Our view
Jun 06 - UK: Compulsory financial education pays dividends in later years
Introducing compulsory financial education into the curriculum could make Britons much better off by their late 40s, according to a new report published today (Wednesday).
The report commissioned by Norwich Union and written by ippr trading - the consultancy arm of the Institute for Public Policy Research (ippr) - highlights research from the US that shows compulsory financial education for school children can lead to people being, on average, richer by a year's earnings between the ages of 35-49. Translated into the UK this could mean that:
- A couple with two children aged five and 11 could be better off by about £32,000
- A couple with no children could be better off by about £22,000
- A single person with no children could be better off by about £13,000.
The research also looks at behavioural psychology to understand how education and public policy can enhance financial capability in the UK.
The report cites evidence that while 17 million adults successfully manage their finances (by making ends meet, keeping track of finances, planning ahead choosing products and staying informed about products) as many as 10.5 million experience difficulty in at least one of those areas.
According to the findings, the most common reasons for not engaging in financial planning are complexity, lack of low-cost advice and the desire for short-term gain over long term security.
The report also investigates the psychology behind this lack of engagement and looks at when and how government and the financial services industry should intervene to change behaviour.
Norwich Union, as one of the leading providers of pension, life and investment products, commissioned the report to help understand the underlying factors to low levels of financial capability in the UK. Norwich Union offers these findings to policy makers to provoke thought on how financial capability can be tackled through non-traditional methods.
David Barral, distribution director, Norwich Union, said: "A better understanding of why people act as they do is crucial if the financial services industry and government are to engage consumers more effectively. We need to help motivate people to overcome their inertia and enable them to take greater personal responsibility for their finances.
"Norwich Union is pleased to have worked with the ippr to bring current thinking on the psychology of the decision making process to a broader audience."
Miranda Lewis, senior research fellow for ippr trading ltd, said: "It pays to get clued up. This research shows that when financial education is introduced onto the curriculum next year it could pay real dividends later in life. But we also need to go beyond education to support the millions of adults who are currently struggling with their finances. More advice and support needs to be made available to all adults."
Rethinking Financial Capability by Mike Dixon:
Download full report (PDF 559KB)
Download executive summary (PDF 106KB)
-ends-
Norwich Union press office contacts:
Cheryl Cox 01904 452791 Out of hours 07800 695275
David Gwyer 01904 452828 Out of hours 07800 699508
ippr trading ltd
Matt Jackson 020 7339 0007 Out of hours 07753 719289
Notes to editors:
- Source: Statistics used come from Levels of Financial Capability in the UK. - Results of base survey; Atkinson et al, Bristol 2006
- For more information about financial education visit: www.fsa.gov.uk/financial_capability or www.pfeg.org
About Norwich Union
Norwich Union is the UK's largest insurer. It is a leading provider of life, pensions and investment products and one of the largest financial adviser (FA) providers. FAs provide over 70% of the company's long-term savings business in the UK.
Norwich Union is the UK's largest general insurer with a market share of around 14%, with a focus on insurance for individuals and small businesses.
Norwich Union's news releases and a selection of images are available from Aviva's internet press centre at www.aviva.com/media
ippr trading ltd
The report was commissioned by Norwich Union from ippr trading ltd, the trading subsidiary of the ippr. The ippr is the UK's leading progressive think tank. To find out more visit www.ippr.org