Call for Chancellor to tackle poor state of “financial wellness” among UK consumers

16th March 2016

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A new report has exposed the poor state of financial wellness in the UK, leading to calls for the Chancellor to urgently tackle the issue in today’s Budget.

The Momentum UK Household Financial Wellness Index has found that at least 10 million adults have not made adequate provision for retirement.

It also revealed that more than 25 million have no discretionary savings and millennials have the lowest Financial Wellness score of any generation.

The Index, commissioned by Momentum UK and compiled by the University of Bristol’s Personal Finance Research Centre, measures key elements such as financial confidence and short-term planning combined with measures of the UK’s macro-economic wellness to give an overall score.

The report has raised key areas of concern, which Momentum is calling on the Chancellor to address:

It argues for more to be done to encourage retirement planning and adequate pension provision: 10 million UK adults (20%) admit that they have not been able to make adequate provisions for their retirement, which could lead to a crisis when you consider the wider implications of a greying population without any adequate retirement income.

Momentum is also calling on the Government to address insufficient UK savings rates: Over 25 million UK adults (50%) do not have any savings or investment products to support them in the event of a rainy day and savings rates are currently at a record low with no sign of improvement.

The report warns that financial disparity between the older generation and millennials needs to be tackled: Following the work of the Commons Work & Pensions Committee’s investigation into ‘intergenerational fairness’ there are renewed concerns that the UK’s current system does not allow the younger generation to save for the future. The Financial Wellness Index also found that those aged 16-24 in the Index average a very low score of 61, indicating poor financial wellness, whilst the older generation (65 plus) is most well off (with an Index score of 75).

Ferdi Van Heerden, chief executive of Momentum UK, says: “Speculation on the future of pensions has varied wildly over the last few weeks, with sources giving contradictory statements on what to expect from the Budget. With the rules already so complex and with so many people without adequate provision, the Chancellor needs to make every effort to simplify the system and incentivise people to save for the long term.

On the savings gap he adds: “Considering that savings rates are at record lows and look set to get even worse, it is not surprising that so many people do not have adequate savings, even for short term emergencies.

“We are currently in one of worst ISA seasons on record and despite the Chancellor’s previous efforts to engage people with a larger tax-efficient allowance from 2015, this is clearly insufficient. More needs to be done.”

On the generational divide Van Heerden adds: “The decisions made in this Budget must do more to ensure the financial wellness of the UK’s young people – if not, we will move towards a future where they will be completely excluded from any of the financial assurances that their elders benefitted from, such as home ownership or a decent retirement income. That, in itself, may have a massive impact upon how the younger generations behave as consumers today, with further negative implications for the long-term health of the UK economy.”

Professor Elaine Kempson, director of the Personal Finance Research Centre at the University of Bristol adds: “We live in complex times financially.

“The economic crash of the late 2000s affected many sections of society, and recovery since has been felt unevenly by individuals and families up and down the United Kingdom.

“At the same time, we have seen a changing landscape in the provision of social support and increasing responsibility on individuals to navigate the financial services industry to provide for their own – and their children’s – financial futures.

“In this context, defining individuals’ Financial Wellness presents a particular challenge to researchers and policy makers alike. The UK as a whole may be relatively well financially but there is significant work to be done to promote wellness in relation to our nation’s savings and assets provisions.”

To find out more and get your own indicative self-assessment financial wellness score, visit:

yourwealth.co.uk/financial-wellness

 

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