Financial literacy

An official study into Britain's personal finances reveals a generation of 18 to 40-year-olds unable to cope with debts and soaring house prices, with alarmingly low levels of savings and little hope of building a decent pension.  

The study, by the Financial Services Authority (FSA) and BristolUniversity, is the biggest of its kind undertaken in Britain.  

It paints a picture of a generational divide fuelled by higher education costs and the collapse of company pension schemes - with 42 per cent of adults now with no pension and 70 per cent with no meaningful savings.

Stakeholder Response: Institute of Financial Services

 

 

Welcoming the FSA’s study, the ifs said that the regulator’s findings came as no surprise.

 

 The ifs’ own study two years ago revealed that 79% of the population did not understand APR; 40% of people admitted they did not understanding financial products such as mortgages and ISAs; 30% didn’t understand what insurance was for; 50% did not understand what 50% meant.

 

ifs chief executive, Gavin Shreeve, said: "The ifs is concerned that all the talk of integrating financial capability into the national curriculum will fail to address the problem.

 

"Learning this sort of skill is best approached when it is done in context.

 

"Simply adding it to maths or arithmetic will not provide the transferable learning that will be required for young people to use that information in making informed and complex decisions outside the classroom.

 

"Percentages and compound interest are already being taught in schools and teachers often use real life situations to teach them.

 

"That still has not allowed young people to understand these key concepts when it comes to their credit card bills or other forms of consumer debt.

 

"It is essential that government and its agencies recognise that financial capability is as much a key skill as literacy, basic numeracy, and IT, and introduce it as a standalone element into the national curriculum."

 

Stakeholder Response: Institute of Chartered Accountants in England and Wales

 

 

A spokesperson for the Institute of Chartered Accountants in England and Wales said: "These detailed and timely reports from the FSA and BristolUniversity demonstrate the importance of putting financial literacy firmly on the school curriculum so that planning is embedded into the learning culture in our schools. 

 

"The report also confirms the critical role of employers in communicating financial information to their employees. 

 

"The government's response to the Pensions Commission's proposals will be very important in providing a long term framework for pensions savings and financial information in the workplace must form part of the long term settlement to be announced in the pensions white paper -- with the government, employers and employees working in partnership to deliver an appropriate and sustainable level of provision.

 

"Consumers have an increasing number of financial decisions to make - from allocating child trust funds and financing higher education, to starting pensions and funding care for elderly relatives. 

 

"However, this report shows that the level of financial literacy has not caught up with the increase in personal choices people face in their everyday lives. 

 

"The ICAEW is committed to working with government, and agencies such as the Personal Finance Education Group, to equip the next generation of young people with the financial information they need for the future."

 

 

Stakeholder Response: Association of Chartered Certified Accountants

 

 

June Deasy, public affairs manager at the Association of Chartered Certified Accountants said: "ACCA has long called for financial education to be a prominent feature in schools' curricula. 

 

"We are involved in a number of initiatives throughout the UK to increase financial understanding amongst pupils.  

 

"ACCA believes that children should be taught about tax and pensions in secondary school.

 

"Basic lessons that explain how and why they will pay tax and National Insurance and why making early provision for pensions pays, may help alleviate on-going and longer term problems.  

 

"At the same time, consumer confidence in pension saving still needs to be tackled if more individuals are to be encouraged to divert substantial parts of their lifetime earnings into private retirement saving.

 

"People need more assurance that their investments are likely to be safe and that their contributions will benefit them in the long term." 

 

 

Stakeholder Response: Finance & Leasing Association

 

 

Edward Simpson, head of public affairs at the FLA, told ePolitix.com: "FLA recognises that the inter-generational differences uncovered by the study are alarming and welcomes the FSA's efforts to tackle them."

 

 

Stakeholder Response: Council of Mortgage Lenders

 

 

 

 

CML director general Michael Coogan said:

"Helping people to improve their financial capability enables them to make informed decisions about how they spend their money and avoid getting into too much debt.

 

"We believe it is essential that consumers have all the advice and information they need to help them make the right borrowing decisions, especially when entering home-ownership for the first-time.

 

"Today's announcement is another crucial step in making more people aware of the need to improve their financial capability and we look forward to working with the FSA to implement the new strategy."