Helena Morrissey, head of personal investing at Legal & General Investment Management is talking on a panel about the culture of financial services at the Money Marketing Interactive conference. Here she explains why we need a fresh look at personal finance and how it should be considered part of a person’s well being.
What key reforms would help get people saving more?
The distribution of wealth is unequal in the UK and savings levels are at an all-time low. Building wealth starts with having enough post-tax income, but the income of the top 20 per cent of households is six times that of the bottom 20 per cent. And these are households where there is at least one breadwinner, one person going out to work. We should be making work pay, but instead we’re taxed when we earn, when we save and when we die.
Part of making work pay is fostering cross-party collaboration to ensure the pension regime is consistent and doesn’t suffer changes every time there’s a new government or Chancellor. We should be encouraged to save for retirement and not punished for trying to create a nest egg. It really does make for a poor outlook for our capacity to save if we’re not motivated to do so and communications around the importance of saving are few and far between.
After three years without any change to the ISA allowance, it would be encouraging to see an increase in the stocks and shares ISA savings limit and raise awareness of the tax breaks that ISAs offer on the whole. While the junior ISA limit has increased this year in line with inflation, the stocks and shares ISA limit has been the same for a number of years. In addition to increase the stocks and shares ISA allowance, with so many non-nuclear families and so much inter-generational financial dependency, grandparents should be permitted to open and pay into a junior ISA for their grandchildren.
What do we need to do to improve financial literacy in the UK?
It’s wonderful to see that schools across the UK now have access to Martin Lewis’s financial education text book. We also need an on-going commitment from government and the private sector to introduce and sponsor activities and initiatives that provide practical support and worked examples for this new part of the curriculum. We’re not quite at the level of Mathletics or Young Enterprise, which can help shape valuable life skills and improve confidence. Showing how better financial knowledge and awareness of the need to save can be applied to real-life situations will create the experiences the next-generation of savers need to make good decisions.
Helena is speaking on a panel looking at culture in financial services: the path forward after Brexit at MMI London. Register for your free place here.
How important do you think coaching and life planning are to a modern advice business?
Financial planning and our attitudes to saving shouldn’t be viewed in a vacuum. Instead, we should be considering money and savings to be a lifelong concern and not about immediate goals. We should also be encouraged, when we think about financial planning, to embrace our emotions and hang-ups around money. We don’t always make rationalisations and we need to accept this by harnessing our feelings and thinking about savings in ways that work for us on an individual basis.
Our finances should be seen as another extension of our wellbeing. By making our financial matters an afterthought to everything else, we won’t address the gender pay gap and will allow the gender investment gap to grow too. The impact of what we do with our money isn’t resonating in the right way with those who are so in need of better financial health and a holistic approach to saving.