Ed Balls launches new financial capability strategy

Today Ed Balls, the Economic Secretary to the Treasury, launched the Government's long-term approach to financial capability, with James Purnell, Pensions Reform Minister, at the Anne Taylor Children's Centre in Hackney.

Speaking at the Centre, Ed Balls announced that a new taskforce, led by Otto Thoresen, Chief Executive of AEGON UK, has been asked to research and design a national generic financial advice service - ensuring that every person, including those on the lowest incomes, can get quick, easy and simple access to good quality financial advice. A cross-departmental Ministerial group will co-ordinate the Government's work plan to enhance financial capability ensure Government programmes link effectively to the new advice service.

The Government believes that everyone in society has the right to get advice they can understand and trust on the financial options available to them, from getting out of debt through to choosing a home and saving for a pension.

Otto Thoresen will report to Ministers by the end of the year. The Government will publish an action plan by the end of 2007 setting out how financial capability will be integrated into existing services, particularly for those most vulnerable to the consequences of poor financial skills and taking forward plans for a national approach to generic financial advice.

The visit marked the start of the first ever Child Trust Fund (CTF) week, promoting CTFs as a straightforward way to start saving for a child's future. The Government is seeking to promote better financial education and to develop a savings culture amongst children and young people, and is encouraging schools and parents to use the Child Trust Fund account - which every child born since September 2002 receives - to help teach children about the value of money and the importance of savings.

Ed Balls said:

"We want everyone in society to have access to, and use, financial services with confidence. So we must use all the levers we can to improve financial understanding and capability, including the Child Trust Fund. Financial decisions are difficult. Financial products are complicated and there can be too much jargon. This puts people off, or they can end up buying something that is not right for them. Sometimes people just want to discuss their financial options and not buy anything. We believe there is a gap in the provision of this last type of advice - generic advice - and I have asked Otto Thoresen to research and design a national approach for filling this gap. I am determined that we should extend the benefits of generic advice to all consumers who need it."

James Purnell said:

"Millions of today's workers are not saving enough for their retirement. That's why we are making it much simpler for people to save through automatic enrolment into a new system of personal accounts, or into workplace pension schemes. Automatic enrolment will help people save. But it will still be their decision whether to opt out, and how to invest their money. Generic financial advice will be vital to help them make those decisions, and a wide range of stakeholders have urged us to ensure that is available. Today's announcement is the start of making that generic advice a reality."

Otto Thoresen said:

"I am delighted that the Economic Secretary to the Treasury has asked me to lead this feasibility study. The Government is clear about the benefits generic financial advice can bring. My role in chairing the study will be to provide realistic answers as to how it can be made to work in practice."

John Tiner, Chief Executive of the Financial Services Authority, said:

"I very much welcome the Government's long-term commitment to improving financial capability across society. I am delighted that Otto Thoresen will lead a study into the provision of generic money advice, a key component of the National Strategy for Financial Capability, and believe that the new ministerial group will bring focus and determination to the Government's major policy initiatives such as financial education in schools.

"This paper complements the current programme being delivered under the auspices of the FSA's National Strategy for Financial Capability which is helping millions of people become more confident in managing their money. The programme is ambitious and already 500 schools have signed up to Learning Money Matters, the Money Doctors toolkit is available in 19 universities and the Workplace programme has issued 148,000 packs of educational material."

Notes for editors

1. The ministerial group, chaired by Ed Balls, will develop, oversee and coordinate the Government's work. This group will develop the Government's cross-cutting approach to financial capability, with ministers participating from the Department for Work and Pensions, the Department for Education and Skills, the Department of Trade and Industry, the Cabinet Office and the Department for Communities and Local Government.

2. The Government announced today that it will promote financial education in schools by:

working with financial education bodies to ensure that teachers have adequate resources to support the use of the Child Trust Fund as a tool for teaching financial education;
providing new curriculum guidance for schools on financial education; and
developing further plans for a Schools Money Week as an additional focus for financial education within the academic year.

3. The Government's long-term aspirations are that:

a. All children and young people have access to a planned and coherent programme of personal finance education, so they leave school with the skills and confidence to manage their money well:
b. All adults in the UK have access to high quality generic financial advice to help them to engage with their financial affairs and make effective decisions about their money; and
c. A range of Government programmes are focussed on improving financial capability, particularly to help those who are most vulnerable to the consequences of poor financial decisions.

4. The Government intends to review the policies and programmes which have the potential to raise financial capability, and to set long-term goals for the contribution each can make. This will include every child matters, the curriculum, CTF, adult skills, planning for retirement, parents and carers and ensuring there is sufficient signposting of information about personal finance.

5. Otto Thoresen has been Chief Executive of long-term savings provider AEGON UK since April 2005. A graduate of Aberdeen University, his career began at Scottish Equitable in 1978 and from 1988 took him to Abbey Life, Royal Insurance and Royal Life International. He returned to Scottish Equitable, which had then been acquired by AEGON in August 1994, becoming Finance Director of AEGON UK in 2000. As Chief Executive he has been an advocate of measures such as financial education and generic advice to help people take responsibility for their finances. He is a member of the ABI Board and chairs its Audit Committee.

6. Details about the level of financial capability of the UK population can be found in the FSA's Baseline Survey published on their website at http://www.fsa.gov.uk/pubs/consumer-research together with other related documents. For more details of the FSA's work on financial capability, please see:
http://www.fsa.gov.uk/financial_capability

7. Child Trust Fund week runs between 15-20 January. A list of events is on the website http://www.childtrustfund.gov.uk. The CTF was launched in April 2005 and since then 2.5 million accounts have been opened. The CTF is a tax-advantaged long-term savings and investment account for children born on or after 1 September 2002. The CTF is intended to provide young people with a welcome nest egg, stimulate their interest in saving for the future and provide a tool for teaching financial education in schools.
For more information on the Child Trust Fund please refer to:
http://www.gnn.gov.uk/environment/fullDetail.asp?ReleaseID=256280&NewsAreaID=2&NavigatedFromDepartment=False

8. Media enquiries should be addressed to the Treasury Press Office on 020 7270 5238.

9. Non-media enquiries should be addressed to the Treasury Correspondence Unit on 020 7270 4558 or by email to public.enquiries@hm-treasury.gov.uk.

10. The long-term strategy for financial capability is on the Treasury website.

11. This press release and other Treasury publications and information are available on the Treasury website at http://www.hm-treasury.gov.uk. If you would like a Treasury press release to be sent to you automatically by email you can subscribe to this service.