People in the UK appear incapable of financially planning ahead, research by the Office for National Statistics has warned.
A 31-page report published by the ONS, Financial Capability in the UK, 2010 to 2012, scored people on a scale of one to 10 in six areas of financial capability.
The research, carried out by academics at the University of Bristol, found individuals performed best at making ends meet (7.0) but least well at planning ahead (2.3). Indeed, only 1 per cent seemed to be financially astute, the study warned.
Rupert Pybus, co-sponsor of the education working group at TSIP, a group of leading financial services companies, trade bodies and consumer groups, and global head of marketing at Columbia Threadneedle Investments, said: “This alarming statistic from the ONS must motivate a more co-ordinated approach by government, voluntary and financial groups to encourage people to save for tomorrow.”
People also performed poorly at staying informed about changes in the wider economy such as interest rates and inflation. The report found that levels of financial capability were higher for individuals living in households with the highest levels of total wealth – and this was especially marked in relation to financial wealth.
The report said: “For planning ahead, staying informed and choosing products, 16 to 24-year-olds score particularly poorly. As such, we observe a fairly marked increase at age 25 to 34.
“This corresponds with a tendency to move towards independent living and increasing financial independence in young adulthood.”
Steve Lowe, director at Just Retirement, said: “People need more help when it comes to planning ahead, staying informed and choosing products. These themes have always been important when preparing for the costs of later life, but the new pension freedoms mean some people may continue facing important choices well after retirement.”
Meanwhile, another 20-page ONS publication, Early Indicator Estimates from the Wealth and Assets Survey, revealed 40 per cent of individuals considered employer-based pension schemes to be the safest way to save for retirement in the period from July 2012 to June 2014, up from 35 per cent in July 2010 to June 2012.
Colin Low, managing director of Essex-based Kingsfleet Wealth, said: “Some steps have been taken to introduce more education in schools, and that is fundamental, but families and parental responsibility are also a basis for education.
“It is also incumbent on financial planning firms to offer support and accept there will be some clients you will not make money from. We offer a pro bono service.”