research has found that children from poorer backgrounds, who live in areas that are high on the Income Deprivation Affecting Children Index, are more likely to receive free school meals, and who are located in areas that have higher Indices of Multiple Deprivation, are much less likely to receive financial education. However, after they have received a financial education programme, they tend to show quicker and more successful signs of learning and development than children from less poor backgrounds. [5] This shows that it is vital to support all children, no matter their background, by developing a funding mechanism to deliver financial education lessons.

There is also an argument to be made that ensuring younger generations are financial literate and capable means that they’d have the financial skills necessary to understand pension pots and benefits better, thus meaning that dormant assets themselves will be less likely to be left. By delivering a high-quality and effective financial education, young people are more likely to understand long-term monetary aspects and will ensure that money is effectively and correctly claimed by those who it is owed to. Using unclaimed dormant assets to better fund and promote financial education can therefore help to break the pattern of poor financial literacy skills in later life, which can end up with people not realising they are owed money in various money and pension pots.

The Centre for Financial Capability is a charity which is backed by leading financial services firms and it is our strong belief that directing funds from the Dormant Assets Scheme into primary financial education would be likely to increase participation from the sector in the scheme. Many of our backers support using the unclaimed money to better fund financial education and, given that funds are being released by the sector itself, championing financial education for young people by directing funds towards an area of public policy that has huge backing from the sector would likely increase the incentive firms had to release as many funds as possible.

December 2021