Financial capability

 This page contains the following:

• Financial capability action plan
• What would the service provide?
• Who will deliver it?
• Benefits of the project 

 Financial capability action plan

On 7 July 2008 the Treasury and FSA published a joint financial capability action plan. This set out new measures to give people free advice and assistance to help them to better manage their finances. The accompanying press release highlighted a number of key initiatives including:

• Development of an expanded one-stop-shop for information and support based around the FSA's Moneymadeclear website and consumer helpline, to be promoted widely after the summer. This will direct people to specialist advice on issues such as problems with debt, mortgages or utility bills, as well as providing information for first time buyers or other people looking for financial help.
• A new £12m programme to deliver new free advice on money matters including budgeting, money management and planning.  It aims to help between 500,000 and 750,000 people across the North West and North East of England as part of the Money Guidance "pathfinder" recommended by the Thoresen Review of generic financial advice, which was published on 3 March 2008. It will be launched early in 2009, and funded by the Government and FSA, who will each contribute £6 million over the two years of the programme.
• Support for personal finance education in schools, through the Government's new £11.5m three-year programme My Money and the FSA's £16m Learning Money Matters programme. This programme will support financial capability for children and young people from ages four to nineteen, focusing on the financial decisions children meet from when they first encounter money until they leave school.

The measures will help households facing money worries access a wide range of specialist help and advice, making it easier for families to get support from the £200m programme of debt and financial advice services funded by the Government.

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What would the service provide?

Examples of where the pathfinder will offer help include -

• budgeting to make the most of your money
• managing borrowing
• shopping around for a good deal on the right products
• building a financial "safety net" in case of unexpected events
• jargon-busting

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Who will deliver it?

The Thoresen Review proposed that the model be led by a central body (employing 20 - 30 full-time staff) but largely delivered through a network of external organisations, on a multi-channel basis - web, phone and face-to-face. The joint Treasury and FSA paper does not offer any further details on delivery at this stage, observing that "once we are clear on the right model to support people with their day-to-day money questions and worries and to equip them with the ability to manage their finances better in future, we will roll Money Guidance out across the whole of the UK."

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Benefits of the project 

A cost benefit analysis carried out by Deloitte, and referred to in the Thoresen Review, estimated the quantifiable net benefits of Money Guidance as being –

• For users, over £15 billion – through –
  
  
  • Better budgeting
  • Management of debt
  • Shopping around
  • Investment in pensions
  • Increased protection
• For the financial services industry, benefits in the range £3,612 million to £5,514 million and costs in the range £390 million to £832 million – through –
  
  
  • Bad debt reduction
  • Reduced acquisition costs (advising and selling)
  • Reputation
  • Reduced cost of regulation (up to £210 million”.
  • Increased demand for products
• For the government, benefits in the range £4,650 million to £6,000 million and costs in the range £390 million to £839 million – through –
  
  
  • Pension credit savings
  • Increased VAT receipts
  • Tax receipts from savings products
  • Other tax/benefit impacts
• For society as a whole, benefits of £344 million.

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