Education is essential when it comes to tackling inertia, helping individuals recognise their needs and understanding the options available to them.
For example, as part of our recent tax year end activity, we focused specifically on improving awareness of ISAs and how they work.
Research from Barclays found that even though more than 21 million people have a cash ISA, 40% hadn’t made a single deposit during the 2015/2016 tax year, despite holding an average of £42,000 in cash savings – more than double the annual ISA limit. Collectively, this cost savers almost £1bn in lost interest.
The PSA has also created a need to ensure people understand the difference between it and ISAs. It recognises that ISAs still have an important role to play in financial management, while understanding that tax rules could change in the future and that their effects depend on the circumstances of the individual.
Another area of focus is the ‘leap’ from cash savings products to investments. In this low interest rate environment, it’s important that people are informed of the risks of loss involved and at least consider investing in other asset classes but often many don’t – they see investing as complicated and with reduced options for affordable advice and guidance they don’t have the knowledge and confidence to ‘take the plunge’.
So we’re looking at how we can break down these obstacles and create tools and support that will help inform people, giving them the confidence to act.
While face-to-face financial advice may not be as readily available as it used to be, technology is presenting other ways of helping people make the best decisions regarding their finances.
Digital empowerment was a key theme of the recent FAMR report (PDF 1MB), and one of the things we are focused on at Barclays is leveraging technology to make the customer experience simpler, easier and quicker.
Action we must take
The savings gap can’t be ignored but there are steps we can take – and are taking – to educate, inform, encourage and empower customers to be more proactive when it comes to planning their finances and thereby securing their futures. Helping people make the best decisions based on their needs and financial goals is critical to the future financial health of the UK.