The Bank of England’s chief economist, Andy Haldane recently ruffled feathers by admitting that the British pensions system is so complicated, even he fails to understand it, warning of the “damaging” consequences this presents for consumers as they approach retirement.
Many people assumed, from the tenor of his speech, that he was criticising financial advisers, and indeed he said that, like himself, advisers had “no clue” when it came to making sense of pensions, and that the opinion had been formed during countless conversations with experts and financial advisers.
However, careful reading of Haldane’s speech reveals that his comments about pensions and advice were a lead in to a more fundamental problem. Part of the problem, he said, was that a great many people found financial issues “difficult and boring”, claiming that this stemmed from the way mathematics is taught in schools. “For many, maths is a turn-off because it seems unrelated to their everyday lives; it lacks real world relevance. Sad to say, payday lenders have a greater resonance to many people than Pythagoras' Theorem” he said. He suggested that maths lessons should be linked to real-life financial decisions, such as working out a monthly budget, calculating interest on loan repayments and comparing different savings, pension and mortgage products. “These are big financial decisions that, if flunked, can have big social as well as financial consequences.”
Not an original idea?
In 2011 the All Party Parliamentary Group (APPG) reported on Financial Education and the Curriculum, and in 2014 statutory financial education in English secondary schools was introduced. The Department for Work and Pensions (DWP) teamed up with financial education charity the Personal Finance Education Group (Pfeg) to produce new teaching materials to help get more information about financial planning into classrooms and boost saving for later life. However, this is only compulsory for around half of all schools – free schools and academies don't need to follow it.
This year (May 2016) in the APPG on Financial Education for Young People report entitled Financial Education in Schools: Two Years On – Job Done?, the Inquiry Chair, Suella Fernandes MP, says:
In this report, we argue that much more needs to be done to strengthen the delivery of financial education in schools in England, with provision remaining patchy, inconsistent and varying in effectiveness. Crucially, primary schoolchildren – already forming habits relating to money – must receive age-appropriate lessons in financial education if we are to encourage positive attitudes towards budgeting and saving from an early age and allow them to make the right financial choices in later life. Many dedicated teachers across the country are already facilitating excellent learning in this area, but there is clear demand for further training and support to help them improve further.
The report goes on to highlight some worrying statistics:
- Those aged 18-24 represent over 20% of the over-indebted population of the UK and a third of young adults find themselves in this situation.
- Many adults lack the knowledge and skills to thrive in an increasingly complex financial landscape.
- Four in ten adults are not in control of their finances, with over 21 million families having less than £500 in savings to cover unexpected bills.
- Around eight million people in the UK have problems with debt.
The report concludes: We need to start early if we hope to reverse this trend. Schools can, and do, play an important role in ensuring young people develop the confidence and skills needed for managing their own personal finances through effective financial education.
What can we do?
Given the increasing pressures on budgets and resources in schools (and colleges), might there not be a role here for a section of the business community with arguably the best understanding of financial issues - Financial Advisers? Many Financial Advisers are conscious of their social responsibilities, and donate time and money to good causes. What better cause could there be than assisting with the financial awareness of the young people who will hopefully be the clients of the future? Watch this space for information about how this would actually work.