The Notebook: Better education to wave in a personal finance revolution in the UK
Where the City’s movers and shakers get a few things off their chest. Today, Brian Byrnes, Head of Personal Finance at Moneybox, takes the pen
A financial revolution on the horizon
Are you aware that Britain may be on the cusp of a revolution in consumer financial confidence and capability?
I say this with optimism, confidence and more than little excitement following the launch of two important programmes in recent months. The first is a government-led inquiry into financial education to try and enhance its delivery across primary, secondary and further education. The second is the Advice Guidance Boundary Review, a Treasury and FCA initiative launched in December that aims to close the financial advice gap.
Both are long overdue and could be truly transformational for consumer finances.
That most of us leave school without the knowledge and confidence to make financial decisions is shameful. We graduate to adult life, left to figure out how to manage our money and plan for the future through trial and error with only eight per cent accessing professional financial advice.
There is irrefutable evidence that highlights the failures of this system; the wealth, investing and gender pension gaps to name just a few. Almost two thirds (64 per cent) of UK adults believe they have missed financial opportunities in life due to a lack of financial knowledge or financial confidence.
We see this play out most noticeably when it comes to investing, with only 30 per cent of UK adults investing compared to approximately 60 per cent of American households. This significantly impacts an individual’s ability to build wealth for the future, as well as homegrown demand for UK equities.
Driving regulatory and cultural change can feel like a marathon rather than a sprint; however, the prize for getting this right is enormous. We recently learned that low levels of financial knowledge and confidence have financially disadvantaged two-thirds of UK adults to the sum of £65,000 – that’s £2 trillion of potential spending power for the UK economy.
We have an extraordinary opportunity to break the generational cycle of poor financial education and in doing so, unleash the potential of a more financially confident, capable and resilient population to drive the UK economy forward.
Pensions dashboard at last?
With several false starts since the pensions dashboard was announced, I’m probably not alone in that I have on occasion feared that it may never see the light of day.
However, the announcement of connection deadlines by the pensions minister last week, with deadlines for the biggest pension providers only 11 months away, was a very welcome development.
With so many people at risk of not saving enough for a comfortable retirement, we must make it as easy as possible to reunite people with the billions sitting in lost or forgotten pension savings.
A marathon effort
On April 21st I will be taking on the London Marathon on behalf of Great Ormond Street Hospital who have been taking incredible care of my nephew since he was diagnosed with Acute Lymphoblastic Leukaemia last August.
Our family has been blown away by the care delivered by the doctors and nurses at GOSH and suffering through 26.2 miles to raise much-needed funds for them is the least I can do to try and repay their kindness and support.
The mighty ISA
It’s 25 years since the launch of ISAs, an incredible tool for wealth creation and the envy of investors around the world. Some say their benefits are skewed too much towards the wealthy however the Lifetime ISA was designed specifically for younger savers. A whole generation of first-time buyers have been able to save a deposit for their first home far sooner than would have otherwise been possible thanks to this fantastic product. It’s imperative the Treasury future-proof the LISA product rules to support the next generation of aspiring homeowners.
Quote of the week:
“All of us would be better investors if we just made fewer decisions.”
Daniel Kahneman, Nobel Laureate and “godfather of behavioural economics” who died last week
A recommendation
I have recently finished The Trading Game by Gary Stevenson. It’s a story of how a boy from East London won a competition won by a bank and went on to become one of the biggest FX traders in the world. Compelling from start to finish with incredible stories from the trading floor. Gary has since gone on to quit trading and become a campaigner highlighting financial inequality in the UK. He also has a brilliant Instagram and Youtube page teaching people about real-world economics. Highly recommended!