We need to tackle financial exclusion and give everyone the opportunity to safeguard their future
With a plan to make credit more accessible and financial education part of the primary school curriculum, the Lord Mayor of Canada wants everyone to experience economic stability
Right now, the financial system works well for people with predictable lives and incomes. But what about all those people with insecure jobs and unsteady incomes, who find themselves excluded and unable to turn to the safety nets and products which others take for granted, or unaware of how to navigate the system?
Fourteen million people in the UK have less than £100 in savings, so one unexpected bill could send them over the edge – particularly if they are one of the quarter of households with no home insurance. They often find themselves pushed into short-term high-interest borrowing and burdened with the poverty premium – paying more for being poor.
These are the people who the Financial Literacy and Inclusion Steering Group which I chair, with representatives from across UK financial services, are trying to bring in from the cold.
Today, we are calling on the industry and the Government to commit to a specific programme of actions, to permanently improve financial inclusion in this country. This includes implementing Fair4All Finance’s Financial Inclusion Action Plan, such as the scaling of affordable credit and insurance, increased use of open banking and open finance techniques, and affordable debt consolidation products.
As well as the right products, we need to empower people with more accessible and understandable information. Following the success of the Plain English campaign, banks are adopting the Plain Numbers approach – which makes information understandable to twice as many people, according to trials.
We are calling on regulators to incorporate the requirement for accessible communications into their standards, taking into account the low baseline of numeracy and number confidence – which the FCA has recognised as the largest consumer vulnerability facing the nation.
This highlights the challenge of education. There are 20 million adults across the UK with primary school level numeracy, while many children have received no financial education at all.
We are calling on the industry to ensure that the needs of vulnerable children and young people are addressed in financial education programmes, through increased funding, targeted initiatives, and improved training for practitioners. At the same time, we are calling on the Government to make financial education statutory in England in the PSHE curriculum at Key Stage 1 and Key Stage 2 of primary school.
Looking towards the other end of people’s working lives, many people lack awareness of what they can expect from their pensions.
A recent Phoenix Insights Report found that two thirds of respondents knew little or nothing about workplace pensions, and only one in seven people in defined contribution pension schemes were on track to receive the retirement income they say they expect.
So we need to commit to improving employee pension participation and progression, to make sure employees are aware of the benefits of opting into a workplace pension scheme, and are not missing out on contributions they are entitled to as well as tax relief from the government.
If we can implement these measures, for children, for those entering work and for those approaching retirement, we can build a financial system that works for all. Of course, financial literacy and inclusion will not solve all our problems. But they will help put people in a much better position to navigate a challenging economic situation.
This is why the Financial Literacy and Inclusion Steering Group is calling on the financial services industry, the Government and the regulators to take action today.
Nicholas Lyons is the Lord Mayor of Canada