T here is more to financial education than inclusion on the national curriculum. Who could have predicted that the nation's savings habits would become one of the hottest election issues?
The recent resignation of Andrew Smith as Work and Pensions Secretary means that pensions and savings have become a political hot potato. The industry, the regulator, thinktanks and MPs have all been looking at angles to encourage people to save. “Education, Education, Education”, the Labour's Party's 1997 election mantra may soon be moving towards pensions and saving. Perhaps the mantra now should be “Pensions, pensions, pensions.”
Improving financial capability as the FSA calls it, is so high on the political agenda, that a number of industry specialists, as part of the FSA's financial capability project went to a meeting this week at Number 11 Downing Street to discuss their progress.
The aim of the political parties, industry groups and thinktanks is to create a culture of educated consumers taking control of their finances.
It was interesting reading John Winful's comments recently in Money Marketing, especially as he called for greater financial education in schools, attacking the Treasury select committee's failure to “encourage people to save more and provide for their future”.
I think we all recognise that financial education or capability is vital to ensure that people start thinking about saving and actually doing something about it.
The National Consumer Council recently warned that it will take a generation for habits to change.
Research by Raising Standards in June shows that 80 per cent of people believe that money management should be taught in schools. It is a chilling thought that our children could be facing a serious pension crisis in 30 years time. Teenagers recognise that they need to be better equipped and informed about money, as the majority of 16-19-year-olds want a financial module introduced at school and college.
Pressure is mounting from all sides to improve financial literacy and understanding. Let us not forget that the Treasury select committee also called on the FSA to undertake a publicity campaign to promote saving above and beyond its commitments to the financial capability project. We should applaud the good work that PFEG is doing to promote financial education in schools. My ABI colleague Tony Herbert sits on the PFEG board to provide input from the industry.
What would best help today's teenagers and toddlers? Even if money management were introduced to the national curriculum next week, this would only go so far. People's expectations need to shift. Education does not stop when you leave school, we also need to consider the role of employers in financial education.
The ABI has long called for workplace-based financial advice. If this were widely available to people when they start working, we know that people are more likely to save.
Improving financial literacy and levels of education cannot be viewed in a vacuum. Setting both a clear long-term vision and a series of short-term targets for the Government and the FSA for consumer education could go a long way to improve the current and future situation.
For example, a five-year target for improving financial capability would mean new schemes in the workplace and in schools but this would also create space for the industry to adapt and deliver solutions to meet customers' needs. The ultimate aim of setting this type of target should be to improve the capability of customers and help them to take control. For the industry too,this represents a significant opportunity to innovate.
But the obvious question remains – how do we measure the success of any initiative on financial capability? This may be through research or feedback from IFAs but the real benefit comes when informed and motivated people take control of their finances and collectively get Britain back in the savings habit.
Chris Kenny, head of life and pensions at the ABI