The Money Advice Service should be given a statutory objective of delivering a clear workplace financial education strategy, according to Unum head of public policy John Letizia
With barely a month until polling day, all the political parties are starting to announce their key electoral themes. Doubtless the outcome of this election, as with most previous ones, will be primarily decided by the state of the economy. As we all know, “it’s the economy, stupid”.
Across the UK, candidates will be quick to point to data and figures that best suit their campaign, whether on debt, inflation, unemployment or cost of living. But I am pretty confident
that two key issues that have affected this country for generations will not get a look-in: lack of savings and lack of financial education.
The recently published report by the Financial Inclusion Commission – Improving the Financial Health of the Nation – estimates that 13 million people do not have enough savings to support them for a month if they were to experience a 25 per cent cut in income. Furthermore, 8.8 million people are over-indebted, with 15 million – 31 per cent of the population – reporting one or more signs of financial distress. This situation is far from ideal and there does not seem to be any political solution on the horizon.
With almost 30 million UK citizens in work and an ever-changing workforce, it is vital that the next government sets in motion a clear, strategic and long-term financial education programme to support people in making the best decisions about their financial plans – whether about their workplace benefits, their insurance or their mortgage. Indeed, the FIC’s report said on this issue: “The people of the United Kingdom need better financial skills.”
So how do we improve the public’s financial skills? The FIC makes a couple of interesting suggestions, such as providing financial skills training from primary school through to retirement – including at key life stages and events – and producing a robust, outcomes-based evaluation of how to improve financial capability developed with industry, government and consumer groups. Regrettably, the FIC report is rather thin on the key role that the workplace can play in this area; its only suggestion is to introduce auto-enrolment for workplace savings schemes.
In spite of the increasing complexity of benefit packages and changes to pensions, in 2012 the number of employers offering financial education fell to 16.9 per cent. Worryingly, only 12.4 per cent of SMEs offered any education.
At the same time, research shows that more and more employees would value greater support from their employer/workplace on financial education and planning.
So who, if anyone, should be responsible for delivering financial education in the workplace? I believe the answer is the Money Advice Service (MAS) – the UK statutory body for improving people’s understanding and knowledge of financial matters and their ability to manage their financial affairs.
MAS has had mixed results since its inception in 2010, partly due to the high expectations placed on it. Critics argue that the body is geared more towards curing the problem than preventing it. What is clear is that while MAS has actively engaged with businesses and the financial services industry, it has not developed a robust work-place financial education strategy.
In May 2014, the economic secretary to the Treasury launched an inde-pendent review of the effectiveness of MAS, required to report to HM Treasury by the end of that year. At long last, the final report and the Treasury’s response have been published.
Although the report’s 25 recommendations are sensible and valid, regrettably there is no specific recommendation nor mention about workplace education – which is rather short-sighted. You can’t have a long-term consumer and education strategy if you don’t involve employers and their 30 million employees.
It is hoped the Treasury revisits this issue urgently and agrees that one of MAS’s statutory objectives should be to deliver a clear workplace education strategy, working in partnership with other agencies and, indeed, industry and concentrating on SME level, where the majority of people work and where, arguably, the need is greater.
Financial education should be an integral part of other workplace programmes – financial worries have a major bearing on employees’ engagement and productivity. Responsibility for this cannot be left to employers – government must take its share. By addressing the increasing need to provide good and transparent financial advice, the next government can set in motion the necessary changes to ensure that people can confidently plan for their financial needs.