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Adult Financial Literacy Advisory Group (AdFLAG) Report
A response from NIACE on the AdFLAG Report to the Secretary of State for Education and Employment
Published February 2001
NIACE welcomes the report and its recommendations to improve the financial literacy of adults. It is appreciated that this has been a neglected area and therefore it will be some time before a coherent view of the issues and methods to overcome them will be achieved. NIACE welcomes the remit given to the Adult Basic Skills Strategy Unit (ABSSU) to bring that coherence.
The report does acknowledge the work of the Social Exclusion Unit in identifying the social exclusion faced by many with poor financial literacy skills. In an age that seeks measurements, particularly of economic issues, it might be appropriate to estimate the cost to the nation of poor financial literacy. At a time when many initiatives are receiving funds to improve literacy, numeracy and spoken English skills, research should in our view be commissioned from one of the department’s new research centres into the wider benefits of action to address the needs of those without financial literacy skills. Many research and development agencies, like NIACE, would welcome the chance to see high quality research in this area. Paragraph 7.7 highlights the work of the Birmingham Settlement and its activity over 30 years. It might be desirable to compare levels of financial illiteracy in that area with other communities, particularly in the areas of debt, take up of banking facilities etc.
NIACE welcomed the AdFLAG report and its recommendation that we continue with our research into the financial literacy needs of older people. We see this as a crucial area. In its work with older people NIACE is discovering that there are sensitivities involved in older people revealing whatever financial literacy deficiencies they may have. Where discussions have been facilitated it has been more productive to focus initially on whatever coping skills or alternative strategies have been utilised throughout life. NIACE feels this could be a productive area for further research, in order to develop strategies to deliver relevant provision and an appropriate curriculum.
NIACE believes that in some instances the report has taken a too simplistic view of problems experienced by adults. It is understandable that the solutions suggested are too limited. For example, restricting action to increasing literacy is not the answer. Paragraph 4.13 refers to the preference of many consumers for pre pay cash meters but does not consider that for many people this is the only option offered by utility providers because of debt, status or geographical location. It is when the wider social issues are taken into consideration that solutions will be achieved. NIACE is pleased to see that recognised and collaborative work is encouraged in the report.
The participation of the financial sector in the research is particularly welcomed. The media is constantly full of advertising and advice on a range of financial products – stakeholder pensions, health care schemes, extended warranty schemes, and complex loan offers. The Strategy Unit may wish to encourage the finance sector to look closer at the quality of information it disseminates and the potential for misunderstanding among those with poor financial literacy skills. The sector may consider issuing some form of standard leaflet with every financial agreement that explains the terms used and key areas of the ‘small print’. The sector may wish to consider a ‘kite marking’ process in which they can indicate if their literature has been tested with a cross section or reference group of the community targeted, together with the ‘Plain English’ mark. A voluntary levy from the sector to fund such work would be a visible indication of their concern. The number of ‘simple’ current accounts and the level of information provided to customers needs to be monitored by the FSA as part of its contribution to the basic skills strategy.
The significance of the developments in our society in terms of changing work patterns, demography, future costs of health, welfare and social care, alongside the movement to stakeholder pensions and benefit payments direct to bank accounts have been noted in the report. NIACE considers that a greater emphasis could be placed on action to reflect these significant changes. Already the media is advertising stakeholder pensions. Whatever parallel current public information exercise to introduce them requires immediate monitoring for effectiveness, as well as the advertising campaigns being monitored for clarity.
Although the nation has not made any decision about adopting the Euro, this is an issue which is not going to go away. Even without formal adoption, the Euro will impact upon our lives. The change to decimal currency 30 years ago was a difficult exercise, particularly for older people. Any change to the currency arrangements in common use could be far worse. For example, there is a still a perception among some of those adults included in the NIACE research and development work that decimalisation caused inflation and that prices rose in direct consequence of one new penny being worth 2.4 old pennies.
It has long been accepted that many adults turn to adult education at times of crisis in their lives – often those life stages identified in the report. The Personal Social and Health Education (PSHE) guidelines on personal financial literacy for schools provide an excellent framework for highlighting and considering the issues at other stages of life – particularly upon redundancy and bereavement. The Unit may consider this within the remit of UfI as outlined at recommendation 1.
NIACE is pleased that Learning and Skills Councils are to be asked to ensure local provision. However it is likely that any such provision will be community based, needing to be sensitively delivered, geared to the needs of individuals and groups and at a pace and time suited to their needs. Use of good community development approaches and an effective adult numeracy curriculum is vital. However, our research indicates that many older learners having help with financial literacy matters do not consider that they have ‘basic skills’ needs. ‘Financial literacy’ as a concept is not well developed but it has the advantage of not having the same overtones of deficiency as does ‘poor maths’ or ‘lack of numeracy’. Providers and funders need to recognise that many adults are turned off by the suggestion that they have poor basic skills or that they have to come to a course to improve their skills. It will be important for the Learning and Skills Council and the Strategy Unit to ensure that providers recognise the importance of constructing the curriculum around the requirements of each individual and (in many cases) embedding the financial literacy programme within activities that are meaningful to adults. This particularly matters given that 30% of the adult population do not participate in any formal education after leaving school, and a significant number of these say they have no intention of doing so in the future, either. What is required is an intelligent approach to programme development, including a consistent and effective assessment of needs and a meaningful curriculum.
NIACE considers that whilst it will be essential to ensure quality provision, any measures should not depend on examination, tests, or any other such narrow measures. Ways and means have to be found to ensure that achievement measures and quality assurance systems are appropriate to the needs of the adult clients.
The actions undertaken since the report was produced in mid summer have been welcomed. NIACE, like other agencies, is committed to pursuing the relevant recommendations of the report. However it is difficult at this stage to see in what way all of the current short and medium term initiatives are to be evaluated, disseminated and built upon. We have a little anxiety about the whole of this matter being left in the ‘basic skills’ domain. This is a broader issue than basic skills, we think. NIACE is committed to participate in whatever forum or structure is created to make a financial literacy strategy happen. We do need a financial literacy strategy for the country. We are particularly pleased to undertake the work arising from recommendation 6.5 about older people. This is now under way using both private and public sector money. NIACE also welcomes recommendation 6.6 where a financial literacy programme for adults is intended, and we support the details of such a programme outlined in appendix 5 where NIACE and BSA will work together on such a programme.
It is important that the current interest and momentum is maintained. The Adult Basic Skills Strategy Unit has a key role as the lead agent to sustain this. It is to be hoped that the Unit will continue to work closely with other government departments, the financial sector, local authorities and other relevant agencies in promoting the work.
NIACE’s concern is that in the field of older people, particularly around advice and guidance prior to and after retirement, there is a range of agencies who would appreciate a lead from the Unit to create and maintain the debate. The current work NIACE is undertaking with Halifax Bank plc is an indication of the concerns of some key players in the finance sector. The recent work of the Pre-Retirement Association of Great Britain and Northern Ireland, is another important organisation; the PRA works closely with its employer members in assessing the quantity and quality of workplace financial advice on retirement planning. It is hoped that the Strategy Unit will ensure that Recommendation 6.17 becomes a better reality. Whilst there are examples of financial literacy through employers and trade unions the provision is currently minimal.
NIACE’s experience of development and advocacy work in all forms of adult learning – whether in colleges, the community or at work - is in promoting the needs of the individual. This ‘empowering’ mission recognises that there are basic skills requirements at all levels and for all ages. NIACE is committed to work with all relevant agencies to improve these skills and create opportunities where they do not exist. We hope that this report is the beginning of a meaningful, committed and well-resourced determination to reach those excluded from many aspect of life today because of their financial illiteracy. We hope that attention is given to older people in particular.
