We must campaign with one voice to end financial illiteracy in the UK
WE NO LONGER live in a world where our financial futures are taken care of by either the government or our employers. Today, we are increasingly expected to take personal responsibility for planning for the long term. If we are to make the right decisions, we need to understand the language of economics, statistics and finance, but as a nation, we still fall short.
Concerns about the levels of financial literacy in the UK are not new and there have been some excellent initiatives launched in recent years, including Morning Wire’s own campaign on this issue, but the evidence tells me that there is still more to be done.
Financial literacy for most of the UK remains poor. We have a large savings gap and a lack of trust in the financial services industry. These problems are exacerbated by gaps in the public’s economic knowledge, including how much is required to provide their expected pensions, and confusion over how financial products work.
The Institute and Faculty of Actuaries believes that a two-pronged approach could make a significant difference. There is room for improvement in consumer information at the point of sale and financial literacy also needs to be embedded across the school curriculum – learning from the work others have undertaken to date.
It was John Ruskin, the 19th-century essayist and philanthropist, who said: “It is far more difficult to be simple than to be complicated.” Many people would say they find the financial products being sold to them confusing, with the literature full of complex jargon they don’t fully understand.
Steps have already been taken to improve point of sale information, including adding more prominent risk warnings and the Plain English Campaign’s efforts to reduce jargon. However, many consumers continue to buy the wrong products – or the right products at the wrong time. They make poor decisions about pensions, sometimes make no decisions at all (see the apathy over annuity purchases) and are more likely to be in debt than to have large savings pots.
That is why it is so important that financial literacy is added to the curriculum. Many organisations, educators and individuals have been striving to achieve this for some time. As good as this work has been, it has sometimes suffered from a lack of unity. It would be a great step forward if the financial services industry, the government, regulators and educational bodies sat down together and agreed one approach. Adding financial literacy to the curriculum would also have the beneficial effect of disseminating knowledge to the parents, friends and family of children being taught.
The Institute and Faculty of Actuaries recently linked with the Royal Statistical Society to publish The Future of Statistics In Our Schools And Colleges. The report, by education specialist Roger Porkess, focuses on the ways statistics is taught and learnt in schools and colleges in England, with some evidence drawn from Wales and Northern Ireland. It concludes that all students should be equipped with a working knowledge of basic statistics and an appreciation of how it impacts on their daily lives. The Institute and Faculty of Actuaries wishes to bring its findings to the table with other organisations and their findings with the aim of agreeing a new approach for the teaching of financial literacy and statistics in schools in the future.
An improvement in financial literacy can only be a good thing and our industry should do more to ensure that this happens. A generation of school-leavers and graduates with better understanding of statistics and finance will provide the industry with an enlarged talent pool for recruitment. And a more financially literate consumer is more likely to buy the right products at the right time for the right job and to avoid being mis-sold to or failing to make sufficient financial provision for his or her future. It is in the best interests of both the financial services industry and the government to work together on this issue.
Even more important, it is in the best interest of consumers, who at present are being asked to provide for their future with too little knowledge or information to help them to do so. Saving for your future, making provision for your family and insuring your prized possessions is something that should be promoted and also something that should be understood by all.
Jane Curtis is president of the Institute and Faculty of Actuaries.