TODAY sees the launch of a new strategy to radically improve the financial wellbeing of millions of people across the UK over the next decade.
It’s a bold ambition. It has to be, to reach out and empower so many people. And its success needs the support of as many public, private and third-sector employers, firms and organisations as possible.
Financial wellbeing is about feeling secure and in control of your money – knowing you can meet monthly bills and deal with the small or big emergencies that life throws at us. It’s feeling confident and empowered for your future. Yet for millions of people, financial wellbeing seems an impossible dream as they struggle to make ends meet.
Across the UK we know that almost 11.5 million people have less than £100 or no savings at all to fall back on. Nine million people regularly use credit to pay for food or priority bills. More than five million kids don’t get a meaningful financial education. And a massive 22 million of us say we don’t know enough to plan for retirement.
Money worries have a grim knock-on effect to our mental and physical health, as well as putting horrible strains on relationships, whether at home or at work. The UK Strategy for Financial Wellbeing from the Money and Pensions Service (MaPS) has five goals and agendas for change.
An additional two million young people are to secure a meaningful financial education. That will create firm financial foundations for almost seven million young people across the UK. It will be helping an extra two million people of working age save, so we have 16.7 million people with better financial resilience when they are struggling with the rising costs of living.
They will rely less on credit for food or bills. Those in financial difficulty will be able to access good-quality debt advice. Five million more adults will feel confident planning for later life.
In developing this new strategy, MaPS invested a lot of time last year listening to the views of more than 1000 experts and organisations at the coalface of financial services and providing help to people. Solutions are based on hard, empirical evidence of what we know works.
From today, a short mobilisation period will begin where delivery plans for these ambitious goals are agreed with stakeholders from the private, public and third sector. Specific action plans for Scotland, England, Wales and Northern Ireland will be developed with local stakeholders and put into action.
A good system of financial education will help young people save money. A My Credit Monitor survey showed one in five adults over 30 are still paying back credit they spent in their teens or 20s. Almost three quarters of young people had no idea what their credit score was before they took out their first credit card.
A decent credit score can mean the difference between getting low-cost credit, a mortgage or an affordable loan. Not being savvy about interest rates or understanding how financial products work can mean you pay over the odds or get into money quagmires that come back to
haunt you.
The Financial Conduct Authority’s Financial Lives survey revealed that every year some 12 million adults receive an unsolicited approach that may be a scam – 100,000 folk lost money because they got ripped off. There are as many financial scams as you can see stars in the evening sky. Prevention is always better than trying to find a cure.
Since pension freedoms were introduced in April 2015, over-55s have withdrawn more than
£30billion from their pensions. It’s possible to be taxed on the wrong tax code, and many have been shocked to discover their pension withdrawal pushes them into a higher tax band for that year. Understanding all of the relevant issues is vital to get the very best out of your pension pot.
Access to free, high-quality debt advice has to be as early as possible to minimise the difficulties for a person. New technology has a role to play to ensure that early intervention is an automatic process where the emphasis is on making the experience as pain-free and seamless as possible. No more hanging on phones all day and being frightened to answer your door.
To realise all of these ambitions the financial services industry has a huge part to play in designing and selling the right products to consumers and changing corporate culture to eliminate mis-selling. It’s in their interests to do so. Almost £40bn has had to be repaid in payment protection insurance mis-selling alone.
For me, as a member of the board of MaPS, it’s been a huge privilege to play a small part in the creation of the UK Strategy for Financial Wellbeing. It will make a real positive difference to millions of people’s lives. It has to.
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