Financial Capability in the workplace
Speech by Clive Briault, Managing Director, Retail Markets, FSA
Parliamentary Financial Literacy Summit
17 July 06
Good afternoon. I welcome this opportunity to spend a few minutes talking about the National Strategy for Financial Capability and in particular delivering financial capability through the workplace.
This is because financial capability is really important to both employers and employees. The issue of poor financial literacy holds back our nation as a whole. It reinforces the plight of the poor and vulnerable in society, and it holds back innovation and growth.
Earlier this year we conducted a survey of the nation's financial capability. The results confirmed that many people, particularly the young, are poorly equipped to plan ahead.
In fact, we found that nearly half of all adults in the UK have no savings at all to help them cope with rainy days. And of the 81 per cent who don't think that the state pension will give them the standard of living they hope for in retirement, a shocking 37 per cent have made no additional pensions provision anyway.
It was also clear that many people need to be significantly better at understanding the choices available to them. Our survey found that 40 per cent of people who own an equity ISA do not know that the cash value of their investment is directly linked to the stock market – while 15 per cent of people who own a cash ISA think that theirs is!
So we know where to concentrate the efforts of the National Strategy for Financial Capability for maximum short and long term effect. Projects have already been piloted across the UK, focusing on the most effective ways and times to reach children and young adults as well as those inside and out of work. The FSA will spend up to £10 million this year in leading this financial capability work, and our target is for the various initiatives - including our workplace initiative – to collectively reach ten million people over the next five years.
We may have led this strategy, but its ideas, action and growing momentum come from the combined expertise, support and commitment of individuals and organisations from public and private sectors as well as the voluntary services. For example, the support and valuable experience of both employers and trade unions have been a great help in testing and implementing our project to extend financial literacy education through workplaces.
A pilot project which we ran in 2005 showed that the workplace – whether an office, a factory floor or a school staff room - is an effective channel for improving financial capability. Employers also benefit, because it gives them an opportunity to provide something valuable to their employees, while educating them about their own benefits package. More than 90 per cent of those attending seminars under this pilot work found the seminars useful.
We are now beginning to roll out an ambitious programme of financial capability education for delivery through the workplace right across the UK. Delivering financial education in the workplace will allow us to reach a very large and diverse range of people, including some of those on low incomes who may not have access to any other forms of money advice.
This programme - 'Make the Most of Your Money' - involves a trained presenter visiting a worksite, free of charge, to deliver seminars to employees. All employees at the worksite receive a financial information pack covering budgeting, managing debt, and long-term planning for the future (including pensions) and all are invited to attend a seminar.
This is an initiative of which the Independent on Sunday said in a recent article "So where's the catch? Astonishingly, there doesn't seem to be one!" Praise indeed and very perceptive of them I thought!
Sixteen major employers are already signed up for this financial year, including from national and local government, education, the media, manufacturing, retail and financial services, and we are in discussion with over 100 more firms.
We have a pool of more than 90 seminar presenters – and each of these will have been through a training process before they present a seminar.
Over the next five years, our target is for 'Make the Most of Your Money' to reach four million employees, all of whom will receive financial information and around half a million of whom will attend a seminar in the workplace. The initiative will help participants improve their ability to understand, manage and plan their financial affairs, and we hope that many will seize the opportunity to take immediate action to review their financial situation. I also hope and expect that the introduction of a National Pension Scheme will generate even more interest in the workplace in personal finance.
I hope that I have given you a flavour of the enthusiasm we have already found for the Make the Most of Your Money initiative, the momentum that is building behind it, and the benefits many more employers and employees will be gaining in the next few years.
So before I hand over to Ron Sandler, who will focus on the importance of teaching tomorrow's consumers how to look after their money, I would like to urge more firms to provide financial education for their employees, and to help today's consumers to become better informed and more able to take greater responsibility for their financial affairs.
You can find contact details on the Financial Capability section of the FSA website so do please get in touch – because we all stand to gain.